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Publishing reality check.

Starting an association publication with the expectation of making money soon--even within a decade or so--would probably be a big mistake. At least that's the implication of a recent study of U.S.-based association publications--large and small and in varying formats--conducted by the International Association of Business Communicators, San Francisco.

In October 1990 IABC mailed a questionnaire--which requested information on association publications published in the last fiscal year--to 996 ASAE Communication Section members, of which 125 (13 percent) responded. The survey found that the majority report their publications lose money and in fact are subsidized by dues income.

It's important to underscore one major difference between association publications and standard commercial ventures. Association publications provide a number of services to members, including

* regular communication that would have to be accomplished some other way if the publication didn't exist;

* a means of marketing association services to members; and

* a means of marketing memberships to prospects.

Since association publications provide these services, they often are measured by financial criteria different from those of strictly commercial publications. However, for this study, IABC confined its investigation to profit and loss, much the same way a study of strictly commercial publications would.

Despite the differences in purpose between commercial and association publications, some of the latter (28, or 22 percent of those surveyed) do make money. So IABC set out to discover who is making money in the association publishing business and how they are doing it.

Association publications have

staying power

What is the secret of financial success in association publishing? The single factor that most clearly separates the money-makers from the money-losers is the length of time they've been in business. More than half of those publications showing a profit have been publishing for 50 years or more, and 68 percent of them have been around for 20 years or more. Of the money-losers, almost 50 percent have published less than 20 years; only 18 percent have published for 50 years or more.

The following comments by respondents underscore the resiliency of association publications.

* "Fifteen years ago the Digest had a serious deficit, and we almost discontinued publication. We had a massive editorial and philosophical overhaul, and today it is very profitable." Those comments were from an agricultural association publication going to more than 100,000 people and published for 50 years.

* A comment suggesting the tenacity of association publications came from a 90-year-old magazine: "Our revenue exceeds our expenses in 1990--for the first time in 20 years."

* Editors of a 57-year-old magazine for the food services industry said. "We came up with a $65,000-$95,000 profit yearly for the last seven years. Before that we operated in the red."

How much do these

publications make?

Of the associations LABC surveyed, the spread is considerable. On the low end is a construction trade publication: "We set ad rates only to cover expenses. The publication makes less than $1,200 a year."

On the other end of the profit spectrum is a health care book in Chicago that shows revenues of $2.9 million and expenses of $1.6 million (not including salaries). Unless this publishing staff of 5-10 people earns considerably more than the editorial norm, the magazine turns a tidy profit.

Another health care magazine in Illinois makes an annual profit of approximately $400,000; one in Virginia, going to manufactures, earns $100,000 a year; one in the oil business in Texas earned $35,000 last year; a St. Louis service-club magazine posts a $100,000 profit; a health care publication in Sacramento, California, earned a $40,000 profit last year; and a Milwaukee-based social service association publication earned about the same.

At the lower end of the profit scale is a San Francisco-based magazine in the construction field squeaking into the black by a mere $1,000. Doing better in San Francisco is a health care book turning a $20,000 profit; in between those figures is a magazine going to members of a financial association that posts a $7,816 profit.

In what we hope is not a harbinger of the future, an Oregon-based medical society reports a "$3,000-$4,000 profit this year compared to $32,000 in 1989."

Most money-makers have

big budgets

Of the 28 money-making publications IABC surveyed, 46 percent report revenues of $500,000 or more a year. By comparison, only 11 percent of the money-losers have revenues of $500,000 or more a year. In other words, the magazines that show a profit tend to be big-time operations. We can infer from this that it's tougher to produce a small, profitable publication.

The most frequent budget size among the money-losers (almost half) is less than $100,000 yearly. By comparison, only 25 percent of the association publications operating in the black report annual expenses under $100,000. With expenses below $100,000--especially when offset by some revenue--governing boards can more easily dismiss deficits from the money-losers as a membership cost.

However, it is interesting that 19 percent of those publications that lose money have expenses between $250,000 and $500,000, making them a bit more than small-time operations and making it more difficult for association boards to write off the deficit as a cost of doing business.

We conclude from these responses that the profitable magazines tend to spend more money to bring in more money. The money-losing publications spend less but bring in less. This is not to say that spending more will automatically create profitability, since those additional expenses must generate revenues over and above the investment for profit to result.

Magazine format heavily

dominant

Another constant of those publications operating in the black is that virtually all of them appear in a magazine format, and the vast majority publishes monthly. None of the money-makers use a newsletter format; 3 of the 28 appear as tabloids. Among the money-loses, the magazine format also is most popular (69 percent), but newsletters are a much closer second choice (23 percent). Tabloids represent 8 percent of those operating in the red.

Indeed, the preference for standard magazine format could be a key ingredient for profitability. For all their sameness, the 8 1/2-inch by 11-inch magazine-format books reap savings in printing, binding, and mailing by adhering to industry standards. They enjoy minimum waste in printing on the expense side, and the comfortable and consistent size and format helps sell advertisers, thus adding to revenues. Newsletters are not a god format choice, since they offer little space for advertisements. Of course, format is not the only ingredient for making a profit in association publishing--we know that because magazines are a popular format choice for the money-losers, too.

Monthly frequency favored by

profitable books

Clearly, the profitable publications do not choose to economize by printing less frequently than once a month. Seventy-five percent appear monthly, compared to about 51 percent of those that lose money. Money-losing publications are almost three times as likely to print every other month than those that report making money (29 percent versus 7 percent).

The monthly frequency helps boost annual revenues from both advertising and subscriptions. You can get twice as many advertising pages into 12 issues as you can into, say 6, so long as the magazine is the same total number of pages in both cases. Many advertisers also like the monthly frequency in order to build image awareness in readers' minds.

So long as revenues exceed production and distribution costs on each issue, publishing more issues brings in more money. Of course, the opposite is true if costs exceed revenues, and in that case, you wind up with a better bottom line by cutting frequency, so long as you continue to achieve the same economies of scale on expenses and your advertisers stick with you in the less frequent book. The latter is especially tough to predict. Cutting frequency usually weakens market position unless you offset the cut with other changes in the less frequent book, such as more pages, more compelling editorial, better graphics, and so forth.

Circulation size not much

of a factor

Conventional wisdom in commercial publishing dictates the need for a large circulation in order to dominate the market. However, more than 50 percent of the profitable magazines in the IABC publishing study mail to lists of fewer than 10,000. Only 7 percent mail to 100,000 or more. Approximately one third report circulations between 10,000 and 50,000. Relatively small circulations help keep expenses down, especially with postage increasing its bite as a cost of publishing.

Large circulations, however, do not appear to be much of a factor in losing money in association publishing either, since more than half (55 percent) of the money-losers report circulations of fewer than 10,000. Only 5 percent of the association publications operating in the red have circulations of 100,000 or more. Forty percent of those losing money report circulations between 10,000 and 100,000.

The majority of publications polled in the IABC survey mail to lists of fewer than 10,000 people--that includes those operating in the red and in the black. Circulation size does not seem to be a significant factor in determining the profitability of an association publication, and indeed small circulations (under 10,000) clearly are the rule rather than the exception in association publishing.

Who sells ads doesn't

matter much

In exactly half of those publications operating in the black, staff has exclusive responsibility for ad sales, compared to about 60 percent at books that lose money. Another 25 percent of profitable publications use both staff and outside reps, while 25 percent of the profitable books and 19 percent of the money-losers use outside reps exclusively. In the survey, approximately 8 percent of the respondents whose publications lose money report that they don't sell ad space.

What's the staff size?

How many people does it take to produce a profitable magazine? Well, 16 of the 28 money-makers (57 percent) IABC surveyed operate with a staff of fewer than five people. Nine respondents report employing 5-10 people, and just 3 of the 28 have 10 or more people on their staff.

By comparison, in more than 75 percent of those publications that lose money, staffs consist of fewer than five people. Thriteen percent have staffs of 5-10 people, and 9 percent have 10 or more people. Thus, we find that profitable association magazines tend to have slightly larger staffs than those that lose money.

Are boards upset with deficits?

The clear majority (59 percent) of boards at associations publishing newsletters are not concerned about deficits. At association magazines, about half (51 percent) are mildly concerned, but 39 percent are not concerned at all about deficits.

The most serious concern we see expressed by boards is with the associations that publish tabloids. While the sample is small--only eight tabloids--two of those eight respondents (25 percent) report that their boards are seriously concerned about the deficit. Most of the tabloids (63 percent) have expenses under $100,000 a year, but one tabloid costs more than $500,000 a year to produce. Interestingly, the board of that tabloid's association is not seriously concerned about the publication's deficit, although it is mildly concerned. Three (37.5 percent) of the tabloids report their boards are mildly concerned about their deficits, and three are not concerned at all.

In the magazine format, of the 67 magaznes IABC sampled operating in the red, only 10 percent cause serious concern her their boards. Some 51 percent are mildly concerned, and 39 percent are not concerned at all. Associations are spending a good deal on those money-losing magazines, since 45 percent have expenses exceeding $250,000 a year and 22 percent have expenses greater than $50,000. Thirty-nine percent of the magazines have expenses under $100,000.

Newsletters' deficits cause association boards the least concern of the publications IABC surveyed: 59 percent are not concerned about the deficit. Part of the reason is that 91 percent report expenses of less than $100,000 a year. Thirty-six percent of boards express mild concern. Five percent of boards report serious concern.

Among the comments:

* "Magazine is in the black if dues allocation is included." Or, "Budget balances with subsidy from membership dues."

* One respondent reminds us that "the IRS is watching closely to see that nondues income is recorded correctly. Could be taxed. We are now competing with free enterprise for ad dollars."

* And another respondent shifts responsibility for the deficit to the board: "Board has set limit of 25/75 advertising/editorial ratio. They know deficit is theie own creation."

Conclusion

IABC finds that most association publications lose money on a straingth expense-revenue basis. But it comes as no big surprise that it's profitable to be in the health care business. Most of the money-making magazines (36 percent) are in that field. It is, however, somewhat surprising that the profitable magazines don't have particularly large circulations (54 percent have circulations under 10,000). And they don't have big staffs (57 percent have fewer than five staff) to produce a monthly publication that operates in the black. Their staffs, however, are slightly larger than those that lose money. Most important, we find that most of the profitable publications have been around for a long time (54 percent have been publishing for 50 years or more).

So if your publication is one of the four of five that don't pay their own way without help from members' dues, ask yourself how long you've been at it. Our responses show that your board is not likely to be too upset by a deficit, especially if you publish a newsletter. And if your association publication is less than 50 years old, show your board that your deficit-ridden publication clearly is in good company. Perhaps most important, remind them of the critical services your publication provides to members and that those services necessarily cost some of the dues dollars it helps generate in the form of new and renewing members.

Cliff McGoon, a consultant for Cliff McGoon Communication Consultants, San Francisco, was vice president of communication for the International Association of Business Communicators, San Francisco, for 12 years.
COPYRIGHT 1991 American Society of Association Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:includes related article; majority of association publications lose money
Author:McGoon, Cliff
Publication:Association Management
Date:Jul 1, 1991
Words:2369
Previous Article:One week at a time: building a superior newsletter.
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