I found this story from the New York Times columnist Dylan McClain. This was a report released by Bill Goichberg, the U.S.C.F. President. He is best known for running the World Open, America’s largest and most lucrative international tournament. The report is not rosy. There are mentions of short falls in revenue particularly in terms of membership. Restructuring is being planned on publications and membership.
The U.S.C.F. avoided insolvency a couple of years ago but has been wracked by scandal and political infighting. The organization is competing against the online chess platform and is struggling to provide value-added services. Many will agree that the magazine has seen substantial improvements, but it (alone) does not justify the US$49/year adult membership. While budget cuts are necessary, I’m not sure what the plan is to invigorate membership. I would say that the board had better develop a strong marketing plan and solicit donations from big corporations.
As you know, after seven months we are running $42,341 behind budget. The membership trend has been poor in the past few months, and legal expenses for the rest of the year will be high, so I fear a loss for the year of at least $100,000. We probably can’t avoid a loss without unacceptable harm to services, but here are some ways to reduce the loss:
Staff cuts. Bill Hall has already let one employee go saving about $25,000 on an annual basis, but including severance, probably only about $7000 in this fiscal year. Of course we are concerned with the following fiscal year as well as this one, and I believe we should tell Bill to make another cut, but he feels this would be impossible without severe damage to service. My experience has been that such cuts don’t work out as badly in practice as feared, so I disagree with Bill here.
It should be noted that personnel costs are already $48,000 below budget, and overall expenses $51,000 below budget even with high legal fees, so our problem is not that the office has been overspending- the worst thing that has happened is that membership revenue is $97,000 below budget.
Magazine pages. I think all at our meeting agreed that we must cut pages for the remainder of this fiscal year. Dan Lucas reported that an 8 page Chess Life cut would save about $2400 per issue, a 16 page cut about $4800 per issue. The March issue is pretty well prepared, features Fischer and has recent material that shouldn’t be postponed; I suggest an 8 page cut from March and 16 pages from April, May and June (June issue expense is largely during this fiscal year), then starting in July we return to the 8 page cut. We may also be able to cut Chess Life for Kids. Overall, there may be a savings in the area of $17,000.
Stop the online distribution of free content from recent issues of Chess Life. Bill Hall says that action to do this will occur next week. As Mike Nolan has pointed out, why should people pay for this content if they can get it free? I think this change has to help membership, though Bill Hall is skeptical that it will have much effect. Unless proven otherwise, I think we should assume that the freebies may be a major factor contributing to our recent poor membership numbers. Some at our meeting suggested the economy was hurting, but poor economic conditions have not seemed to hurt USCF in the past (some people switch from more expensive pursuits to chess). USCF didn’t exist during the great depression of the 1930s, but it is believed that chess boomed then.
Make emailings available to affiliates for a fee, probably the same 5 cents per member that we charge for mailing labels. There have been issues in the past with such emails being considered spam, especially by AOL, but we can probably avoid this problem by using an emailing service and/or not sending them all at once. We may be able to make 3-4 cents profit on each email we send. If we can get this project going soon, I believe we can make at least $10,000 from it in this fiscal year and would be willing to use the service extensively for my own tournaments. It would also be a great help to affiliates, as that 5 cent cost per player is the whole cost while for postal mailings, with printing and postage the per player cost is more in the area of 30-50 cents per player.
For TLAs that are online only, initiate a small charge, maybe $5. I don’t know what this would bring in but every little bit helps.
For the long run (2008-9 fiscal year and after), we need to consider some fundamental changes. One option that was suggested was ending the dues sale at year end and charging $49. We tried charging $49 in 2003 and it was an utter disaster, losing over 3000 adult members in 14 months. We would probably have lost another 3000 in 2004 were it not for the $38 promotional membership started March of that year for new and long expired members. I don’t think the $49 rate would go over any better now. Indeed, when we offered the $39 dues sale we said it was important for the rate to start with a “3,” yet we then ignored that idea when the dues sale rate was changed to $41. I think we were better off at $39 and that the change to $41 has hurt membership more than expected. All major classes of membership but Senior and Family are off since then, but adult is down the most.
Instead of charging more and hoping this won’t severely hurt membership when our recent experience shows otherwise, we should consider lowering dues and expenses for our junior membership classes, where interest in a magazine is the lowest. Even with our new $7 junior tournament membership, the number of USCF rated scholastic tournaments appears to be decreasing, with some organizers using other rating systems. Entries in the national scholastics have also declined somewhat in recent years. Lower dues will be attractive to scholastic organizers and can turn this situation around, and we can afford to lower dues for kids if they receive an online publication.
Unlike adults, many of whom prefer hard copy Chess Life to online, kids are really into the internet, and I think most will be happy with an online magazine. In 2005 before Chess Life for Kids was created, this was considered by the Scholastic Council with some support expressed, but most were opposed. I hope the council will support such a change now, and think it will both expand scholastic chess and give USCF a huge financial boost.
For example, here is one possibility, which assumes we stop providing Chess Life free online and include a password required magazine with membership, and uses $1 per issue as magazine cost.
A) Scholastic dues are now $17 with a $2 commission. Most affiliates pass on the commission so most players pay $15. If magazine printing & mailing is $6 and processing cost $2, we retain $7.
We eliminate the cost of printing and mailing 6 issues of CL4K, saving probably about $6 per year. We end membership card mailings and make them available for players to print out on line, saving maybe another $1? (I know such mailings are sponsored now, but the online printouts can also be sponsored). We save some staff time because a separate TLA section will no longer be needed; CL4K can just link to the regular TLA section. We can spread the content out and make the magazine monthly without extra cost. Overall, if we save $7, the dues could become $10 with a $2 commission. $8 should be very attractive to scholastic organizers compared to $15! And maybe we could offer a junior tournament membership for $3 or $4. We retain the same average net on each member, but by having more rated scholastic events, get more members.
We now have 26,000 scholastic members. If lowering dues minus commission from $15 to $8 causes enough additional tournaments to be rated to bring this up to say 33,000, and we retain a $7 net, we are ahead by $49,000.
B) Youth dues are now $19, with a $2 commission, and they get 6 issues of Chess Life. We lower these dues to $17 with a $2 commission. They are paying $2 less and getting twice as many issues, and kids like things to be online, so most should be happy. Even if the $2 drop doesn’t cause many more JHS/middle school events to be USCF rated, if we lower our cost by about $7 per member, we are ahead about $5 per member.
With over 7000 Youth members, this could increase revenue by about $36,000.
C) Young Adult dues are now $25, with a $2 commission and 12 issues of Chess Life. We merge this category with Youth and offer it for $17 with a $2 commission. High school and college organizers will love the $8 drop in cost, and players will like it as well while most won’t mind the switch to online Chess Life.
A relatively small number of players will want to receive hard copy Chess Life. They (unlike adults) are unlikely to drop out as a result, and will become adult members, increasing revenue to USCF.
We would save $13 on each membership, and with the $8 drop in cost, come out $5 ahead of what we retain now. With 9000 Young Adult members, that’s a $45,000 gain. Also, the $8 drop should cause some nonrated high school tournaments to switch to rated, increasing membership. Guessing 1000 more members, that’s another $14,000 net. Also guessing that 400 Young Adults will pay $41 for regular membership to get hard copy Chess Life, that’s about $13 more net on each, or about $5000.
It’s all a guess, but the total is $49,000 + $36,000 + $45,000 + $14,000 + $5000, or $149,000. Even if I am too optimistic, we’re probably still well ahead. All the related discussion at our meeting was in favor of making Chess Life for Kids online only; the above numbers were not discussed, nor was the idea of removing hard copy Chess Life from Youth and Young Adult.
Source: New York Times