Increasing Revenues Why Should Societies & Councils Care?

1. Increasing RevenuesWhy Should Societies & Councils Care? John Vig Chair, TAB, and VP, Technical Activities February 2005

2. Reasons to Care About Increasing Revenues • S/C responsible for most of IEEE’s revenues (of ~$227M)* • Inflation alone requires ~$7M/y of new revenues • Offset infrastructure charges and other expenses • No. 1 reason for non-renewal: “Membership is too expensive” • Dues produce only ~19% of revenues • Need money for initiatives** (investing in the “business”) • Need money to be more transnational • Publications & conferences: ~78% of revenues • Pubs revenues are threatened by open access & scholar.google.com • Most of pub. & conference revenues go to the S/C * Based on 2003 actuals without investment income; Source: IEEE Audited Financials ** $30M submitted; $2M approved for 2005

3. Overhead Rates* - Averages for S/CNumbers vary based on reserves, ASPP income, conf. proc income, membership size, headcount (if they have staff) and expenses. Actuals= 22% * Actuals are typically lower than budget. Corp OH = Indirect and direct infrastructure charges; TAB OH = TAB support line (funds TAB infrastructure); Soc OH = Society Admin (cost centers 19xx; funds S/C general operations, and executive offices.)

4. A Successful Society? Assume: • Society expenses = $1M • Conference surplus (>15%) = 100K • VP Conferences is a hero • Publication surplus = 100K • VP Pubs is a hero • Net of all else = 0

5. A Successful Society – part 2 Further assume that: Society is assessed infrastructure charges (overhead) of 27% = $270K Then, even though the society netted 100K each on its conference & publication, the society lost $70K!!! Leadership: “They robbed us again!”

6. IEEE’s Revenues From Operations1Membership dues = 19% 2004 Total Revenue ~$260 Million 1 Omits Investment Returns on Reserves; Source: IEEE Audited Financials

7. Dues are a bit less of an issue in 2004 than they were in 2003. This is very likely due to the slower rate of increase in dues and assessments in 2004. IEEE member dues rose 9% in 2003 and 3% in 2004. IEEE U.S. regional assessments rose 6% in 2003 and 3% in 2004; outside the U.S. regional assessments did not increase in 2003 and 2004. From the list below, please check all the reasons that influenced your decision not to renew your IEEE membership. (Select all that apply.) (Percentage of respondents) Other may be categorized as follows (as a % of “other”): 12% Cost/costly–not worth the money, don’t want to pay that much 11% Unhappy with IEEE on a wide range of service/product issues 6% Personal status changed–health issues and financial difficulties 4% Career/Work–Career change, interests have changed 4% Job–new job, job has changed, no longer have a job 4% Unemployed Others are less than 4% Note: Percentages will not add to 100% because respondents were allowed multiple responses to this question. IEEE Research

8. Membership Dues “Membership is too expensive” is the no. 1 reason for non-renewalBylaws I-108: Dues “increases shall be made in accordance with the rate of inflation, in the United States based on the Consumer Price Index (CPI) for the preceding calendar year, rounded up to the nearest whole dollar.”How does increasing dues every year make sense?Why not increase revenues other ways, instead?Dues revenues x CPI = <$1.5M/year$1.5M = ~$15 average conf. reg. fee increase$1.5M = ~20 new IEL sales (~3% increase)$1.5M = ~300 new Enterprise sales (out of 100K sales prospects)

9. Membership Growth Outside the US1963-2004

10. Membership by Region

11. Transnational Scorecard (1)

12. Transnational Scorecard (2)

13. IEEE Product Sales1999-2004F in $ millions / 129% growth in 5 years $94.7 $41.3

14. IEEE’s Revenues From Operations1Publications = 50% Publications Business Open access (NIH) + scholar.google.com + COUNTER compliance = trouble for IEEE’s pubs business 2004 Total Revenues ~$260 Million 1 Omits Investment Returns on Reserves; Source: IEEE Audited Financials

15. But This Important Program Is Subject To Several Threats • IEL customers demand usage stats by title – in “Counter” assoc. format • We estimate 15% to 30% of IEL customers don’t use all titles and will ask to trade down • Switch to smaller packages may drop IEL revenue 10% to 15% 10% to 15% of IEL Revenue At Risk Due To “COUNTER” Usage Stats

16. But This Important Program Is Subject To Several Threats • Open Access gives articles to readers for free • Google Scholar makes it easy to find these free copies, so people don’t need a subscription • There are many proposals for new business models, but they won’t replace subscriptions 100% 20% to 50% of Total Revenue At Risk Due To Open Access and Google Scholar

17. IEL Rev IEL Net Margins are between 50-60% Others Portion TAB Portion STD Portion 2% 88% 10% What happens from increased IEL Revenue?

18. IEEE Enterprise • Launched June 30, 2004 • A flexible, cost effective new way for business to search and access IEEE information • Instant desktop access to over a million articles from IEEE journals and conference proceedings • Not available to Academics • Three access levels available • Level 1 - $4,995: 350 downloads ($14.28/article) • Level 2 - $9,995: 800 downloads ($12.50/article) • Level 3 - $17,495: 1,750 downloads ($10/article)

19. Sales Channels for IEEE Enterprise • Sales forces • IHS Inside Sales • IHS North American sales • International select IHS subsidiaries • Independent dealers worldwide • IEEE direct sales team Closing sales leads from: • IEEE Discover site • Direct Mail campaigns • Telemarketing • IEEE Section and Society Pilot Program Note: None of these channels are exclusive in any territory, but IEEE cannot sell Enterprise direct to a list of 985 North American companies that IHS is in active commercial negotiation with. IHS subsidiaries and independent agents around the world also have an active prospect list that IEEE cannot sell Enterprise to directly (Note: the IEL product is a different story, IEEE has an exclusive sales agreement with IHS except for North American Academic and Government accounts).

20. Rebates to Societies • Rebates of 20% of the initial price and 15% of the renewal price shall be credited to S/C that are the procuring cause of the new or renewal license of IEEE Enterprise and the IEEE/IEE Electronic Library (IEL). • 20% of IEL  $21K; 20% of Enterprise  $1K to $3.5K • When a S/C and IEEE staff are jointly the procuring cause of a new license, 14% of the initial price shall be credited to the S/C. • When a S/C is the procuring cause of a new IEL license in IHS' territory (such as Corp. NA and Academic/Corp/Gov’t markets in RoW), a $3500 rebate (not 20%) shall be credited to the organizational unit.

21. Section and Society Participants • 2005 Pilot Program participants 6 sections and 2 societies • Bangalore • Beijing • Brazil • Northern California • Ottawa • Spain POC: Michael Spada m.spada@ieee.org • Computer Society • EMBS

22. IEEE’s Revenues From Operations1Conferences = 34% Conference Business 34% 2003 Total approximate Revenue $227 Million 1 Omits Investment Returns on Reserves; Source: IEEE Audited Financials

23. IEEE ConferencesIEEE Society/Council Sponsored/Co-Sponsored Conferences * *NOTE: 4 Conferences Cancelled in 2003 due to SARS

24. Conferences are Increasing in Importance • Pubs, conferences and membership dues are 96% of total IEEE revenues • Pubs are at risk due to open access and COUNTER compliance • Membership dues are only 19% of revenues • “Membership is too expensive” is the no. 1 reason for non-renewal • Society memberships declined 4.6% in 2004 & 12% in the last 3 yrs • Conferences are stable

25. Conferences Facts/Finances 2 • 2003 registration fees (~$400 to $600) were ~20% lower than competitors’ (~$500 to >$700) • Reg. fees = ~25% of total costs (airfare + hotel + meals + car/taxi + reg. fee = $1.6K, ave.) • Loaded cost of employee’s time away from job >>$1K • $50 ave. fee increase  ~2% total cost increase • $50 ave. increase has negligible effect on attendance, but yet, it yields >$5.5M net* * Net to IEEE would be less because some conferences are cosponsored

26. Conferences Facts/Finances 1 • 325 conferences/year; >115,000 attendees • $10 ave. reg. fee increase  >$1M net* • 2004 conference revenue ~$62 million = ~25% of the total IEEE revenues • Half of attendees are non-members – good opportunity to do sales & marketing • “Overhead” not included in conference budgets

27. Reasons to Care About Increasing Revenues • S/C responsible for most of IEEE’s revenues (of ~$227M)* • Inflation alone requires ~$7M/y of new revenues • Offset infrastructure charges and other expenses • No. 1 reason for non-renewal: “Membership is too expensive” • Dues produce only ~19% of revenues • Need money for initiatives** (investing in the “business”) • Need money to be more transnational • Publications & conferences: ~78% of revenues • Pubs revenues are threatened by open access & scholar.google.com • Most of pub. & conference revenues go to the S/C * Based on 2003 actuals without investment income; Source: IEEE Audited Financials ** $30M submitted; $2M approved for 2005

28. Is A Large Increase In Net Possible? • IEL • Currently have ~700 IEL customers @>$106K per customer. • Large potential for additional sales, especially via consortia, e.g., of small colleges and universities, and new packages. Additional 200 IEL sales would result in incremental revenues of >$21M+;  >$12M net. • Enterprise • Average price ~$10K. • Worldwide number of sales prospects >100K • Potential revenue: >$1B! • Sales to 1% of the prospects ~$5M net • Additional potential for increased net from conferences; $50 increase in average registration fee  $5M net

29. What Could Be the Effects of Increased Revenues? $22M of extra net could: • absorb all indirect infrastructure charges to S/C (2005B: ~$8.6M), • absorb the cost-of-living dues increases (~$1M+), • provide an extra 2% of revenues for reinvesting in the business (~$5M), • provide an extra 3% of revenues for increasing reserves (~$7.6M)

30. What Can S/C Presidents Do? • Show this presentation to your AdCom/BoG • Be an ambassador for IEEE*; not just for your S/C • Don’t raise membership dues; instead… • Participate in the sales rebate program • Use your conferences for sales & marketing - IEEE exhibit booth - arrange free access to Xplore during conference; - arrange free two-week Xplore trials for interested organizations after the conference • Be aware of “overhead” in conference budgeting • Charge competitive conference registration fees; generate $$$ for doing good things * For example, understand and explain Infrastructure