Hello Dave,

I hope you had a good weekend (I read where you are out until Monday). I know many of the questions being asked may seem to be pointless, but some of us have ideas and would like to contribute. In reading your answer in the “Model Aviation”/Dues thread, it occurred to me that someone did a bunch of research recently only to find out that advertising costs in MA seem to be significantly below most of the market. To me, and others, that makes little sense as MA has a much larger circulation than any other modeling publication. Do you think we can change that so MA is no longer a cost center?

Hi Jim,
It was a great weekend........ if you were a penguin.

I think that's a legitimate question. I'm not totally familiar with the advertising rates for the other publications but I'll take your word for it and make a couple comments in general.

First I think it's important that we (the Council) allow the paid staff, the experts, the latitude to run the day to day operations of the organization. That's not to say that we shouldn't oversee the operation, set direction, and be ultimately responsible, but we have to rely on the staff to make appropriate decisions in the areas they're educated in.
Now, this really applies to all areas of AMA that are a type of business entity. That would include the magazine, supply and service, custom products, etc. We should look at these as stand alone businesses. The directors and managers should make an effort to make their division as profitable for AMA as possible. The philosophy I'd like to see them bring to the table is to run their "company" as if every expense was a dollar out of their pocket, and every dollar of income was a dollar in. Using that concept it would seem that every entity would be doing its best to improve our "bottom line". For the most part, I think our staff is doing a god job. I know we adjusted our advertising rates a year or little more ago. If it turns out they're unrealistically low, my opinion (without the benefit of an explanation as to why they are what they are) would be that it may be time to take another look.
Dave

Dave, I agree that the EC should set goals and give the tasks to the employees, yet I certainly believe that the EC should MANDATE high-performance levels. That requires that each EC officer be intimately familiar and aware of how the upper management employees are performing.

Model Aviation has lost almost a million dollars each year (in the audit reports) of 2002 and 2003. Outside subscription income in 2003 was some $11,000 less than '02. The advertising income increased by $48,000 yet the amount of advertising has increased by a significantly larger amount. The low cost of the advertising is evidenced in the significant amount of income tax reduction in 2003.
>>>>Income Taxes - The Academy operates as a nonprofit organization and has received exempt status under Section 501(c)(3) of the Internal Revenue Code. The Academy is, however, subject to unrelated business income tax on magazine subscriptions and magazine advertising. The unrelated business income tax expense for the years ended December 31, 2003 and 2002 was $105 and $5,950, respectively.<<<<

Now while tax reduction is great, if my taxes dropped such, then it would mean that my income also had dropped. That portion of the taxable income subject to taxes increased by about $36,000 yet tax went down, evidencing a significant change in rates, profits, and/or proportionment. This may well be a good innovative change HOWEVER: OTOH since the expenses of producing the advertising income of $851,000 + change was offset by advertising expenses of $771,740, then there isn't much profit left to pay tax on. Except for some $80,000+/-, the membership foots the entire Model Aviation bill for a number of people to have a fat-cat job where they can do as they please.
Also take a look at the advertising costs which include a 15% commission for the agent over and above the administrative costs. Kind of a fat deal. Easily Sell lots of cheap advtising, get a healthy commission, have no expense and set back with a case of cold ones.[>:]

As AMA President I know that little item would get CHANGED. How about YOU, Dave?

Also >>>The Academy of Model Aeronautics, Inc. (the "Academy") was incorporated in 1966 under the laws of the District of Columbia. The Academy's primary objective is to promote the educational and scientific aspects of model aviation.<<<<<

Therefore I think that the EC should mandate that Model Aviation, an unrelated business entity should be separately funded,
separately accounted, and required to live on its own merit. For example, an initial WAG would be that:
(1)AMA provide $5 per open member to the entity of MA along with the minimum requirements of MA to fulfill the
requirements of the stated objective.
(2) All costs are borne by the entity MA.
(3) MA would be required to return 5% of gross to AMA, plus all net profit.
(4) Bonus plans would apply to the employees for all net profits returned. No profit = no bonus, Loss = new managers.
(5) Take a long look at in-house advertising as done by all the other mags that have to make a profit.

Hey Dave, don't try to answer all this in big detail. Just place it all in the memory bank. The fact that you will now be aware of some of the significant items concerning MA expense could help place you in the lead in future discussions. [sm=lol.gif]

For all to see: Even Jim Branaum and I can basically agree on at least one thing.

In addition here is one of those things that as AMA EVP, I will initiate appropriate action to change MA from a "drag" IRC 501 (c) (3) expensive-to-membership "Unrelated Business" to a profit-making "Unrelated Business". Method: Currently CLASSIFIED so as to keep enemy defenses guessing. [>:]