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SEG finances over the past 75 years—the real story

Sumner Geophysics, Houston, USA

Why are SEG finances of interest and why should anyone care about them? Even more to the point, why should you or any SEG member care about the history of SEG finances?

To spare the details of the raw data and the inflation-correction tables that I used, here is my "elevator-ride" summary (the sort of information that could be related to a fellow geophysicist in a couple of minutes).

SEG exists to provide geophysical information and technology related to geophysics to its members. At present, we have an annual budget of around $8 million (all financial figures are in U.S. dollars). Seventy-five years ago our annual budget was less than $4000.

Our membership started small and grew. We were 39 in 1930 when we were essentially an interest group within AAPG, 5000 in 1955 (the last year we shared our annual meeting with AAPG), 13 500 in 1980, and more than 23 000 in 2005. It might seem that our growth was smooth but a glance at the membership by year (Figure 1) shows that this has not been the case. Over our 75 years, I find six clearly identifiable membership epochs: the Early Years (1930–47), the Post WWII Boom (1947–57), the Pre-embargo Years (1957–73), the Boom (1973–85), the Bust (1985–89), and finally, Consolidation and Globalization (1989–2005).

View larger version (18K): [in this window] [in a new window]   Figure 1. Membership and the six significant epochs in the history of SEG.

The Journal era began in 1930 and continues today. The Books era started in the 1960s and continues as an important SEG activity (Figures 2 and 3).

View larger version (44K): [in this window] [in a new window]   Figure 2. The upper figure shows the total income to SEG and the contribution from dues and advertising on a per-member basis in 2005 dollars (if interested, see the steps in data compilation and conversion in the appendix to this article). The brackets on the figures mark the three significant eras (Journal, Books, and Meetings) of SEG.

View larger version (27K): [in this window] [in a new window]   Figure 3. Publication and total expense on a per-member basis in 2005 dollars. Publication expenses tracked total expenses until the mid-1970s. The jump in per-member expense starting in 1976 marks the increase in the size of the annual meeting. The jump in expense matches the even larger jump in income (see Figure 2) from the annual meeting and the OTC. Blue bracket marks the "Journal only" era—our dues paid to publish GEOPHYSICS. Green bracket marks the "Journal and Books" era that started in the mid-1960s and continues to today—our dues paid for only GEOPHYSICS, and our publications paid for themselves and more. Gold bracket marks the "Journal, Books, and Meetings" era—our dues pay part of the costs for our journals while income from publishing and meetings pays for our other programs.

Is it correct to assume that our next era will be the Internet era? If so, we must learn how to pay for it or devise a way in which it can pay for itself.

Each era had its own character in terms of finances, membership, publications, and services to members. The details will take longer than an elevator ride. If you have the time, read on.

	Introduction

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
The financial history of SEG tells a tale as much as the names of our members and a list of our publications. For example, we have always needed additional funding for our publications. Our dues alone do not cover the costs. As with most scientific and technical organizations, we are our own customers and our market is limited. Our best sellers, Sheriff's Encyclopedic Dictionary of Applied Geophysics and Yilmaz' Seismic Data Analysis, don't exactly compare to the latest Grisham novel in sales. GEOPHYSICS and THE LEADING EDGE don't fly off the shelves like the Sports Illustrated swimsuit edition. We always spend what we take in. We don't make a profit.

Petroleum and mineral economics strongly influence our membership and our finances. An increase in exploration typically translates to an increase in our membership. Now that we have moved into an era in which many members are involved with development and production, our technical emphasis has changed.

Another piece of the tale is that our membership has shifted away from North American dominance; we are now truly global.

I've loosely organized what follows into income and expense followed by some membership numbers and a "snapshot" from each of our three periods of 25 years.

Our income is from membership dues, advertising, book sales, and meetings. Our expenses go toward publications (and Web-supported activities), and the staff to aid in publication, advertising, and meetings. The summary from each 25 years also matches the three eras of Figures 2 and 3 mentioned in the "elevator ride" summary: the Journal era, the Books era, and the Meetings era.

	Review and compilation of SEG's financial history

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
Or, in other words, how much is that in real dollars?

In order to get financial summaries from different years into a form that I could understand and that could be compared with each other, I did two things. First, I converted all the dollar amounts using an inflation-correction table. This allowed me to correct for the more than 10-fold decrease in the value of a dollar from 1930 to 2005. Second, I next normalized the inflation-corrected dollars by the number of members.

With the correction for inflation and normalization, I was able to make more meaningful comparisons of expense and income on a per-member basis through our 75-year history. See the appendix for an explanation of the methodology.

	Income

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
As members, we pay dues and expect to receive something in return. Originally the "something in return" was the journal GEOPHYSICS. Since 1982, we have received both GEOPHYSICS and THE LEADING EDGE. How do our dues today compare with those of 75 years ago?

If we compare the inflation adjusted dues in 1938 with those in 1968 and 1998, we find that they were $64 (2005 dollars) in 1938, $59 in 1968, and $63 in 1998. From this example, one might conclude that the average dues paid by our members have been relatively constant. A glance at Figure 2 shows that our dues per member (in 2005 dollars) have ranged from more than $150 in 1936 to around $30 in 1943. Figure 2 supports the notion that dues have averaged around $65 inflation-adjusted dollars per member.

However, because we have a multilevel dues structure, some pay more and some pay less. As it turns out, our dues have never been enough to pay for our journal publications. For the first 35 years, advertising in GEOPHYSICS made up the cost difference and assured that SEG ran in the black. In the early years, our dues represented more than half SEG's annual income. In the past two decades our dues provide less than 10% of our annual income.

In the early years, advertising augmented our income from dues and allowed us to publish GEOPHYSICS. This model held until 1980 as shown in Figure 2. Since 1980, advertising income has increased, but, with the introduction of THE LEADING EDGE, so have our publication expenses. In the early years, advertising provided almost half our annual income while in recent decades it accounts for less than 25%.

Figure 2 reveals that dues and advertising provided all our income through the middle of the 1970s. The annual meeting contributed 5–10% to our income (with an associated 5–10% of our expense).

Then, in the mid-1970s, our annual meeting became a "big deal." Suddenly, instead of producing 5–10% of our income, it was generating almost 50%. Net income from the annual meeting jumped to 15–20% of SEG's net total income by the mid-1980s and continues at that level today. By 1987, our net income from the annual meeting reached $1 million. For the past two decades, net annual income from meetings has provided almost 50% of our operating budget. (Note: About half of the annual meeting income comes from registrations and half from booth space rental.)

To state the obvious, the financial health of SEG now relies heavily on revenue from the annual meeting.

	Expenses

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
The other side of the dues structure is what we receive as SEG members. Our flagship publications are GEOPHYSICS and THE LEADING EDGE.

On a per-member basis, adjusted for inflation, each member received four issues of GEOPHYSICS valued at $79 in 1938. In 1998, each member received six issues of GEOPHYSICS, 12 issues of THE LEADING EDGE, and the SEG Yearbook valued at $235. Recall that the per-member dues in inflation-corrected dollars were $65 in 1938 and $63 in 1998.

SEG also publishes specialized technical books. These are not automatically sent to us. They must be purchased, but SEG members receive a discount on these books.

Figure 3 summarizes the publication expenses per member in 2005 dollars. From the founding of SEG until the mid-1960s, income from member dues and advertising in GEOPHYSICS paid for the publication of GEOPHYSICS. We also published four books that essentially reprinted important papers from GEOPHYSICS. This changed in 1966 with the publication of Mining Geophysics. Unlike GEOPHYSICS, which came as part of SEG membership, members had to buy this two-volume publication. Members and other geophysical professionals bought it, as did libraries. The book brought a surge in income. Our technical publications were on their way.

As SEG grew, we also needed to add skilled people to help edit and publish our journals and our books.

The annual meeting has always been a significant event, but it hasn't always been significant financially.

For our first 25 years, we held our annual meeting in conjunction with the AAPG convention. Expenses and income were modest with little net income to SEG. In the last 25 years, expenses and income associated with the annual meeting have become significant with the net income representing a sizable portion of our operating budget. On a per-member basis and adjusted for inflation to 2005 dollars, our early meetings cost about $5/member and earned about $5/member. Annual meetings in recent years have cost almost $250/member to execute but earn almost $350/member.

Our finances and our membership are linked, in the same way that our membership and the level of exploration and production activity are linked.

We have always had a multilevel membership structure. For the first 25 years, members were either Active or Associate. Since our membership was 80–90% Active during this period, we can infer that Associate members were just beginning their professional careers and would be eligible to become Active members of SEG with seven years of geophysical experience. We initiated a Student membership category in 1941 and students represented 5–10% of our membership until 2003. This changed in 2004 with a jump in Student membership to 15% (3286 of 21 895), clearly linked to the generous underwriting of a corporate sponsor.

Figure 1 plots the total and Active members of SEG by year. Active members provide the core of SEG. They vote and provide the leadership pool. As shown in Figure 1, Active membership grew from 34 in 1930 to 9680 in 1985. The rate of Active membership growth was 100–500 members per year. From 1985 to 2004, Active membership declined by about 100 members per year, from 9680 to 8414.

The numbers of "non-Active" members (Associate and Student) tracked Active membership (see Figure 1) until 1996. However, between 1996 and 2004, Associate membership has grown by almost 500 per year—a span in which the number of Active members decreased. In summary, Active members comprised almost 90% of membership in 1930 (34/39), fell below 80% in 1948 (1446/1822); 70% in 1950 (1640/2500); 60% in 1977 (6240/10400); and 50% in 2000 (8490/16874). In 2004, Active membership made up 38% of the total.

	Snapshots from each 25 years: 1938, 1968, 1998

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
By the late 1930s, we had grown to more than 500 members and had moved out from under the umbrella of AAPG. More than 75% of our members were Active and one could conjecture that those Associate members were new to the profession and would move into Active status once they had a few years of experience.

Member dues accounted for 60% of our income and went toward the quarterly publication of GEOPHYSICS. Advertising in GEOPHYSICS represented an important source of income and assured that we ran in the black. Refer to the pie charts of Figure 4 for a breakdown of income and expense.

View larger version (13K): [in this window] [in a new window]   Figure 4. A snapshot from the first 25 years (1930–1955). Percentage of (a) income and (b) expense for a typical year in this period.

By the late 1960s, we had grown to more than 6900 members. More than 65% of our members were Active, 30% Associate, and 4% Student.

Member dues accounted for 30% of our income. Advertising, book sales, and subscriptions brought in about 25%, 15%, and 5%, respectively. The annual meeting brought in 20% with the remaining income coming from investments and Corporate member dues. Along with the increase in income came an increase in expenses.

Accounting changes combined the expense of staff time with the various activities, such as publications. Publications accounted for 75% and the annual meeting for 20% of our expenses. The remaining expenses were mainly Continuing Education, Lecturers, and related activities. Refer to the pie charts of Figure 5 for a breakdown.

View larger version (14K): [in this window] [in a new window]   Figure 5. A snapshot from the second 25 years (1955–1980). Percentage of (a) income and (b) expense for a typical year in this period.

By the late 1990s, we had grown to more than 15 200 members, with 57% of our members Active, 37% Associate, and 6% Student.

Member dues accounted for less than 10% of our income. Advertising and book sales earned 28%. Investments and the building (the SEG Geophysical Resource Center in Tulsa was built in the early 1980s) accounted for 11%. The annual meeting and OTC accounted for 49% of our income.

There are expenses associated with each of the income-generating activities. For example, the GRC may appear to be a money maker, but the expenses associated with maintaining and operating the building equal the rental income. On the other hand, we pay no rent! Publications accounted for 37% and the annual meeting for 37% of our expenses. The building and office overhead accounted for 17% and the remainder went toward Continuing Education and related activities (Figure 6).

View larger version (18K): [in this window] [in a new window]   Figure 6. A snapshot from the last 25 years (1980–2005). Percentage of (a) income and (b) expense for a typical year in this period.

	Summary

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

By the middle of our second 25 years, book publication represented a significant activity and benefit to membership. Dues and advertising provided about half our income with book sales and the annual meeting providing the rest.

By the middle of our third 25 years, dues provided less than 10% of our income, book sales and advertising provided about a third while the annual meeting and OTC accounted for half. In return, members received not one but two journals, an extensive book publications list, and had come to expect a blockbuster annual meeting. To this we should also add Distinguished Lectures and the Distinguished Instructor Short Course, Continuing Education, and an expectation that everything should be accessible "on the Web."

This seems a pretty good deal for members. By paying dues that are about the same as they were 75 years ago we get four times as much in return! We face a problem in that our increasing use of the Web has little or no income associated with it. How we handle this will be the answer to an important question concerning the viability of SEG as an independent platform for exploration geophysics.

An even more important question concerns the decline in Active members over the past 20 years. If this is any indication of the future, we may have some tough decisions to make in the coming years if SEG is to remain viable and independent. Got any ideas?

Images from the 1930s: (top left) This seismic recording truck was photographed in 1931, outside of Dallas, during a shakedown test. Henry Happell is checking out the instrumentation and geophones, designed by Karcher and McDermott, and built in the laboratory in Newark, New Jersey. The Model S-2 geophones, (earth microphones), each weighing 35 pounds, are shown in the foreground. The box on the running board is the photographic developing compartment. Photo courtesy Texas Instruments; (top right) Seismograph Service Corporation's first full contract crew, 1932 (Learn more about this pioneering geophysical company and one of its principal leaders at http://www.mssu.edu/seg-vm/bio_gerald_westby.html); (bottom) crew members work a shot hole drill.

	Appendix

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
The following brief paragraphs provide the details of my methodology.

I reviewed all annual reports from 1935 to 2004. I could never find the reports for 1930–1934 and assume that they are somehow contained within AAPG's annual reports. Our annual reports contain all the financial information for the Society for the previous year (or two) along with explanations for any expense and income that were out of the ordinary. Until 1954, we did our accounting on the calendar year but changed that on the eve of our 25^th anniversary to fiscal year accounting.

Since it takes 10 of today's dollars to equal a 1930 dollar, I converted the dollars for any given year into 2005 dollars using standard inflation-correction tables. Figure 7a shows the income from dues and expenses for publications after correcting for inflation.

View larger version (44K): [in this window] [in a new window]   Figure 7. Plots of revenue from dues versus expense for publications in (a) inflation-adjusted dollars and (b) per-member cost in 2005 dollars.

Adjusting for inflation allows us to compare dues in 1930 ($15 for Active and $10 for Associate) with the complicated dues structure in 2005 ($75 for Active and Associate, $37.50 for Emeritus, $17.50 for Student; additionally, dues are adjusted by country according to World Bank classification). Adjusting to 2005 dollars converts the $15 in 1930 to $170. As an example, if we compare dues in 1938 with those in 1998, income from dues in 1938 was $3251 ($43 000 in 2005 dollars) and in 1998 it was $860 350 ($986 000 in 2005 dollars).

Because we have always had a multilevel dues structure, it is useful to consider the dues on a per-member basis in present-day dollars. Using our 1938 versus 1998 example, our membership was 668 in 1938 and 15 589 in 1998. After converting to 2005 dollars, per-member dues were $64 in 1938 and $63 in 1998. From this example, one might conclude that the average dues paid by our members have been constant. Figure 7b shows the dues revenue on a per-member basis for the past 75 years.

If we make the same comparison between 1938 and 1998, cost for our publications was $4000 in 1938 and $3 202 000 in 1998. Adjusted for inflation, this was $53 000 and $3 668 000 in 2005 dollars. On a per-member basis (in 2005 dollars), publication expenses were $45 in 1938 and $175 in 1998.

	Acknowledgments:

Top Abstract Introduction Review and compilation of... Income Expenses Snapshots from each 25... Summary Appendix Acknowledgments:

 
Thanks to my fellow members of the Finance Committee over the past three years who have helped clarify the income and expense issues that face SEG: Richard Verm, Terry Young, Steve Hill, and Susie Peebler. Thanks also to the accounting staff at SEG's business office, particularly Nancy Carter and Melanie Laster, for their roles in educating us.

	Footnotes

 
John R. Sumner received a PhD in geophysics from Stanford University in 1971. He was a member of the faculty at the University of California-Santa Cruz and Lehigh University before joining Exxon Production Research Company in 1977. He remained with Exxon, with assignments in both research and exploration departments, until 2003 when he formed Sumner Geophysics. He became a fellow of the Geological Society of America in 1999. Sumner was Technical Program Chairman for SEG's 1995 Annual Meeting and was Secretary-Treasurer on SEG's 2002–03 executive committee. He is an SEG Trustee Associate.

This Article Abstract Figures Only Full Text (PDF) Submit a response Alert me when this article is cited Alert me when eLetters are posted Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Sumner, J. R. Search for Related Content GeoRef GeoRef Citation