A high-level summary and interpretation of ACM finances

:: academia

I’m in the middle of liaising with the UBC library to attempt to negotiate joining ACM Open. It’s not going well. While US universities appear to see cost increases of 2x—3x, Canadian universities are seeing costs of 10x—20x. And our budgets run much tighter, and with far less research funding, particularly for article processing and other publication costs. A 10x—20x increase in publication costs is hard or impossible to swallow.

So, I’ve been forced to look at publishing—where should I publish, how much will it cost, etc—and one question I asked was: why does ACM Open cost so much? It’s a lot more than other open access journals. So I started looking at ACM finances and.. well…

Here’s my dive into ACM finances, and questioning fundamental claims surrounding ACM publishing costs.

UPDATE, March 1 2024 After discussions with other ACM members and feedback on this article, I’ve realized there are several errors in the analysis and the interpretation. I’ll publish an updated version eventually, but leave this version for transparency and as a record.

In short, here are a list of errors in the below facts and analysis:

  1. The data relied upon, FY 2022, is atypical due to including running conferences under COVID restritions. Conferences generally pay for themselves.
  2. The $700 average cost of an article is justified by the Form 990s, despite the profit. This can be seen by cross-referencing the ACM publications finances report with the Form 990s, which is somewhat difficult to do because of the difference in categorizations and granularity of the different reports.
  3. Eliminating membership fees would actually increase costs, since it would likely increase membership, and members receive various benefits which incur costs.
  4. The ACM is probably not as bad as it seems at investing. The calculated return on investment appears to be atypical or artificially low. Further, for very good reasons, the ACM has a conservative investment strategy.
  5. The assets, and income from assets, are at least partially restricted in various ways, both from donors (restricted or endowed funds), or because it is held for the SIGs, which limits how it could be spent down.

However, I still stand by my high-level interpretation of the high profit and high assets of the ACM.

Outdated, invalid information

A high-level summary of ACM finances, from an objective view point

The ACM publishes annual reports in which it summarizes financial information such as its revenue and costs etc. The most recent is available here: https://cacm.acm.org/magazines/2023/4/271230-acm-publications-finances-for–2021/fulltext

Others have relied on this to infer where the $700 APC is spent, and I will argue about that later.

But these reports are presented in the best possible light, to tell a story; they come from a very subjective view point. They’re also at a very low level, so I have a hard time making sense of them at first.

The ACM is also required to file annual IRS disclosures to maintain their non-profit status, which are available with convenient summaries here: https://projects.propublica.org/nonprofits/organizations/131921358.

These are incredibly boring pure figures, presented on PDFs of tables of rows of undigested data—IRS tax documents. Interpreting them can be difficult, for multiple reasons—tax accounting can be different from our intuitive classifications of things; can involve figures from the past and future, anticipated figures, and completely imaginary figures. However, they should be exact and objective.

Here are some salient facts about that ACM’s finances, as reported to the IRS and the public in these filings, and as somewhat inexpertly summarized to a few significant digits by me:

  1. The ACM has been making, on average, ~$8,000,000 in annual “net income” for the past 10 years, and on average $10,000,000 in “net income” for the past 5 years.
  2. The ACM currently has approximately $150,000,000 in investments, essentially all publicly traded securities.
  3. From these investments, the ACM made approximately $3,000,000 in dividends and $3,000,000 in net gains—an approximately 4.4% return on their investment.
  4. The ACM is currently sitting on $25,000,000 in uninvested, non-interest bearing, cash. (I assume it’s filling a swimming poll in Times Square.)
  5. The ACM spent ~$3,300,000 on “good works” related to its mission—grants, student awards, travel awards, etc. This does not include any expenses spent on operating the ACM, publishing, running conference, running the digital library, salaries, etc.
  6. The ACM’s total revenue was $66,000,000, with a breakdown of the major sources below:
    • Publishing: $24,500,000
    • Conferences: $18,000,000
    • Membership fees: $7,500,000
    • Ads: $1,000,000
    • Investments: $6,500,000
      • Dividends: $3,300,000
      • Capital gains: $3,200,000
  7. The ACM’s total expenses were $56,000,000, with a breakdown of major categories below. There are quite a few other smaller categories, all of which are pretty reasonable.
    • Conferences: $20,000,000
    • Salaries (non-executies): $7,200,000
    • Publication production and services: $6,200,000
    • IT: $5,000,000
    • “Good works” (grants and awards etc): $3,300,000
    • Executives pay: $1,500,000

This summary of the IRS filing is easy to misunderstand. For example, the “conferences” category is probably the most difficult to understand from the IRS filings. Some of this could involve some publication costs, since publications are associated with conferences. The publication costs probably looks artificially low, since the IT category is probably almost entirely related to the digital library, which we would consider part of publication costs, but the IRS considers as a separate line item. Much of the salaries are related to staff for support publication, but salaries are considered separately.

“Good works” is an ill-defined term that comes up in discussion about the ACM’s mission. In the IRS numbers, the things I’ve labeled “good works” are what the IRS calls grants. These are unambiguous expenditures of money by the ACM not on operating any business or service, but that it just gives away. However, note that running conferences, publishing, and maintaining the library are part of the ACM mission.

A subjective interpretation of the high-level ACM finances

Digital library subscriptions and APCs are the main source of revenue

The “publishing” revenue of $24,500,000 is the main source of revenue. We can ignore the conference revenue entirely. This is money that ACM collects ($18,000,000), and then immediately spends on conferences ($20,000,000). The ACM appear to marginally subsidize the cost of conferences, although this is deceptive given the membership fees and the possible misinterpretation of the conference expense category.

Given that they are the main source of revenue, it’s pretty understandable why any change to the structure of that revenue greatly concerns that ACM. A significant change in publication revenue could bankrupt the ACM…. although, it would take several years of literally $0 revenue, given the large pile of reserves the ACM is sitting on.

The ACM is sitting on a very large rainy day fund

The ACM has $25,000,000 in cash and $150,000,000 in investments. Given annual expenses of $50,000,000, the ACM could afford to take in 0 revenue for 3 years, and still wouldn’t be bankrupt.

This seems pretty excessive, but I’m not experienced enough as a financial analyst. The only point of comparison I could quickly find was arXiv, which in 2013 was aiming to cover half of their annual expenses in a rainy day fund: https://info.arxiv.org/about/reports/arXiv_Reserve_Funds_Policy.pdf.

The investments are a little different than the cash, since they could take a while to sell off, you might sell them at a loss, and selling them cuts of a small bit of future revenue. But we’re talking about emergencies and unlikely events here.

The ACM is very profitable, particularly for a non-profit

Normally, a for-profit business would call net income “profit”. The ACM is quite profitable, averaging $10,000,000 per year in profit. It’s not unusual or bad for a non-profit entity to have net income in a given year; it would be a very precarious entity that was constantly breaking even or running a deficit. But this long term trend of surplus is interesting, at least to me, a member, who is being charged various fees that form the revenue of the ACM.

The purpose of a non-profit is not to make profit, but to achieve its mission, which according to Schedule O is:


I do not think it is in the public or professional interest to charge unnecessarily high fees, taken out of research and educational funding, and to hold onto that surplus income as an increasingly large pile of assets.

The profit margin for the ACM is 15%. For context, Elsevier has profit margin of around 40%, while Springer has a adjusted operating margin (similar enough to profit margin for our purposes) of 26%. These two are notorious for-profit academic publishers, and should be considered outliers. They have absurdly large profit margins.

For a better view, we could look at various related industries. Given that this is essentially entirely from publishing, I’ll compare this to publishing companies: https://ised-isde.canada.ca/app/ixb/fpd-dpf/report.

From here, I generated the NAICS 513 - Publishing industries - Financial Performance Data, for year 2022, for companies with average revenue $5,000,000—$20,000,000. The publishing industry profit margin range is –8.8%—17.5%.

The ACM has a very high profit margin for the publishing industry.

The ACM is not spending $700 per article

The ACM is not spending $700 per article to publish and maintain the library, no matter how we look at it.

The easiest way to see this is to observe the approximately $10,000,000 in profit the ACM makes, on average, every year, which comes almost entirely from its publication licensing. The ACM could afford to cut the APC to $595, 85% of the APC, giving up its 15% profit margin, and benefiting its members at the same time.

Arguably, it should not give up all net income, as you want some saved for a rainy day. However, the ACM currently has as large rainy day fund.

The ACM funds no good works at all

The ACM funds essentially no good works at all. 5% of the ACM’s costs go to good works, which represents a margin of error in costs. The good works the ACM funds represent the same amount of money, about 3 million dollars, as it makes in annual dividends from its investments. Arguably, nothing the ACM does—collecting revenue from publishing, membership fees, conferences, or donations—funds the good works. It’s only the passive investment in publicly traded companies that fund the good works—the profit from the ACM’s private capital funds good works.

The ACM doesn’t need to charge membership fees

The ACM could cut its membership fees to 0 tomorrow and still be running a $2,500,000 surplus. In fact, probably more, because it could reduce expenses in maintaining infrastructure to collect membership fees, accounting, etc.

The ACM seems very bad at investing

The investment numbers can be very deceptive because its very easy, totally legal, and advisable to play various tax shenanigans with how investments are taxed, so the actual return may be higher.

But, taken at face value, and considering the ~$500,000 in investment management fees, the ACM is extremely bad at investing their money. If they stuck it in a CD right now, they could in principle receive about 5% return for 0 fees. My personal investments currently return about 4.5% dividends and total return of 13%.

If the ACM would like to hire me to manage their money, my rate is $499,000 per year, payable directly to my unrestricted account at UBC. Past performance is no indication of future success; investments may lose value; this does not constitute legal advice; please consult your doctor before starting any medication; etc.

Conclusions: What should I do with this information?

If you’re an ACM member, then there are several things you could call for, press for, attempt to change, etc.

  1. A policy around limiting the net income, or at least directing the use of the net income, of the ACM could substantially reduce costs for members. This could be short-sighted: investing the net income does build an endowment and future income, could better reduce costs in the future. However, the ACM seems bad at investing, and tying the stability of the ACM to the stock market doesn’t seem any more stable than having a long-term balanced budget at lower costs.
  2. A policy to spend down ACM assets. It’s reasonable to keep some cash in reserves, but it may be unreasonable to keep that much cash invested. On the other hand, all universities have large endowments that are similarly managed, so maybe you don’t want to spend it down.
  3. Eliminate membership fees. They represent 75% of the profit.
  4. Eliminate conferences. Conferences are a major expense for the ACM, and apparently a net cost. Removing them could reduce the obvious costs, but also some of the non-obvious indirect costs, and enable reducing publishing costs.
  5. Fund more good works. Maybe we’re fine with the costs, but we just want to spend that profit on good works. We could afford to triple them, and still be profitable.
  6. Do nothing. Maybe things are fine the way they are.

To draw any more conclusions, I think we’d need to dive into the low-level details of ACM’s budget, start comparing it to other publishers, other organizations, reconsidering the services we want the ACM to provide, etc. Some good, low-level information is available in the annual reports: https://dl.acm.org/doi/pdf/10.1145/3389687. One bit that sticks out to me is the cost of copyediting, which is about $1,000,000, and I’d really pay for them to stop destroying my work.