A distinctively different office building is about to rise from a muddy pit at 16th and M streets NW.
Unlike its box-shaped neighbors downtown, it will step up from the street like a terraced Mayan temple--not so surprising, since the building was designed for the National Geographic Society and will connect the three M Street buildings that now form the society's headquarters.
And unlike its neighbors, the $30 million building will be paid for in cash.
That turns out to be not so surprising, either, because the National Geographic Society's publishing business is a remarkable success, thanks to a long-standing reputation for photographic quality and its nonprofit institutional status that frees it from both property assessments and corporate income-tax liabilities and assures it a postal rate well below what its profit-seeking competitors must pay.
Despite its microscopic attention to accuracy and detail, on the subject of money, the National Geographic is amiably imprecise, a little like the millionaire who doesn't carry a wallet and isn't certain what's in the bank account, exactly.
Gilbert M. Grosvenor, 50, president of the society and fourth generation of the family that has guided the society's activities for most of its 93 years, recently discussed the organization's building program and financial position in a rare interview on those matters.
The society spends about $220 million annually, give or take some millions, and has assets of more than $100 million, which will be heavily tapped to pay for the new M Street building, he said. The figures are approximate. Those curious for more detail can get it from the society's public statement with the Internal Revenue Service, Grosvenor added.program and financial position in a rare interview on those matters.
The society spends about $220 million annually, give or take some millions, and has assets of more than $100 million, which will be heavily tapped to pay for the new M Street building, he said. The figures are approximate. Those curious for more detail can get it from the society's public statement with the Internal Revenue Service, Grosvenor added.
"I really don't measure success and growth by the financial bottom line," Grosvenor said during the interview in his elegant corner office in the society's headquarters building at 17th and M streets. The measure of success is the size of the audience that reads the National Geographic's magazines and books and sees its educational films and television features, he said.
"I want to put one thing in perspective," he said. Assets and revenues are "financial information that basically we don't hand out," he added. "We have no stockholders. We have nobody who takes money out of this organization. That's the total accumulation of 93 years. So while it may seem like a lot of money, in reality, it isn't."
National Geographic's competitors don't agree.
The reason that building is going up is that a money-making nonprofit organization has to keep finding ways to spend its wealth, said Peter Diamandis, who was involved in the initial, unsuccessful attempt to launch the magazine GEO in the United States, in competition with Geographic. (Diamandis' firm sold GEO to another publishing firm, which continues to produce it.)
"I'm not an antagonist to the Geographic," Diamandis said. "It's a helluva publication. But speaking as a publisher--and a taxpayer--I do question what they're doing with that avalanche of money they're making every year," added Diamandis, executive vice president of Gruner & Jahr USA in New York City.
The great lengths--and expense--Geographic will go to to get photographs, check quotes and data are legendary. It even uses a computer to make sure the words in the articles prepared for its children's magazine, World, aren't above its young readers' heads.
National Geographic's original charter as a scientific organization "is a little bit of a sham," Diamandis said. "They're publishers. They're in the magazine business. They're not out charting the Earth."
The source of the society's financial strength is its 10.7 million members who pay $13.50 a year in membership dues and receive in return the monthly National Geographic magazine in its familiar, yellow-bordered cover.
"We're financially healthy because our magazine is . . . underpriced, when you come right down to it," Grosvenor said. "That's an ace in the hole."
For 20 years, during the 1960s and 1970s, membership dues increased only $2 or $3, Grosvenor said. "We're very proud of that." However, in the past two years, the price jumped by $4. "We've never had that kind of inflation before. It's providing a greater gross income, but the bottom line remains the same," he added.
Even with the recent increases, the National Geographic membership dues constitute a very low magazine subscription price in today's market--about one-third the $36 annual price for GEO. "The Geographic is the best magazine bargain in the country," said an envious David Legge, associate publisher of Houston City Magazine.
"Our members are our stockholders," Grosvenor said. "They own us, if you will, and we're paying them handsomely, in my opinion, for their investment. Therein lies the difference between the Geographic and most profit-making companies. The difference is, we don't have to pay dividends, we don't have to justify a return on capital, we don't have to show a profit in order to be financially stable."
In fact, the Geographic has "profited"--its reported net worth grew by nearly $9 million during 1980, a $3 million surplus from operations and nearly $6 million in the growth of its stocks, bonds and other assets.
Under the law, however, it is permissible for a nonprofit, tax-exempt organization to make an annual surplus, said Bruce Hopkins, a Washington attorney who advises nonprofit firms. "It would be a poorly managed organization if it didn't have a surplus every year," Hopkins said. A nonprofit organization isn't violating the law as long as it doesn't distribute surpluses to members or officers, he said.
National Geographic's resources are substantial, based on a look at the society's filings with the IRS.
Revenues for 1980 included:
Membership dues, $110.2 million.
Interest and dividend income, $10.3 million.
Book sales, $57.3 million.
Advertising revenues, $26.4 million.
Subscriptions to the society's World magazine for young people, $10.9 million.
Educational films, $1.7 million.
Lectures and television revenue, $517,212.
In addition, the society received $11.9 million from the sale of stock and other assets; however, these transactions produced a net tax loss of nearly $425,000 after subtracting the the purchase price of the assets.
Revenues totaled $217 million.
Expenses came to $214 million, leaving a $3 million surplus, which was added to the society's financial reserves. That addition, plus a $5.7 million increase in the society's investments, raised its net worth from $109 million in 1979 to $118 million last year.
The $214 million in expenditures went for:
National Geographic magazine publication, $83.5 million including $14 million for postage and $2 million for travel .
World magazine, $10 million.
Books and other publications, $46 million.
Advertising, $23 million.
Membership promotion and notices, $7.7 million.
Compensation of officers, directors and trustees, $1.6 million.
Other salaries and wages, $35.4 million.
Pensions, benefits and payroll taxes, $9.4 million.
Contributions to charity and grants to researchers, $4 million.
The society's growth in the past four years has essentially kept pace with inflation, Grosvenor said. In 1976, membership dues amounted to nearly $82 million; other income was $64 million, for total revenues of $146 million. Expenses came to $143 million. The net worth of the society's property, investments and other assets totaled $87.7 million.
It is the steady increase in the society's net worth to $118 million at the end of last year that makes it possible to pay for the new building with cash over the next three years.
A major factor in that growth has undoubtedly been the reduced postal rates that the Geographic can use thanks to its nonprofit status, magazine industry experts say. The minimum nonprofit rate is 6.6 cents a pound with additional charges based on mailing distances and advertising lineage. Profit-based publishers pay a weight-rate of 12.8 cents a pound, plus other charges.
Diamandis estimated the Geographic would be paying at least $21 million a year for postage rather than $14 million if it weren't a nonprofit institution.
The society has been preparing to finance the new building for the past five years, and has been saving for decades, Grosvenor said. The 1980 tax filing shows that its wealth includes nearly $35 million in U. S. government securities, $61.8 million in corporate bonds, $33.9 million in corporate stocks, and buildings, furniture, presses and other equipment valued at $48.5 million before depreciation. The value of the buildings is based on original cost and is undoubtedly low, Grosvenor said. And District of Columbia records agree: the society's land on M street and its three buildings there are assessed at a total of $45.5 million, and that doesn't include the society's large membership center building on 150 acres in Gaithersburg.
The new building is intended to meet the society's needs well into the next century, Grosvenor said. The new space will provide room for society staff that is now located in various rental offices in Washington. The top three floors of the seven-story building will be leased and the return on that rental space should pay for the building's cost in 12 to 15 years, he said. "That's how I intended to get my capital back," said Grosvenor. The National Geographic now has 1,100 employes in downtown Washington and another 1,100 in the Gaithersburg building. As the staff expands, the society will gradually reclaim more of the new building until it is filled.
A 400-seat theater will be constructed in the new building and made available to selected groups, as well as to society members. The architect, David Childs, was asked to design a building that doesn't dominate the original headquarters on 16th Street, but still ties in visually with the much larger present 17th Street building.
The society's investment portfolio won't grow for five years, "but we won't endanger the financial stability of the organization," Grosvenor said. In 15 years, the reserves of the society should be restored to their previous levels, "and we will have a building that will hopefully fill our needs" for 30 years or more.
It isn't surprising to see Grosvenor looking that far into the Geographic's future. The society has been a family institution. It was formed in January 1888 by "33 public-spirited men" under the leadership of Gardiner Greene Hubbard, a Boston lawyer who had helped his son-in-law, Alexander Graham Bell, organize the first Bell telephone company. Bell succeeded Hubbard as president of the society in 1898, following Hubbard's death.
In 1899, Bell hired a 23-year-old schoolteacher, Gilbert H. Grosvenor, "to put some life in the magazine and promote membership," the society says, and that he did, appealing to the members' curiosity about the world around them, and pioneering in the use of color phototography. The society also began a program of support for explorations and research, which would include Richard E. Byrd's flight over the South Pole, the first American ascent of Mount Everest, and the explorations of the Leakey family into mankind's origins in Africa. These ventures expanded the society's appeal to readers and its credentials as a scientific institution critical to maintaining its nonprofit tax status .
Gilbert Grosvenor married Bell's daughter, and their son, Melville Bell Grosvenor, was groomed almost from birth to carry on his father's work as editor of the magazine and head of the society. During his decade in those positions, between 1957 and 1967, he put color photographs on the magazine's cover, invested in high-speed color presses, expanded the society's book publications and began production of the Geographic's color television features.
Gilbert M. Grosvenor, Melville Grosvenor's son, became the society's 14th president in August 1980, after 10 years as magazine editor. His salary last year was $126,000.
The society is governed by 24 trustees, who fill vacancies in their own ranks and annually elect officers who operate the society's businesses day to day. Melvin M. Payne, a long-time officer of the society, heads the board of trustees; he and six other society officers or former officers are on the board and the rest are outside members.
The trustees have traditionally included top members of Washington's establishment--Chief Justice Warren E. Burger is a trustee, as are Lady Bird Johnson, Lloyd H. Elliott, president of George Washington University, and J. Carter Brown, director of the National Gallery of Art. The result is an essentially self-perpetuating hierarchy that apparently has satisfied the society's members by any available measure.
Gilbert M. Grosvenor, like his father, moved up the ladder at the Geographic until the trustees picked him to run it a year ago. Despite appearances to the contrary, it is not a family business, he said. "It just so happens that three generations of my family have devoted their lives to the organization. I'm the only member of my family employed in the organization now. Whether this is the end of any family involvement in the National Geographic Society, I haven't the faintest idea.
"If you're a member of the National Geographic Society you own just as much as I do, and it's just the way it should be. The board has made it very clear to me I serve at their pleasure," said Grosvenor.
It happens that the family has left behind tangible marks of their work--the buildings in the M Street block where the society is centered. In 1903, the society moved into the Hubbard Memorial Building, named for the founder and donated by his heirs. A new headquarters was built alongside the hall in 1913 and expanded in 1932 and 1949 to keep up with the society's growth under Gilbert H. Grosvenor. And in 1964, the society moved its headquarters to 17th Street in the 10-story white marble building that also contains Explorers Hall, the society's museum. The society considers it a monument to Melville Grosvenor's service.
The legacy that Gilbert M. Grosvenor talks about now is likely to be electronic. "Here's the Geographic from 1890 to 1981," he said, indicating the bound volumes of the magazines, beginning with the first issue, that fill an office bookshelf. The magazine could be reproduced on a a few video discs and projected through video disc players over color television sets. The discs would cost not much more than a phonograph record; the players would cost $600 or so, about what many consumers spend for stereo music components, he said.
"Look at this atlas," Grosvenor said, lifting the Geographic's latest world atlas. "It sells for $44. It costs me $7 just to bind it. Look what I could do with a video disc of the atlas. I've got 54,000 frames on each side of the disc. I could have infinitely more information for signficantly less money if the technology expands as fast as I think it's going to."
The Geographic's illustrations and graphics could be animated, he continued. "Here's the solar system. You could have that in motion, showing the revolutions around the sun. We could show a storm center by a series of satellite photos, showing how it developed.
"Think about plate tectonics" the shift of the continents over the earth's surface . "You could take the planet Earth when it was one solid land mass, break it apart, and stop at any millenium you want to." An animated atlas, on video disc, shouldn't cost more than $20, he said.
"We're committed to looking out for the next five to 10 years to see how we can best meet our primary mission, which is to increase and diffuse geographic knowledge, and that's what I'm really interested in. I have to have the financial resources to do that."