In explaining the National Geographic Society’s decision to sell its 127-year-old magazine and other assets to Rupert Murdoch’s media empire Wednesday, chief executive Gary Knell stressed the financial urgency facing his organization. The nonprofit society, he told employees in a staffwide meeting in Washington, faced “enormous and real existential risks” if it didn’t sell the properties.
Although the magazine was by all accounts in decline, a sense of financial peril — let alone impending doom — isn’t evident in the organization’s publicly available financial disclosures.
The society, founded in 1888 by Alexander Graham Bell and others, has had relatively robust finances the past few years. In fact, in 2013, the most recent year for which records are available, the organization had one of its best years. Its revenue grew 16 percent, topping $500 million and throwing off a $25.7 million surplus. Net assets expanded by 20 percent, putting the society’s net worth close to $900 million.
As other organizations struggled through the recession, National Geographic profited from its many media operations, including its long-running cable TV partnership with Murdoch’s 21st Century Fox. Overall, between 2010 and 2013, the society pulled in $42.4 million more than it paid out in grants, charitable projects and salaries during that period.
The architects of the organization’s financial health were handsomely compensated as a result. John Fahey, Knell’s predecessor (and now chairman), was paid $5.04 million in his final year as chief executive, 2013, and $1.58 million in 2012. Fahey’s second in command, President Tim Kelly, received total compensation of $2.98 million in 2012, his last year of employment.
In addition, three executive vice presidents and the magazine’s then-editor in chief, Chris Johns, were each paid between $670,000 and $773,000, according to the society’s filing with the Internal Revenue Service.
So why sell now?
Knell and other National Geographic officials say the deal with Fox, which had been discussed for several years, is a good one — for the magazine, for Fox and for the organization.
Fox, the parent of Fox News Channel and other multibillion-dollar businesses, will pay the society $725 million for 73 percent of a partnership that will operate all of the society’s media properties, including the vaunted magazine; digital operations; map, book and film division; a travel service; and a children’s division. The payment is rich: In effect, it values the National Geographic brand at $1 billion.
Morever, for the society, the timing was right — or at least better than waiting much longer. The magazine is still making “a positive [financial] contribution” to the organization, as Chief Financial Officer Michael Ulica put it in an interview. But he and Declan Moore, the executive who will head the partnership with Fox, suggest it is in steep decline; in a few more years, both said, it could be worth much less.
“You can’t control the future,” Moore said Friday, “but you can be smart enough to be prepared for what you see coming.” And in a few years, without the marketing and financial muscle of a large organization such as Fox, the declining magazine would put the society in “an untenable” financial situation.
As for the society’s growth in recent years, Ulica said much of that has been driven by its investment portfolio, not its media properties. With more than $900 million in securities on its books, the society rode the Dow Jones industrial average up. For the moment, it remains vulnerable to its wild swings.
The money it gets from the asset sale to Fox will give National Geographic a potentially more stable foundation. It will swell the society’s endowment to more than $1 billion and provide the cash flow for it to double its annual spending on philanthropic activities in research and exploration. The news of the deal with Murdoch coincided with the fruits of one of those charitable projects: a two-year archeological dig in South Africa that uncovered fossils from what scientists say is a newly discovered ancestor of modern man.
As for the salaries, Fahey’s 2013 compensation, which includes a pension contribution and other bonuses for his long service at the organization, ranks among the highest of any such executive in the country.
According to a 2014 study of 3,946 mid- to large-sized charities by the nonprofit watchdog Charity Navigator, the median salary of CEOs at nonprofit organizations in 2012 was $120,396. The median for charities that spend more than $200 million was $526,679.
But Ulica said that a direct comparison of salaries at traditional nonprofit groups with those at National Geographic isn’t fair. Thanks to the society’s many revenue-generating operations — many of them created under Fahey’s years as chief executive — the organization is a “hybrid”: part charity, part commercial enterprise.
After shedding its media operations this week, the society will go back to where it started, dedicated solely to exploring and mapping the world.