#122 Blog Post - Tuesday, March 30, 2021
Posted by: Denny Hatch
The Most Fun, Fascinating & Funkiest
501(c)(3) Business I Have Ever Seen!
(Stick around. You might be able to use this business
model to become rich beyond the dreams of avarice!)
triggered this post is one of Peggy's myriad hobbies—picked up during
the Covid-19 lockdown—the Chinese game of Mah Jongg. Reportedly invented
in the mid-18th century—with an estimated 300 million devotees
worldwide—it's played with 152 tiles. Americans play under the aegis of the National Mah
Jongg League. During Covid-19 Peggy plays with friends online.
From the National Mah Jongg League Website
In 1937 a number of Mah Jongg enthusiasts met in New York City to standardize the game so that all Mah Jongg players would play the same hands and rules—it was at this meeting that the National Mah Jongg League was founded. Each year the League changes the hands and rules to add more excitement to the game.
For more than 75 years, the National Mah Jongg League has been the arbitrator for everything that relates to American Maajih. The League started with 32 members and today numbers over 350,000.
• The League publishes the American
Version of the Rules.
• Supplies the Official Standard Hands
and Rules Cards each year.
• Sells merchandise for playing the game
and replacing missing playing pieces.
• Answers questions and arbitrates
disputes about individual games.
• Makes numerous donations to
A Unique Set of Rules
games—e.g., bridge, poker, chess or backgammon—have a set of rules,
values and pieces known to players all over the world. Mah Jongg is
different. In order to play Mah Jongg in America, Peggy is required to
purchase a $9 (small) or $10 (large) card from the National Mah Jongg
League with the 2021 hands and rules. Anyone who purchases a card is
automatically a member of the League.
The main benefit is you can play Official American Mah Jongg anywhere with any member in the USA. Without membership in the League—and the yearly card—you are outta luck.
In a stroke of brilliantly intuitive direct marketing, Mah Jongg players are totally dependent on the League if they want to play the game.
Actually Nine or 10 bucks is cheap, cheep, cheap considering the many hours of pleasure and social interaction the game brings.
The Official 2021 Mah Jongg Card
The blue card pictured above contains the official 2021 hands and rules for American Mah Jongg players. The product is glossy paper card stock 5" x 18" folded into three 5" x 6" panels, printed front and back three colors over two.
Selling price: $10 for the large card and $9 for the small card. Let's say the average revenue per member is $9.50.
If 350,000 Mah Jongg players spend an average of $9.50 per year, that's a total revenue of a cool $3.325 million. Guaranteed every year. Yum, yum.
This blog post title calls the League "Fun, Funky and Fascinating," because I don't understand the arithmetic. Here's the lede of their Form 990 for the year ending Feb. 28, 2019.
Since the League is a private, non-profit 501(c)(3) foundation, the revenue is not from sales, but rather "contributions, gifts and grants." Two entries above are interesting.
• Look at the Last Line Above:
Contributions, gifts, grants, etc. received: $1,000,000
Golly gee, that's fascinating. First of all I have never seen an official tax form for an organization with many thousands of customers (donations) with exactly $1 million revenue! Always there are a few dollars and cents plus-or-minus. Whatever the actual amount, you can bet your sweet bippy it ain't no $1,000,000 even. Something is terribly odd.
I multiplied 350,000 members spending an average of $9.50 each and the calculator came up with $3.325 million. Yet the League claims an even-steven $1 million revenue. What happened to the other $2.325 million? Where'd it go???
The Rainy Day Fund
Now look at the boxes above:
Fair market value of all assets at end of year (from Part 11, col (c) line 16):
In other words, in their 75+ years the League has amassed a tax free fun fund of $10.4 million walking-around money. Yum-yum.
"84 Years of Friendship & Charity"
Based on Creating Dependency!
The business model is truly unique. The League needs only to send out yearly reminders to players that they must purchase the coming year's card for the new rules and hands. Or else...
Or else they cannot play. Response has to be in the nabes of 80% - 95% (e.g., people die, move, get married/divorced and change names or they can't continue because of failing eyesight, go gaga, etc.).
However, if the League relied solely on these automatic renewals, it would be like the mythical oolum bird that flies in ever decreasing circles until if flies up its own cloaca and disappears.
The League Came Up with
An Ingenious Idea: M-G-M!
When I was running book clubs for Better Homes & Gardens, Macmillan and Grolier, we relied heavily on M-G-M—Member-Get-a-Member. A typical offer: "Introduce a new family to the Dr. Seuss books and the new member will receive two FREE Dr. Seuss books. PLUS AS A THANK-YOU GIFT, YOU WILL RECEIVE TWO FREE DR. SEUSS BOOKS FOR YOUR CHILD!
M-G-M was the second-most profitable marketing technique!
The National Mah Jongg League's
M-G-M Offer to Its Active Members
Sign up 35 or more new members and send us all their names at the same time and we will give your favorite charity a neat-o donation in your name. Your name and favorite charity will be listed in the League's bulletin. Here's how it looks and what is said:
Newspapers and The Love of Fame
IMO the two greatest newspaper men in American history were:
• William Randolph Hearst (1863-1951)
"You furnish the pictures. I'll furnish the war."
—W.R. Hearst to artist Frederic Remington in Cuba, 1898
• Warren G. Harding (1865-1923)*
*Yes, that Warren G. Harding who later became the 29th President of the United States and the second most corrupt occupant of the White House. (e.g. Teapot Dome Scandal.)
When he was in his 20s, Harding and a buddy bought the Marion (OH) Daily Star—a falling apart newspaper about to go out of business. The partners turned it into the largest, most profitable newspaper in the area (which it is today). Their simple publishing philosophy:
"Mention the Name of Every Person
In town at least twice a year."
A huge majority of blokes—men, women, LGBTs—from the bottom of rung of society to the highest reaches (e.g. Bezos, Gates, Musk, Oprah, the Kardashians et al.) adore personal publicity, their names in the papers, guest shots on The View, network and cable TV and social media.
• "Power is an aphrodisiac." —Henry Kissinger
• "Fame is an aphrodisiac." —Denny Hatch
Roger Craver Weighs in
of the savviest, smartest, funniest practitioners of Direct Marketing
Sciences and Arts is America's premier Liberal fundraising impresario
(Democratic candidates and groups, Habitat for Humanity et al.),
The Agitator Blog and co-founder of Donor Voice ("The Experience and Relationship Company.").
I sent Roger a work-in-progress of this post and asked him (1) if I were nuts and (2) was I liable to be sued by the National Mah Jongg League for questioning their Form 990-PF? Roger's reply (reprinted with permission):
As far as I can tell, these guys, while somewhat eccentric, are legit.
I went back and looked at older tax returns (attached) and they comport, more or less with what you have. Some years they make more, some years less. My guess is that while they may claim certain number, any inaccuracies are probably not intentional
Why do I say this? None of the officers are paid, there's no unusual expenses, and they do give away money. The IRS regulations require that a foundation give away 5% of its assets each year and the tax years I looked at show they're doing this. I did not look at the 2020 return in your draft. The charities they give to are legit.
I've also attached a piece from the
Milwaukee Jewish News that gives a brief history of how this got started and also a copy of their current Mah Jongg Blog. Fascinating.
In short, this looks to me like a legit, albeit somewhat bizarre charity. But then 'bizarre' is in the eyes of the beholder.
Let me know if other questions.
Takeaways to Consider
• The National Mah Jongg M-G-M membership scheme is a helluva a lot cheaper that marketing with direct mail shots at say, $750/M. For starters, what lists could they rent. The League owns probably the only list of Mah Jongg players extant.
• The late, great direct marketing magazine circulation and merchandise consultant Dick Benson talked about the power of recruiting members v. sending out mailings.
Benson's Rule: "If you can turn your subscription-based magazine into a
membership organization, you raise response rates by 15%."
Can you Use the NMJL Business Model to Get Filthy Rich Tax-Free?
If the National Mah Jongg League can pull in an automatic $3.325 million a year from a membership of 350,000 game players, think of what you could do with 3 billion game players!!! Tax Free!!!
Most-played Video Games by Player Count
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