The recent USCF contract extension with Games Parlor, already under fire for allowing substantial commissions on USCF membership revenue for members who are not active on US ChessLive, has another clause unfavorable to USCF.  The federation is no longer able to accept paid advertising for online play without the permission of Games Parlor.

The original Games Parlor contract, while prohibiting USCF endorsement or sponsorship agreements with online play providers, did allow the federation to accept advertising.  For example, the June issue of Chess Life has a full page inside front cover ad for, for which USCF probably received about $5000.

The federation must pay Games Parlor 25% of any membership revenue increase each quarter compared to a projected figure, with the projection based on the average revenue growth rate between 1996 and 2000.  The exact cost to service a member has long been subject to dispute, but it is likely that the net income from the average membership is close to 25%, so the new contract may give up all the net from any revenue increases!  

And effective January 2001, affiliate commissions were ended and youth and scholastic dues raised, which would appear to generate an automatic bonus for Games Parlor.

Seasonality could also be a troublesome issue for USCF.  The contract does not mention taking this factor into account when determining projected revenue, and without seasonal adjustments, substantial payments could be due during peak quarters such as October-December, even if annual revenue falls short of its projection.  There is no provision for USCF to receive a credit for quarters in which actual revenue is below projected.  

USCF must also pay Games Parlor an additional $8 commission on each Internet Membership sold.  However, there is some good news here for a change.  This particular commission is payable only if the principal benefit of the membership is access to USCL.  As USCF's Internet Membership also entitles the member to play in rated OTB tournaments, the federation can argue that no payment is due, because rated OTB play is a far more valuable benefit than free online play, which is offered by many other providers. 

Under the original Games Parlor contract, the federation is believed to have spent $100,000 to $150,000 this year on USCL content, programming, advertising and office time, and profitable alliances with other providers, like the ICC deal which once netted over $30,000 per year for USCF, were no longer possible.  For the next two years, we can expect still larger losses, unless the new Board can mount a successful legal challenge to the contract extension, possibly under 2B of the USCF Bylaws, which says, "The Federation is pledged that no part of its contributions, dues, or net income shall inure to the benefit of any individual."  

In return, USCF has obtained the ability to say that free online play is a membership benefit.  Is this really worth anything?  FICS, Yahoo, KasparovChess,,, It',,, Chess247, GameKnot, and Achess are among those who also offer free online play.  Even ICC, the undisputed market leader, charges only $4 per month and has free online play for guests. 

USCF President Tim Redman has asked us to "be patient" and wait for USCL to begin promoting membership.  He, Pechac, Barry and Warren apparently feel that even though there has been little or no change in the membership trend since the debut of USCL on 8/1/00, we must persevere, even at a greater cost.  Rather than invest a huge sum the federation cannot afford to lose, praying for a miraculous turnaround, these Board members would have been far wiser to consider the saying of the legendary investment analyst Martin Zweig, "the trend is your friend." 

The Games Parlor contract extension appears roughly comparable to the following fantasy, except that there is no evidence that USCL has brought in even 250 members!


USCF wants to organize the biggest tournament ever, the "Games Parlor Open," in order to promote membership.  The federation signs a contract with Games Parlor to organize this event without charge, in return for their name being publicized as the sponsor.  USCF pays for prizes, GM lectures, many trips by USCF employees to and from the site, and a massive publicity campaign.  The cost of all this is $150,000, and entry fee is free.  The tournament draws 2500 players and brings in 250 USCF members at $30 average, or $7500 in memberships.  

Then USCF says, OK Games Parlor, we have to be patient.  Some Delegates say we should cancel this thing, but keep the faith, we'll do better next time.  Let's lock in a two-year deal now, before any skeptics can try to stop us at Framingham.  Just to make sure no one causes trouble, we'll keep the contract secret.

We know you guys can't afford to run the tournament for nothing again, so we'll give you 25% of all the membership revenue increase the federation may have from any source, and we just raised dues, so you can count on a profit there.  You'll get a nice Xmas bonus even if we're losing members, and we'll also accept no TLAs or ads for any other tournaments for the next two years, so our members won't know about those tournaments and will have to travel to this one if they want to play OTB chess.   

Only USCF members are allowed to play in this great event, so if we can just bring in 5000 members next time rather than 250, we'll cover our costs! ...uh, well, maybe the cost of servicing those 5000 members wouldn't really be covered, but we'll look for sponsorship... homepage