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The Art Museums of Tomorrow in a Free Market Economy

How will the art museums of tomorrow function in a free market economy?

About one year ago while I was visiting one of America's great art museums, I stood in a busy rotunda area and saw a broad array of objects and activities: large paintings and statues, an acoustiguide booth, a silk-screen labeled exhibition entrance, cases filled with scarves, jewelry, and assorted objects all being sold in an adjacent shop, and-in the distance but within view-a sales area for postcards, posters, reproductions, and catalogs. This mixture of art and commerce made me realize that if I had been blindfolded in my hotel room and taken to that spot, I could have thought myself in either a grand galleria or a department store or a popular museum.

The most important point I wish to emphasize today is this: The traditional boundary line that has separated profit from nonprofit institutions is becoming blurred. In the case of art museums, this is caused by the museums' need for funds, their need for business and promotional skills, their need for viable channels for reaching large audiences; and because, on the other hand, the profit sector often imitates art museums, seeks professional art museum guidance, and desires to work in some co-sponsorship capacity with art museums.

I remember years ago encountering a caustic museum director who hated any merchandising in museums. When someone told him that a fellow director-who shall remain anonymous-urged his employees to make their museum look like the prestigious Bloomindales rather than the discount Sears, our old-fashioned director paused and responded in the meanest way he knew how. What did he say?
"Yes, my esteemed colleague's museum does look like Bloomindales."
Historically, nonprofit organizations in our society undertake missions that are, in other countries, committed to business enterprises or to the state. As one observer noted, "In America, we rely on the nonprofit, or third sector as it is called, to cure us, to entertain us, to teach us, to study us, to preserve our culture, to defend our rights and to protect nature, and, ultimately, to bury us. In essence, we rely on private philanthropy-third sector financing-to support activities that other nations support with public funds." I suggest that this is changing rapidly.

Imagine a straight line. At one end of this straight line place a dot. Label it PROFIT or BUSINESS. At the other end of this line, place another dot. Label it NONPROFIT or MUSEUM. Now, imagine various forces pushing both dots toward one another on this line. Eventually art and business meet; they intersect or merge and form a new entity, a hybrid which today may seem outlandish or impractical, but an institution which is the by-product of the American mind and marketplace.

I mentioned this hybrid to a friend not long ago, and his reaction was disbelief. He said the I.R.S. would simply not allow it. But I am not talking about a change in accounting procedures. I am suggesting a new set of values which are altering the ways Americans view and enjoy business and culture. Somehow, even the I.R.S. will adjust.
When I use the term "nonprofit," I mean an institution that cannot distribute net earnings (if any) to the people who control the institution, including members, officers, or trustees. Net income in a "for-profit" business is given to its owners and shareholders, whereas enterprise income earned by nonprofit institutions is put back into the organization. A key point to keep in mind however is that a nonprofit organization is not barred from earning a profit.

Since the mid-1970s, there has been an acceleration in the trend (that Neil spoke of) to spend large amounts of money and time proving the importance of art museums from an economic point of view. A recent U.S. government publication put it bluntly: "The question is not what the economy can do for the arts, but what the arts can do for the economy." In 1981, the National Endowment for the Arts surveyed 49 institutions in six cities across America and reported a total direct economic impact of more than $68 million for the year 1979. The indirect impact amounted to $237 million. The NEA concluded, "It is clear that culture pays." Fifteen years later, that $68 million was close to $200 million and the indirect impact grew from $237 million to nearly $1 billion.
We should note here that there are individuals, some even friendly, who question these impact claims. Paul J. DiMaggio, an expert in the non-profit field, concluded in a book entitled The Arts and Public Policy in the United States:

In the long run, concentrating on economic effects is neither good advocacy nor good policy. It is not good advocacy because, on close inspection, the arguments are too weak. In some cases, as in the assertion that businesses relocate to be near culture, the evidence is simply too thin. In other cases, as in the argument from economic impact, the claims can be too easily turned against the arts-for example, by those who would cut arts funds in favor of other expenditures with even greater economic impacts.
Dangerous ground, yet museums persist in the need to justify themselves economically.

When economic justification for art museums is not pushing our nonprofit dot toward the middle of our imaginary straight line, a host of concerns in the area of management and finance gather momentum.

The rise of modern management and financial practices in museums seems to have occurred overnight. No one thinks museums should be managed poorly, but modern management brings new values that are changing museums.

For example, balanced budgets were once primarily the goal of a museum's development office and/or the trustee finance committee, but now a balanced budget threatens to become an end in itself. The importance that the National Endowment for the Arts, National Endowment for the Humanities, Institute of Museum and Library Services and major foundations place on fiscal stability intensifies the concern. One alarmed trustee of a New York museum said recently, "Our function is not to be like a corporation that worships at the altar of 15 percent compounded growth. Our business is to help enrich our lives. Institutions like museums, universities, and libraries have a different role to play in society, a non-economic role. If fundraising priorities in any of the spiritual realms take precedence over their raison d'Ítre, the long-range result may be a flattening of that purpose." On the other side of this debate is Mr. Eli Broad, a great collector and financier, who serves on the Los Angeles County Museum of Art board of trustees. In the May 1996 Art and Auctions magazine he was quoted as follows: "I think museums ought to be held accountable for what their attendance is and whether it's really cost effective." There is a non-economic justification for art, yet I am willing to bet that art museum directors are spending more time on financial matters. This does not mean necessarily that financial concerns always lower artistic standards, but that directors' schedules are becoming crammed with budget meetings, audits, fundraising, and all the rest.

One solution to this time squeeze is to hire a professional, business-type manager and make him or her president of the museum. Theoretically, this frees the director to concentrate on artistic matters. The Metropolitan Museum of Art is the celebrated model, and other art museums, such as Los Angeles County Museum of Art, are following the format.

The need for modern, corporate-type management skills in a museum director is essential. Business schools like Yale, Wharton, Northwestern, and Harvard make nonprofit management a part of their curriculum offerings. And MBAs with degrees in art history are becoming desirable as administrators in art museums.

Management skills are not the only new qualifications desirable in a museum director. Art museum directors are also as committed to lobbying legislatures as the leaders of industry. An ability to give convincing testimony may well become a prime prerequisite in job descriptions of future directors. Many art museums have paid lobbyists in city, county, state, or national levels of government-and sometimes in all four. Why? Because it pays.

There are numerous additional areas where, as an art museum director, I find myself interacting and working with businessmen. Development and fund-raising are obvious examples, but how about community relations and trustee relations? Whole blocks of my daily schedule are taken up with activities for which I have little formal training, and somehow fine art seems to slip in priority. Nowhere, in my opinion, is the merging of profit and nonprofit occurring more clearly than in marketing and sales. American art museums have had shops or stores since the l9th century. For a long time we have encountered these stores at the entrances of the more aggressive museums. Traditionally, this was considered the most profitable point of sale. The emphasis was on selling merchandise that had been ordered. Belatedly, but now at a rapidly increasing pace, many museums are committing time and money to hiring marketing personnel and designing public relations campaigns. The difference between selling and marketing is that marketing first tries to discover what the consumer wants and then gives it to him. Peter Drucker's famous descriptions are more eloquent than my own. "The aim of marketing," he says, "is to make selling superfluous." The ultimate purpose, according to Drucker, "is to understand the customer so well that the product or service fits him and sells itself."

If all of this sounds a little far-fetched and distant from the business of art museums, then look at the prestigious American Association of Museums' publication, Museums for a New Century. Marketing is highlighted as an essential skill which will determine who survives. The financial benefits are obvious, but the Report goes a step further:

Marketing as a consistent effort builds a foundation of public understanding and appreciation. Over time, the public learns about the values on which museums are founded, the heritage they collect, the knowledge they embody and the services they perform. In turn, with greater understanding, the public will use and support museums more fully.

Marketing influences the entire museum, particularly earned income and membership. Enterprise, as a part of marketing, is becoming a familiar word in art museums. The Nonprofit as Entrepreneur was the title of a conference held m Washington, D.C. And recently I purchased a book entitled Enterprise in the Nonprofit Sector, cosponsored by the Rockefeller Brothers Fund, which argues that art museums and other nonprofit institutions should create the position of "Director of Enterprise." The purpose of this office would be to establish programs to fund the parent art museum.

In 1979 the Association of Art Museum Directors sponsored a program about business and museums. During an uncomfortable moment, I tried to relieve the tension by saying, "Well, the for-profit art museum is right around the corner." I meant it as a joke back then-people laughed-but none of us are laughing now. In various American cities like St. Petersburg, Florida, Memphis, Tennessee and others we now have the equivalent of for-profit art museums. The governing structures vary but basically they are museums without collections which specialize in blockbuster exhibitions such as Catherine the Great, Ramesses II, etc. Their goal is to bring tourists to the city and generate large amounts of money. They have been financially successful more often than not.

The way it works is simple. The city establishes a 501(c)(3) tax exempt entity called the "museum." All contributions and income go to the 501C3. This eliminates the taxman. The actual work is subcontracted out to a for-profit business. This for-profit business is actually the equivalent of the staff of the museum.

Professional museum people have looked down their noses on this type of "unprofessional" institution. But the fact is that these hybrids are in many instances out-performing the older type museums. Is it good? There are pros and cons. My only point is that they exist and often prosper.

Over ninety percent of all cultural nonprofit institutions generate funds from enterprise activity. And I do not think it is an exaggeration to say that an idea is evolving at the 1rustee level that art museums must begin to cover a larger percentage of their expenses with earned income. Exhibitions are an immediate source. Based on the highly promoted blockbusters in the 1970s and 1980s, we face demands for popular exhibitions. We must advertise, sell tickets, produce popular catalogs, posters, post cards, wrapping paper, and reproductions. Profit-centers, formerly called museum stores or shops, must be located throughout the museum and stocked with items the market surveys tell us people want.

The June 20, 1996 New York Times published an article by Carol Vogel entitled "Hustling High Culture with Fliers and Freebies." Ms. Vogel noted all the promotion surrounding the recently closed Cezanne exhibition in Philadelphia. My favorite item for sale was the baseball with Cezanne's signature. Ms. Vogel also quotes the Whitney Museum of American Art director, David Ross: "We all have to be more entrepreneurial". And Lisa B. Walker, vice president of cultural affairs for Chase Manhattan: "...now corporations are discovering there are ways to support the arts that are market-driven." The awakening is everywhere.

I belong to the school that believes there is nothing intrinsically wrong with entrepreneurial activity except when it confuses visitors, makes art secondary, or transforms art-into advertising. Recently while visiting another museum I turned down a hallway thinking that I was following the galleries in sequence. Instead, I found myself viewing reproductions in gilded wooden frames. For awhile, I was confused, then I realized I was in the entrance of a museum profit center. Exhibition spaces and transitional areas are being appropriated by profit centers. If the trend continues, will there be a day when some museums will have more sales space than exhibition galleries?

The desire for more earned income and greater popularity has created a rush for larger memberships. Enter marketing again, complete with surveys and analysis. This requires sophisticated and expensive techniques such as mass mailing, advertising, public relations campaigns, slogans-you name it.

The irony, of course, is that as enterprise and membership succeed (thanks in part to marketing) a large support staff is needed for accounting, inventory, mailing, processing, auditing, and general management. In order to keep control, someone at the top must think like a corporate manager because earned income demands specific skills and attitudes. If you wonder what the profession thinks of this, let me point out that the NEA in Challenge Grant applications looks favorably on art museums with healthy earned income statistics, and in Museums for a New Century. We read: "Museums should vigorously pursue cost-saving opportunities and creative ventures to increase earned income."

"Well," you might say, "all these things you are speaking about are the means art museums use to carry out their mission of preserving man's heritage. These are simply modern tools." That may be so, but the people who are experts in commissioning, assembling, and using economic impact surveys, people who train in and teach management and finance, marketing experts, lobbyists, and entrepreneurs may love visual art but their instincts, values, and priorities are profoundly different from the older style museum professional.

In my opening comments I asked you to picture two dots at opposite ends of a straight line. Thus far, we have been talking about the momentum of the nonprofit dot as it moves toward the center. Let's look briefly at the profit dot. I do not suggest that most corporations are speeding intentionally from profit orientation to philanthropy, but numerous developments deserve attention.

Today's corporations have collected works of art, hired full time curators, established museums, organized major art exhibitions, offered free public tours, provided art educational material, and advertised their museum-type activities often within the confines of their own buildings. Many services provided to communities exclusively by art museums in the past are now becoming available from corporations too.
There are national seminars sponsored by prestigious nonprofit institutions teaching corporations how to collect art. And some museums, like the Museum of Modern Art, have helped businesses with collecting for many years. A few museums help corporations purchase art with a contractual agreement that after a specified period of time the corporation will donate the works to the museum. Naturally, the assumption is that the works will have increased in value, thus making the art a low cost capital expense.

There are enough officers in corporations presently assigned to art and art programs that several national organizations (complete with newsletters) have been established for these corporate art/museum professionals. Former curators, former art museum directors, former NEA officers, and semi-retired vice-presidents fill the ranks of corporate art executives.

Many corporate art activities are carried out in partnership with nonprofit museums. Museums for a New Century highlights the Rouse Company's Art in the Marketplace program, for example, which in seven years opened 13 museums in shopping malls across America. The motivation, according to Rouse, is simple: "The computerized, prepackaged, fast-paced world is warmed and slowed down by the presence of museum, the dancer, the actor-all in the midst of the market. Everyone wins."
The Whitney Museum has had success with its satellite museums, particularly the one located in the Phillip Morris office building in Manhattan. And if any of us thought that corporate art museums were a fad, which would fade from view, look again. Thirteen years ago, on May 14, 1985, the New York Times reported that Equitable Life Assurance Society of the United States was incorporating into its newly planned midtown 54 story, $200 million corporate headquarters three art galleries, two of which would be operated by the Whitney and a third for New York museums seeking space in midtown Manhattan. This has had mixed success, but there are numerous more recent examples.

The partnership between art museums and corporations has many forms: one of the most common, exhibition funding, deserves special attention. There has been concern among art museum directors that corporations who fund exhibitions are far more interested in public relations than in philanthropy. Often the tour schedule of an exhibition is influenced by the corporate sponsor and the bias against scholarly exhibitions in favor of broad surveys suggests important issues which can not be ignored. There is no standard format for crediting corporations at exhibitions or in museum catalogs, but the issue deserves some thought. The ongoing debate on television's PBS stations emphasizes a potential problem. When some educational stations began airing commercials from corporations who had contributed to programs, numerous people objected, saying it made PBS a commercial network. In that case, the profit and nonprofit dots intersected.

A similar debate which most of us m museums wish would go away has to do with exhibition sponsors. Recently, Michael Kimmelman of the New York Times questioned the propriety of the Faberge Company sponsoring the immensely popular Faberge in America exhibition at the Metropolitan Museum of Art. Since then the Christian Dior and Cartier exhibitions in New York have been sponsored by Dior and Cartier respectively. And in the past there was the precedent of Tiffany and Company sponsoring the large Tiffany exhibition and Ferregamo sponsoring its own retrospective at the Los Angeles County Museum of Art. Director's, like the Museum of Modern Art's Glenn D. Lowry, have been forthright about this issue: "It's easy enough in the abstract to draw the line (between artistic vs. business decision making), but in real life, in an environment where everyone's competing for corporate funders, the line isn't clear..."

If a survey were taken to analyze current boards of trustees, I believe we would find a large increase of corporate presidents and chief executive officers and a decrease of art collectors. The Business Committee on the Arts has done a lot to keep art museums and corporations well informed about one another's activities, particularly in areas of mutual interest. And art museums have encouraged corporations to sponsor programs and become a member of the museum family.

Some of us say blatantly m our promotional literature that public relations opportunities and specific market objectives can be met often through this creative partnership. The corporate evening party has become very popular in art museums because it helps both institutions. Indeed, I am involved in so many of these events that when I was once asked how someone should train to become a museum director, I recommended that they attend the Cornell School of Hotel and Restaurant management! Jokes aside, corporations have been supportive of art museums and in many cases are developing programs in their own rights.

When discussing the issue of commercialism with other museum directors, one of my colleagues asked: "Wouldn't it be wonderful if we had all the money we needed so that we could return to serious research and forget blockbusters, mass marketing, shops, et al?"

The answer may not be so simple. In my opinion, the museum profession is in an unhealthy frame of mind regarding this issue. The standard professional rhetoric that I hear is anti-big exhibition, anti-marketing and public relations, anti-commercialism; yet, museums are in a frantic search to be more popular, to earn more income, to be of the people When talking to one another, museums are saying "no" to popularity but doing everything in their power to be popular. This contradiction is worse in museums that have seen what popular exhibitions, for example, do for fund balances, for community enthusiasm, for raising the museum's image in the public conscious.

This situation reminds me of an old Jimmy Durante movie about a circus that had fallen into debt. When the creditors got the police to seize the circus' assets, Jimmy Durante tried to escape out of the back of the tent with the star of the circus, a three thousand pound elephant. A law officer stopped Durante, who was leading the animal, and asked, "Where do you think you are going with that elephant?" Durante's classic reply was: "What elephant?" Just change the actors and a museum director might actually say, "What marketing?"

Would museums stop profit type activity if they did not need the money? I suggest "no," we would not.

Commercialism, advertising, and public relations have proven to be viable means for interesting people in art. The democratic, educational mission which is written into nearly all of our museum charters and which is the justification for the tax-exempt and eleemosynary status museums enjoy is served by the evolution of this new style institution. Visit the J. Paul Getty Museum in Malibu or The Kimbell Museum in Ft. Worth. Both are endowment-funded and both could do the minimum public service to maintain their I. R. S. status as tax-exempt institutions. But that is not the course they have chosen. Instead, they aggressively "stimulate ... public commitment." Why? In America, museum life is styled by the popular will. The director of the Kimbell said it best: "Museums are servants of the people."

And what do foreign observers think of all this? It is difficult to say because they are only now becoming aware of how differently their museums function compared to American museums. In a study published in 1988 at the Free University Berlin these differences were enumerated.
1. American museums have a great number of target groups.
2. American museums offer a multitude of services, nearly round the clock.
3. American museums are trying to make themselves an integral part of their communities.
4. American museums are nonprofit organizations but nevertheless commercial.
5. American museums are not systematic in their marketing; they are "intuitive."

What could the Germans learn from the Americans, the report asked rhetorically: "German museums have to find a way of their own which certainly has to be on a more systematic line than the more intuitive American way of doing things."

I am somewhat disturbed that this topic is not being discussed on a more regular basis. Why isn't it? Possibly because it is (1) new, (2) moving and changing so quickly that it is impossible to see clearly, and (3) maybe the Germans are right-the process is intuitive . Today, we have noted, the art museum and its images are on ATM cards, the television home shopping networks, the Internet and virtually everywhere else. But as journalist Carol Vogel noted, it was only 30 years ago when the Metropolitan Museum of Art pioneered the use of outdoor banners with its "Great Age of Frescoes." This was considered a great innovation. In just 30 years, there has, in essence, been a kind of cultural evolution which some might see as a revolution.

Without in-depth research to support what I am saying, these ideas must be categorized as opinions. Yet, the cold facts are that our museums exist in a market economy, our museums must be managed efficiently, and our museums need funds to provide ~e functions for which they were established. This makes American museums radically different from most other museums in the world. For us to ignore the impact of the marketplace and to make believe that a new kind of art institution is not evolving is to forfeit the opportunity to help form a hybrid which could be healthier and of greater service than any earlier form. To talk of art and commerce, nonprofit and profit as separate and distinct is to miss one of the important facts in recent American art history. This is not necessarily negative. I do not agree, for example, with the cynical comic who suggested that U.S. museums are changing the spelling of MONET to MONEY.

The nonprofit art museum has become a part of big business and mass-communication. The leading corporations on the other hand have begun to make art a part of their daily routine. From this has evolved an institution which has characteristics of both-it's a new realm with new possibilities. Stay tuned!


* Dr. Peter C. Marzio is director of the Museum of Fine Arts, Houston, and is a member of the Society.