Sex, Drugs and Pirates

The Rise of the For-Profit Museum
By Leah Arroyo

Some of these new money-making ventures may have glitzy
themes, but they insist that they have the same educational mission as mainstream museums. They just make a little cash at it.

Here are a few objects that will grab your attention at the International Spy Museum in Washington, D.C.: A tiny camera concealed in a hairbrush. A KGB-manufactured umbrella capable of shooting poisonous pellets. Padlocks used to teach Soviet spies the tricks of lock-picking.

Like items in any reputable museum, these espionage artifacts are displayed behind glass with well-researched, descriptive labels. And as in many modern museums catering to techno-savvy visitors, objects from the collection are enhanced by visual and audio, from recorded testimony of a WWII Czech resistance fighter to a replicated fully loaded spy car with rotating license plates and retractable guns.

What sets it apart from your average institution is that every penny of your $18 ticket goes to a commercial business: the museum. Unlike its more ubiquitous nonprofit counterparts, the International Spy Museum aims not only to educate visitors but to make money doing it.

While no one is tracking the total number of for-profit museums in the United States, in the past six years several flashy for-profit institutions have emerged and garnered a lot of media attention. In addition to the International Spy Museum, prime examples include the National Museum of Crime and Punishment in Washington, D.C.; the Museum of Sex, a.k.a. "MoSex," in New York; and in Florida, Key West’s Pirate Soul. They join a few prominent, long-established historic sites such as the Biltmore House in Asheville, N.C., and Graceland, the Memphis mansion of Elvis Presley, both run as for-profit organizations.

Nonprofit museums obtain tax-exempt status from the IRS, which allows them to avoid paying federal taxes on the majority of their income. In return, they act as educational, charitable or religious organizations that benefit the world in some way. That doesn’t mean that nonprofits can’t have more revenue than expenses, however. In these cases, the money must be channeled back into the organization—and not into the pockets of shareholders as is the case in for-profit entities.

But the small but highly visible group of for-profits is doing well, thank you. The International Spy Museum’s website warns visitors, with justification, "Don’t be disappointed; buy your tickets NOW: Tickets sell out fast in the summer!" Its director talks proudly of fielding weekly demands for interviews. Although many in the Washington, D.C., museum community were skeptical about the chances of a money-making museum successfully charging $18 admission while surrounded by some of the nation’s most prestigious—and free of charge—institutions, the International Spy Museum is still around and just celebrated its sixth birthday. This is an even more remarkable feat when considering that a for-profit museum has no access to foundation grants, government funding or tax-exempt individual donations. And as for predictions that such museums would price themselves into oblivion, the International Spy Museum’s newest neighbor is the ultra-high-tech Newseum, a nonprofit charging as much as $20.

Is the sudden presence of these new for-profit museums a cause for alarm? Or just a minor annoyance and a source of some envy? There may indeed be some jealousy over the crowds of visitors and the press coverage in the New York Times or the Washington Post. But these newcomers are demanding respect, too—as educational institutions, as "real museums." Pirate Soul, for instance, touts not only its theme park-style experience for visitors who come to learn about the "Golden Age of Piracy," but a collection of almost 600 pirate artifacts such as an authentic treasure chest. While the bulk are from private collections, there are also items from Blackbeard’s ship on long-term loan from the North Carolina Maritime Museum and several artworks by 19th-century artist Howard Pyle purchased recently from the Delaware Art Museum.

Such a blurring of distinctions affronts some on the nonprofit side who see for-profits as interlopers with lesser missions, fewer obligations and unfair advantages, threatening the field’s hard-won respect and laughing all the way to the bank. The International Spy Museum’s advertising probably doesn’t help: Its big banners in the D.C. subway system include the assurance that "The word ‘museum’ is just a cover."

The resentment can be mutual. Staff at for-profit museums contend that they uphold the same standards as nonprofits and that nonprofits are often boring and are coddled by their 501(c)3 tax-exempt status: They not only receive government and foundation funding, they get more donations because they offer tax deductions. Also, some government-owned collections will not lend to a for-profit, not wanting to favor a particular business by helping it make money.

The arguments on both sides have some merit. Together they offer a defense of what museums are today and a perhaps unsettling look at what museums could become. Can nonprofit museums and profit-makers coexist peacefully in the same profession?

Frank Aucella, executive director of the nonprofit Woodrow Wilson House in Washington, D.C., cites a critical perceived difference between his museum and the for-profits: "Isn’t it the expendability of their collections? Those of us in the truest sense of nonprofits take the stewardship of the objects entrusted to us as a public duty. And I think these other more entertainment-focused and marketing-focused for-profits have less emphasis on the care of actual artifacts, authentic artifacts." He adds, "I don’t want to come off as this dyed-in-the-wool traditionalist, but going through the accreditation process and looking at all the standards the profession sets up for us—how are these going to translate for folks who don’t have that public trust as part of their reason for being?"

David W. Ellis agrees that collections are central to distinguishing the two breeds. Ellis, president of the Museum Group, a consulting organization, and president and director emeritus of the Museum of Science, Boston, says, "To generalize a little bit, a major difference is that not-for-profit museums in general look upon their collections very differently. If an institution has a collection, it views that collection as its heart and soul. To a science center, education is very much its heart and soul. The role of research is extremely important to a small number of museums. Their purpose is fundamentally different from ‘How do I make money?’"

True, some for-profits are not as burdened as nonprofits by such responsibilities as collections, programs and curatorial staff. Pirate Soul, for example, has neither curators nor historians, which frees up a lot of money. But Ellis notes that one must be careful in generalizing. "All nonprofits are not the same, and all for-profits are not the same. Most science centers"—and, others add, children’s museums—"do not have collections. There are a number of [nonprofit] institutions where most educators are contract people, where research and collections aren’t very important. You could have a for-profit and a not-for-profit in almost any domain.

"So what’s different?" he asks. "I think it’s related to something very deep, at the heart of an institution. A not-for-profit really does put first education or research or a collection or a combination of those missions. I think a fundamental difference is how you think about what you’re doing—is it because of profit or because it will enhance the visitor’s understanding? The heart is in that word ‘because.’ In operations, day to day, there are a lot of similarities, but you do it for different reasons."

The museum field has been analyzing the for-profit-nonprofit divide for years. In 2004, the annual Berkshire Conference, a leadership forum organized by the Sterling and Francine Clark Art Institute, Mass MoCA and the Williams College Museum of Art, issued a white paper titled "Why Not {For} Profit?" "At the forefront of any discussion of this issue," the paper noted, "rest public perceptions of institutional credibility." If for-profits trade on the public’s trust of museums but don’t provide the same product—education, stewardship, collections, research—will it erode that trust? In the words of Frank Aucella, "Let me know when AAM is going to start accrediting the Hard Rock Café. They have collectibles on the wall."

Anna Slafer, director of exhibitions and programs at the Spy Museum, defends for-profits. "We’re a member of AAM," she notes. "We can’t be accredited, which I think is annoying and should be reviewed as a policy. There are poorly governed museums that are nonprofits. We should be investigated as a category. We’re very good and would meet the standards." Having worked at such nonprofits as the National Building Museum, the Los Angeles Children’s Museum and the Smithsonian’s National Museum of American History, she says, "On the day-to-day operational level, it doesn’t feel very different to me. I know there are technical differences, the main one being governance. [And] we don’t have access to sources of funding that nonprofits have access to—foundations. We teach history through the lens of a sexy topic, but we’re as educational as any museum I’ve ever worked at."

Milton Maltz, the Spy Museum’s founder, agrees that nonprofits and for-profits can share much of the same DNA. And he should know—he has his hand in both. His Cleveland-based Malrite Company, which developed, owns and operates the Spy Museum, also is the major benefactor behind the Maltz Jupiter Theatre, a nonprofit regional playhouse in Florida. He and his wife, Tamar, also founded the Maltz Family Foundation, a grant-making organization with a soft spot for the arts, healthcare and education, and Maltz played a fundamental role in founding and developing the Rock and Roll Hall of Fame and Museum, working to grease the skids with the Cleveland city government. More recently, he opened the Maltz Museum of Jewish Heritage just outside the city in 2005.

"I run our museums, whether for-profit or not, as a business," says Maltz. "There are some terrible businesses, lousy businesses, and there are great ones. We try to be efficient, to put out a quality product, and we try not to go broke doing it." As important as avoiding bankruptcy is to him, though, "When all is said and done, I have a lot of fun doing these things, and I wouldn’t do it for money." Maltz, who made most of his money in radio and television broadcasting, sees a "common denomination" among all types of museums: "There has to be a certain level of entertainment; you can’t be dry. You must know how to use the mechanics of presentation to reach the public. When you hear a public program on NPR, you’re entertained, are you not? We’re fragmenting all our entertainment. There are hundreds of TV channels. Computers. iPods. We’re being bombarded with media. We have to create a mechanism so that what we want to teach has a flavor and is entertaining as well."

Peter Earnest, executive director, says the the museum’s revenue model—much like many museums—is based on ticket and retail sales, its high-end restaurant Zola, its casual Spy City Cafe and special programming and events. "I think Milt felt that this was a new kind of museum," said Earnest. "He looked around and saw that museums, particularly not-for-profits, were struggling—anywhere from the Smithsonian to some of the smaller ones—because they weren't charging anything and were falling behind on basic things [like] maintenance. He wanted to do something that would enable whoever was running the museum to have flexibility, more so than you see sometimes in publicly funded institutions. He thought that the for-profit model built entirely on a foundation of earned income would be exactly the way to go."

And by all reports, the Spy Museum is a success. The museum forecasted half a million visitors annually. Each year since it opened in July 2002, it has reached or exceeded 700,000. It initially relied on Washington, D.C., bonds to open but is now self-sustaining. "I think sort of the product speaks for itself so far," says Earnest.

Despite Washington, D.C., being the capital of free museums thanks to the Smithsonian, a number of for-profits have done well. The Spy Museum’s Slafer says, "Word of mouth is stupendous. One of our goals was to be one of the go-to sources on espionage. We work hard at credibility." Peter Earnest, the museum’s executive director, adds what for-profit professionals are quick to point out: "Of course, if you pay your taxes, you’re paying" for non-profit museums. To the public, he says, it’s been a non-issue. "On our comment cards at end of visits, it’s rare we’ll see anything on price. Our more common criticism is crowding."

He points to the museum’s topic as the key incentive for visitors. "We are so unique—we’re the world’s only spy museum. Our competition for a long time was hard to define. Now there’s the Newseum and [the National Museum of] Crime and Punishment appealing to a similar demographic."

Earnest has done "hundreds of interviews" about the Spy Museum, from chef and TV star Anthony Bourdain to an upcoming talk with Stephen Colbert. But David Ellis of the Museum Group points out that a high level of attention is not unusual among such museums. "For-profits have found niches where there is a public interest inherent in the subject—pirates, espionage, sex. They’ve identified areas of special interest to people and found a way to capitalize on it, and I wouldn’t say that’s bad." However, he adds, "No for-profit museums have cropped up yet that somehow have gone into the esoteric. That’s an important point as one surveys the landscape. I doubt any will crop up that deal with 18th-century Flemish masters."

Staff of the Museum of Sex in New York view the institution’s role as filling a need. Curator Sarah Jacobs says, "We are able to talk about sex and sexuality, one of the most universal subject matters that goes across time and culture. How could you not have a museum of sex?" The museum presented this goal to the New York State Board of Regents in an initial effort at nonprofit status but was rebuffed—as noted in a 2002 New York Times article titled "Sex Sells, but Can It Sell a Museum?" "The board suggested that the word museum could not be used in a way that would make fun of the term," the article stated. 

Any snickering should subside with a look at the museum’s advisory board, which includes a Pulitzer Prize-winning New York City historian and several Ivy League professors, as well as, for authenticity—an important concept in the museum world—Veronica Vera, creator and founder of Miss Vera’s Finishing School for Boys Who Want to Be Girls. Jacobs says, "At first, people didn’t know what we were going to be: straight entertainment or serious, particularly in a larger cultural discourse." But the exhibitions are non-exhibitionist, such as "The Sex Lives of Animals," which explores non-reproductive copulation among animals. "It’s very scientific," says Jacobs. "We had 15 scientists as advisers—evolutionary biologists, primatologists." Similarly, she says, the museum’s collections are as serious as a nonprofit’s: "They’re ever-increasing. We have 15,000 physical offerings and 15,000 to 30,000 films. We’re preserving a history that often gets discarded—censored, because of its content."

For-profits know what nonprofits are saying about them—that they are raking in money hand over fist, for example. But Slafer says handling a budget has the same weight no matter what type of museum it is for. "People think, oh, you’re a for-profit, you must have a lot of money. But we’re an education center, and educational organizations are not profit-making ventures in this country. People don’t value education; they don’t pay the $72 they’ll pay to Disney. We’re in the same boat."

For-profits also contend that they have a profound, sincere, demonstrable commitment to education. Maltz, who has an intelligence background, says, "When I sold my [broadcasting] company, I decided the American public had little knowledge of the importance of intelligence. We see James Bond and think that’s what spies do, and that’s not the real world." He feels that his museum "makes people realize what this country is all about, as citizens of a democracy. Pearl Harbor was a nightmare for America. Did it really have to happen? We had sufficient information to know it might happen, and in Panama and the Philippines. We’re facing a conundrum in Iraq, in Iran, the Middle East. We must learn what’s going on in those states for our own security."

This points out some differences among the driving forces behind for-profits. Orlando businessman John Morgan, who owns WonderWorks amusement parks in Florida and Tennessee, admits that financial possibilities inspired him to found the Museum of Crime and Punishment in Washington, D.C. Light dawned when he tried to visit the island prison of Alcatraz in San Francisco, only to find that tickets were sold out eight days in advance. In the Washington Post, he was quoted as saying, "I slipped the guy a couple of hundred bucks and he let me on the boat, and I realized, if America is so enthralled with crime that they’d book eight days out to see an empty prison, that’s something pretty strong."

Another wealthy businessman’s entrepreneurial drive—coupled with personal passion—is behind Florida’s Pirate Soul museum. A former sports medicine mogul who now works in part as a motivational speaker and author, Pat Croce’s longtime obsession with pirates is evidenced by his pirate tattoos, hoop earring and the skull-and-crossbones stencil on his molar. His trove of pirate-related artifacts inspired and serves as the foundation for Pirate Soul’s collection, and he and his business partners provided the funding. The museum has become only one part of a veritable pirate empire. Croce has built a chain of Pirate Island miniature golf courses on the Jersey Shore, opened the Rum Barrel restaurant and bar next to the museum and developed a line of pirate-themed costume jewelry—because "every lady wants to feel adventurous, daring and uninhibited at times," according to his website. Croce also has collaborated on a movie about Blackbeard slated for production next year.

"He’s a big entrepreneur, so I can’t see him doing something nonprofit," says Sarah Knott, general manager of Pirate Soul. "He’s a businessman." Museum profits stem from entrance fees ($13.95 for adults, $7.95 for children) and from on-site and online gift shop sales.

A graduate of Tulane University, where she studied art history and business management, Knott calls herself a "jack of all trades" at the museum, where she handles collection-related tasks including cataloguing and caring for the artifacts. She and other staff members are held accountable not to a board of directors but to Croce and his family members. Pirate Soul is "very different" from the nonprofit institutions where she has worked previously, says Knott. "It’s based on running it as a business more than a museum."

For all the debates, the lines between for- and non- are sometimes blurred and are likely to get fuzzier still. For one thing, there are those serious for-profits whose mission, exhibitions and programs look a lot like those of nonprofits. And there are nonprofits that have dubious missions or that hew pretty closely to the for-profit mold—a criticism lobbed, for example, at Washington’s Newseum. Nonprofits also have blockbuster exhibitions that charge extra, and they feature their own ways of making money: museum stores, facility rentals, restaurants, IMAX theaters and collaboration in heritage travel marketing. Both sides want to please donors, which could create a problem with trust. How different are the "corporate partners" of the Museum of Crime and Punishment from those who receive "vanity shows" sponsored by and about a single company at nonprofit institutions?

Nonprofits concede that they have such lessons to learn from how for-profits do business as how to market themselves, make the local government and community aware of their strength as economic drivers and be more efficient and disciplined in their practices, which for-profits must do because they lack the safety net of government and foundation support.

"Can [for-profits] play the same role in society and culture?" asks Aucella. "I think they’re going to because the lines are sort of eroding. We have to be careful that they provide education along with entertainment. We as a community have to make sure they are providing good content and police the content if we’re going to accept them and if they’re going to use the moniker ‘museum’—as we pride ourselves on saying, museums are a trusted voice in society. It gets to the point where we’re parading wax wigs and reproductions and Hollywood models as the real thing. That will start eroding respect, and museums will start becoming a sideshow attraction with the only goal of making money."

The British National Trust, he notes, rents out some of its properties for overnight accommodations. Historic estates in the United States are promoting themselves as conference centers and linking themselves to heritage travel.

In addition, Ellis notes, for-profits’ dependency on achieving measurable outcomes serves as motivation. "If your prime focus is on money, that provides a strong discipline. I would argue that not-for-profits, just as much as for-profits, must also have a strong sense of the business side of things. When I was young, it was not uncommon for a museum to have one or a few patrons the director could go to at the end of the year to say, ‘I need help.’ They’d write a check, and the museum would end the year in the black. It’s very different from most institutions today."

The lines probably will not blur completely. For-profits can choose to serve the public, but nonprofits must serve the public—not only because of their tradition of duty, but due to the legal tax requirements that accompany a critical part of their funding. The museum field may develop mechanisms of motivating for-profits—whose numbers may ultimately be limited by the number of hotly marketable topics—to go beyond their founders’ passions to pursue field-wide standards. At the same time, nonprofits may borrow some of the more aggressive, market-driven practices of their for-profit peers.

Participants at the Berkshire Conference foresaw both possibilities. "Overall," they noted, "the most important element of any museum, regardless of the nonprofit or for-profit status of the institution, may be good management. The characteristics of successful leadership in the for-profit and not-for-profit world may have more in common than either likes to admit. Under the leadership of an engaged and informed director or CEO—and supportive board of trustees—museums can cultivate an environment where significant work and fiscal responsibility are simultaneously achievable."

Leah Arroyo is senior editor of Museum. Susannah Cassedy O’Donnell, Editor in Chief Susan Breitkopf and Associate Editor Joelle Seligson contributed to this article.