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Seeking a New Business Model for Museums

Category: Center for the Future Of Museums Blog

Read the news nowadays and it seems like museums are the blazing spud in a giant game of hot potato. Financial responsibility is being tossed in all directions.

League City, Tex., is trying to transfer the Butler Longhorn Museum, which has never quite got off the ground under city governance, to a private nonprofit group. On Long Island, the town of Islip, faced with a $10M budget shortfall, is trying to toss the municipal art museum to Dowling College. (Which is ironic, considering that many colleges and university are proving to be unreliable museum parents—think Brandeis University and the Rose Art Museum. So much so that ACUMG, AAM and other associations recently felt compelled to issue a declaration that “museums are no more disposable assets [for colleges] than are libraries and archives.”)

The potato flies in the other direction in Stevens Point, Wisconsin, where the Scarabocchio Museum is trying to give itself to the city. (This appears to be a classic case of “I want to start my own museum…hey wait, now I want to retire, who cares enough to keep it going?”)

Sometimes the spud is lobbed from museum to museum, for example to the Arizona Science Center which is taking on the failing Phoenix Museum of History (Their web domain, is now inactive. Always a bad sign.)

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Other times the potato will simply fall, as may be the case of the Claremont Museum of Artt in Calif. and the Legends of the Game Museum in Arlington Tex, which seem to be on the verge of closing<. This happens to for-profit museums as well, such as the Sports Museum of America in NYC, which closed earlier this year.

These stories represent more than challenges to individual museums. They illustrate the fact that whole categories of funding are threatened right now. For example, government funding, which has shrunk gradually over the last decade from a mean of 40% of museum operating income to about 25%, now seems on the verge of collapse. Pennsylvania has not only cut funding, but narrowly defeated a proposal to extend the sales tax to museums to fund other social services. A recent article about budget cuts in Illinois provides commentary on how this rollback has affected museums whether or not they have traditionally relied on state funding in the past.

On the national level, Sen. Tom Coburn (R-Okla.) is questioning whether the Federal government should fund museums at all. This same article quotes Rep. John Campbell (R-Irvine) dissing federal support for local museum projects. “Is that what people elected me and my colleagues to do, to take their tax money and make charitable contributions with it?” (Personally I agree with Oliver Wendell Holmes, Jr., that what I buy with my taxes is civilization, and museums are a great addition to the shopping cart.) But museums are being weighed against other social goods, like health care, and sometimes found wanting.

All of which leads to a question I have been hearing frequently: “What is the new business model for museums?” People want a magic formula that will turn museums from something too hot to handle into desirable entrees.

This is a tough question. While the distribution of funding sources varies from museum to museum (see AAM’s new 2009 Museum Financial Information) the basic financial model for years has been nonprofit status supported by a mix of funding from earned income (admissions revenue, membership, space rental), philanthropy (individual, corporate), government (primarily local) and investments. Sure you can fiddle with the particular mix your museum relies on. You can get better at leveraging local support (like the Cincinnati Museum Center, master of the local tax levy.) You can assiduously court donations (Like the Norman Rockwell Museum, which despite the economic downturn recently announced that the quiet phase of its fundraising campaign has yielded $18 million—nearly three-fourths of their $25 million goal.) You can creatively explore more ways to earn money (like the LA Museum of Contemporary Art, whose recent auction of art donated by artists for the occasion grossed $650,000). But these aren’t revolutionary ideas, even if they can be hard to implement in the current economic climate. They don’t constitute a “new business model”—they are examples of getting maximum efficiency from the old model.

So what would a truly new business model look like? It may seem trite to say “nothing like the old one” but that’s actually a good place to start. To come up with a new model we need to shed assumptions that constrain our thinking about how museums operate. Want an example? Here’s the old model: museums need to be complete and independent entities. Just like a brain needs a body to keep it alive, museums need all sorts of appendages that enable it to survive, think and create.

What is the alternative? Be a disembodied brain. Only staff and deliver the things that museums do uniquely: build physical and intellectual resources and provide access to them through exhibits, programs, publications, research. Don’t just outsource some support functions, outsource everything you don’t have to be expert at. Let non-specialized commercial firms like Aramark supply services such as accounting, building maintenance, facilities management, IT, ticketing and housekeeping. Specialty firms will supply services that need to be more museum-specific: exhibit fabrication, security and HVAC maintenance for example. Local consortia will handle the collections support needs of geographically bundled institutions: storage, data management and shipping.

As with many truly new models, the biggest barrier to giving this a try will probably be human nature and organizational culture—it is hard to erase the “self-image” held by a museum staff and board of their organization as a separate and independent entity, containing all the traditional functions.

I’m not saying that the “museum as disembodied brain” is the right new economic model, but it is certainly a different model (rather than squidging around the edges of “business as usual”) and might be worth a try.

So this is a call for dialogue: is your museum trying something truly new to secure its financial future? If so, share the news! Do you have an idea for what the “new business model” might look like? Throw it out there for comment and debate—maybe some enterprising organization will give it a try. And what do you think of museum as disembodied brain, relying on outside suppliers for the vast majority of its operations?

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  1. Interesting blog. The question is very broad but also very provocative. Why not ditch the not for profit model all together? A country founded upon free enterprise should use that model for all activities. If people want to support museums they should be able to pay for what they want. Maybe we are just providing what people don't really want! What do you think?

  2. This post raises many important questions about viable museum business models, and implies that (almost) "everything in on the table" for potential outsourcing (and perhaps insourcing as well).

    My view as a long-standing museum trustee is that definition of the business model needs to proceed from the institution's mission (and vision). Tough times may force or facilitate doing a serious reality check of mission/vision, but the next question is: if we (the board, staff, community) believe we exist to accomplish these noble ends, what business model will best allow us to do so?

    Nonprofit status is presumed to be the best model to start, but I think there are some fresh questions to ask as contributed income from all sources becomes less certain, and less, period.

    Aggressively outsourcing your non-core functions — from facilities maintenance to HR processes to whatever — certainly can help whatever model you may choose, but also has its pitfalls…

    And as donors, foundations and governments becomes more "agnostic" about whether an institution doing social good or delivering needed services to citizens is a 501(c)3 or just a well run "business," I believe there will be early adopters of a range of models, including commercial/nonprofit hybrids, which will bear watching.

    Action on any of this, though, depends on trustees and a governance culture which will take the courageous and even risky steps that may be necessary.

    Equally, that governance courage may require addressing the reality that the current business model has failed and that the insitution should fold…certainy tough in the comercial world but nearly unthinkable and incredibly emotion-laden in the nonprofit world.

    As CFM looks out to 2019 and 2034 in its work, I believe that two themes may warrant more engagement: analysis of a range of business models and their strengths and weaknesses (clarifying which paths are more likely to lead to marginal survival and which to vibrant societal contribution), and the governance behaviors and board culture needed to lead, helping assure the second of those two paths (vibrant societal contribution) is followed….

    David R Curry
    Managing Principal

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