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insid of an art museum with two large benches

The Business of Art

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Yale School of Management
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Traditionally museums have been institutions closely tied to a great city. The Metropolitan Museum of Art is part of New York; the Louvre is a monument of Paris; the Hermitage is a landmark of St. Petersburg. Like a famous university or library or hospital, a museum was thought to be one of a kind, no more reproducible than the great works of art that it houses.

But during the 1990s, this concept of the museum began to change, as the scale of operations grew in every way. Traveling exhibitions grew to become money-making blockbusters attracting large crowds. Art works themselves became larger, which required larger exhibition space. And as the economy expanded, increasing donations allowed museums to buy new art and to build additional wings to house their collections. As The Wall Street Journal put it in a 1999 article, "It's party time these days in the normally staid and sober museum world."[i]

During the 1990s and early 2000s, the Solomon R. Guggenheim Museum, under the direction of Thomas Krens, was a leader in museum expansion. Krens went beyond the acquisition of new works and the building of new additions to open Guggenheim franchises in cities around the world. The Guggenheim's expansion began in 1997 with the opening of a branch museum in Bilbao, Spain. Krens followed this success with extensions in Berlin, Las Vegas, and the Soho section of New York. He also explored the possibility of opening additional branches in Rio de Janeiro, Taiwan, Singapore, downtown New York, and Bucharest.

Although the Guggenheim Bilbao was a grand slam in terms of attendance and ticket sales, not every Guggenheim branch was so successful. Some extensions had to be closed; others were abandoned during the planning stages. It was not always clear what was the formula for a thriving museum franchise. In addition, Krens' ambition had aroused some controversy among donors and art critics.

Yet the museum's strategic plan called for a Guggenheim on every continent, and Krens and the trustees believed that the concept of expansion was basically sound. In 2007, as it pursued this strategic plan, the Guggenheim began considering a proposal for a new branch in Guadalajara, Mexico. A spectacular site, a healthy tourist industry, and a cooperative local government all seemed to offer a solid foundation for a new museum. However, the Guggenheim's endowment was not growing at the same fast rate as it had during the 1990s. Was Guadalajara a good option for a Guggenheim in Latin America? Or should the Guggenheim wait and pursue offers from other cities?

Published Date: 24/03/2008

Suggested Citation: Andrea R. Nagy and Alexandra Barton-Sweeney, "The Business of Art,"Yale SOM Case 08-026,  March 24, 2008

Keywords: Art, Museum