Museums and Art Galleries

SIC 8412

Companies in this industry

Industry report:

This industry classification includes establishments primarily engaged in the operation of museums and art galleries. Art galleries and dealers primarily engaged in selling to the general public are classified in SIC 5932: Used Merchandise Stores and SIC 5999: Miscellaneous Retail Stores, Not Elsewhere Classified.

Industry Snapshot

The numerous U.S. museums seem as permanent and stable a part of the cultural landscape as schools and libraries, but it was not until the late nineteenth century that they attained social respectability and civic solidity. Museums had existed since the founding of the country, but they were often small collections of odd paraphernalia, housed in someone's home or carted around by circus masters such as P.T. Barnum. Nonetheless, U.S. museums grew as the country grew and became a source of civic pride.

Although no official agency keeps count of how many museums operate in the United States, the American Association of Museums (AAM) placed the estimate at 17,500 in 2012. The National Registry Publishing Company listed 14,400 entries in its annual Official Museum Directory in 2012. Nine out of ten counties in the United States have at least one museum. Slightly more than a third of museums are free to the public. However, even those that charge admission depend heavily on private donations and government funding to underwrite expenses.

Supported by government funding and private donations, modern-day museums became elaborate storehouses of America's and the world's artistic, scientific, historical, and technological past. In the process, they became very big business. According to the AAM, U.S. museums attracted 902 million visitors in 2010, with science/technology centers and museums receiving the most visitors, at about 357,000. Contemporary museums are supported by billions of dollars of annual support from government sponsorship, corporate donations, and public membership, and they employ and educate a wide range of professionals.

Organization and Structure

The museum world is fragmented and hard to summarize. About three-quarters of the 17,500 museums nationwide were founded after 1950, and less than 5 percent have origins in the nineteenth century. These institutions are distributed throughout the United States in roughly the same proportion as the population.

Approximately 60 percent of museums are privately run, and 40 percent are run by the government, usually state or municipal authorities. Only 7 percent of the nation's museums are operated by the federal government. Government-run museums are most commonly found in southern and western states (slightly more than half of museums in these regions are public) and are least commonly found in the northeastern states (only about 27 percent of museums in the New England and Mid-Atlantic regions are public).

Museum budgets totaled some $4 billion at the end of the first decade of the twenty-first century, but this money was not evenly dispersed. For example, in the late years of the first decade of the 2000s, just 8 percent of museums had annual budgets of $1 million or mor, 57 percent operated with $100,000 or less, and 38 percent had $50,000 or less to spend. Using budget size as an indicator, most museums in the United States are generally small institutions. When budget size is adjusted to the differing operation costs of museum types (e.g., a science museum needs a $5 million budget to be considered large, but a nature center requires only $800,000), 80 percent of museums could be described as small. About one-half of museums have endowment funds, but these funds were being cut drastically in the early 2010s. According to the AAM, government funding was reduced at 52 percent of U.S. museums in 2010, and investment income dropped at 37 percent of all museums. Personnel expenses account for the largest share of museum operating expenses, taking up approximately half of museum budgets. Despite this large investment in personnel, museums are still heavily dependent on volunteer staff to accomplish both day-to-day tasks and special functions.

In addition to serving as conservators of the nation's cultural and scientific heritage, U.S. museums have a strong commitment to education. Sherman Lee, former director of the Cleveland Museum of Art in Ohio, claimed in Past, Present, East and West that "in the world of visual images...the museum is the primary source for education. Merely by existing--preserving and exhibiting works of art--it is educational in the broadest and best sense, though it never utters a sound or prints a word."

Most museums provide educational programs for both children and adults, including guided tours, study groups, special lectures, and demonstrations. Historic sites, history museums, and zoos were the most likely choice for school groups. Many museums have joint programs with universities or colleges to provide work experience and research opportunities for college students. The American Association of Museums (AAM), a national membership organization representing all types of museums and museum professionals, provides an ongoing series of educational programs and seminars to ensure that museum professionals are as well educated as their visitors.

According to the AAM, more than one-half of museums are open to the public 52 weeks per year. Weekly operating schedules vary, with arboretums and botanical gardens tending to have the longest hours, and art museums and children's museums having the shortest. As is the case with funding dollars, attendance at museums is not evenly shared by institutions. Large museums, although they make up only 7 percent of museums, attract nearly 50 percent of all people who visit museums. Historic sites, zoos, and art museums are the types of museums most popular with the general public.

After increasing during much of the 1990s, museum attendance rates began to decline during the second half of the first decade of the 2000s before rising again in 2010. According to the National Endowment for the Arts (NEA), the U.S. attendance rate for art museums fell to 23 percent in 2008, down from a high of 26 percent between 1992 and 2002. In addition, those who fell into the age category of 45- to 54-year-olds, commonly the most stable age category of art museum attendees, showed the largest drop in attendance for most art events, compared with other age groups. However, the AAM reported that attendance increased at more than 50 percent of U.S. museums in 2010.

Many museums have greatly expanded their restaurants, gift shops, and parking facilities. Museums have also done much to shed their staid and elitist image, especially art museums, some of which are among the nation's oldest and most prestigious cultural institutions. In the late 1960s, it was considered a daring innovation for New York City's Metropolitan Museum of Art to hang a banner outside its door advertising its "Great Age of Frescoes" exhibit. The 1970s saw the advent of the "blockbuster" art museum show. The blockbuster exhibition, wrote Michael Conforti in Art in America, was created by Metropolitan Museum of Art director Thomas Hoving in 1971. He added, "Museums all over the country quickly adopted the formula established at the Met for self-supported exhibitions of popular and usually artistically credible subjects like impressionism, certain archeological objects, or treasures from foreign collections. Museums expected to fund these shows through revenues from admissions, merchandise, food, and also through grants from corporations and foundations seeking more positive public images."

Background and Development

Museums of one sort or another have played a part in the United States' cultural life from the country's inception, and they have reflected the cultural variety and democratic tendencies of the country's diverse population. European collectors had always cultivated collections of artistic and historical importance, but their collections were reserved for their own personal enjoyment. In the United States, similar collections were made available to the public as early as 1773, when the Charleston Library Association in South Carolina announced the establishment of a museum to house specimens that would allow citizens to study the natural history of their colony. In 1785, a similar desire to make educational materials available to the public prompted artist and American Revolution officer Charles Willson Peale to display his collection of art and natural history specimens from his Philadelphia home. Within a decade, his collection had grown so large and his visitors so numerous that the collection was moved to larger quarters in Philadelphia's Philosophical Hall. Peale's example was soon followed in cities throughout the growing nation with the establishment of the Tammany Society Museum of Indian Relics in New York City; the Columbian Institute for the Promotion of Arts and Sciences in Washington, D.C.; and the Columbian Museum in Boston, Massachusetts.

In the eighteenth and nineteenth centuries, many Americans eager to construct for themselves a sense of national identity found scientific, historical, and artistic value in nearly all aspects of their lives. Museums sprang up across America, housing collections of everything from Indian artifacts to stuffed animals, wax figures, and automobiles, airplanes, and art. Karl E. Meyer, author of The Art Museum: Power, Money, Ethics, noted that by the mid-nineteenth century, there were two kinds of museums. "One was the 'dime' museum, an emporium of curiosities operated for profit and dedicated to entertainment. The other was the impecunious but high-minded public gallery, usually an appendage of an art academy, library, historical society, college, or private club." Out of a combination of these two early progenitors, the modern museum was born.

In 1835, the U.S. government learned that it was the beneficiary of the will of British scientist James Smithson, who left slightly more than $508,000 to found "the Smithsonian Institution, an Establishment for the increase and diffusion of knowledge among men." According to Paul H. Oehser's history, The Smithsonian Institution, the U.S. government hardly knew where to begin. By 1846, however, Senator John Quincy Adams had introduced legislation calling for the construction of a national museum in Washington, D.C., which would house all the objects of art and natural history belonging to the government, maintain a library, and encourage the study of science. By the mid-twentieth century, the Smithsonian Institution, with its numerous buildings spread across Washington's mall, and with additional sites at other locations, had become the largest museum in the world. By 1996, it boasted more than 25 million visitors annually.

In 1870, corporate lawyer Joseph H. Choate convinced the city of New York to finance the construction and operation of the Metropolitan Museum of Art, which was to be governed by a board of 21 private members and civic office-holding trustees, including the mayor. The museum charter, with its unique pairing of public funding and private control, became the model for most large U.S. museums that followed. Such an organization provided unique advantages to both the city and the wealthy Americans who sat on the museum board. The greatest benefit for the city was the status that a world-class art museum conferred. New York City's cosmopolitan reputation rested in part on its museums, and even smaller cities could brag of the sophistication of their own local arts showcases. Museums bring money and people into the cities and often serve as a focal point for other cultural activities. According to former Smithsonian Secretary Dillon Ripley in The Sacred Grove, "The art museum managed...to become a symbol of the community's rise to prominence and sophistication."

Wealthy arts patrons and businessmen were equally enthusiastic about the new U.S. institutions, which served as culturally-sanctioned storehouses for the surplus wealth of the country's industrial leaders. "Of all the uses to which wealth can be put," wrote Lind, "surely there are few that are less antisocial than endowing a public museum." The first art museums in the United States were filled with the art collected by America's first multimillionaires: J. Pierpont Morgan left his $60 million art collection to the Metropolitan Museum of Art in New York City; the Rockefeller family made cultural philanthropy a family tradition; and museums across the nation became the beneficiaries of private collectors. Changes in the U.S. tax structure in 1909 and 1913 made donations of art an appealing way for the wealthy to avoid paying taxes on their assets and to mollify critics who accused corporate giants of benefiting at the expense of society at large.

Heavily advertised and often so expensive to mount that relatively small profits are common, blockbuster shows (such as those exhibiting Picasso, Van Gogh, Hopper, and Monet) draw in segments of the public who might rarely enter a museum otherwise. They can also raise a museum's status within the art world. In addition to being crowd pleasers, such shows are considered valid, scholarly endeavors. One such attraction, which opened at Chicago's Field Museum in the summer of 2000, was the exhibit of "Sue," the largest complete Tyrannosaurus Rex skeleton.

Although officially classified as privately or publicly funded, most museums rely on a patchwork of funding sources, including government and corporate grants, private donations, interest from endowments, and earned income, such as admission fees, memberships, and revenues from food service and gift shops. The number of museums charging admission, either a fixed fee or a suggested donation at the door, went up from 32 percent in 1979 to 55 percent in 1988. Zoos are the most likely type of museum to charge admission (84.8 percent), and art museums the least likely (35.8 percent). Many museums in the late 1990s had moved to a "suggested donation" format, instead of the more common practice of charging admission.

Even well-endowed institutions were always in need of financial assistance. Museums were hard hit by cutbacks in government spending. The budget of the NEA, the largest source of government funds, was slashed by 40 percent in fiscal 1996. Private philanthropy was also down. To make up for this loss, museums sought new ways of raising money. "With less government money around, we all have to be more entrepreneurial and figure out ways to stretch our advertising dollars. We are slowly learning lessons others have known for years," David A. Ross, director of New York City's Whitney Museum of American Art, told The New York Times.

Museums entered into alliances with hotels, airlines, phone card companies, and credit card operations. Corporations, which once considered underwriting museum activities as primarily a gesture of goodwill, were increasingly finding their connections with museums an effective form of advertising. In addition, branches of museum gift shops opened up in many malls across the United States, with a portion of the proceeds going to the museums. On a larger scale, the cable television shopping channel QVC began a series of museum programs in 1996. In addition to being able to purchase items from the featured museum's gift shop, QVC viewers were taken on a tour of the museum's exhibits. Among the museums showcased on QVC were the Smithsonian Institution, the Philadelphia Museum of Art, Colonial Williamsburg, and the Winterthur Museum of American Decorative Arts.

Some museums, especially in the eastern United States, saw a drop in visitors after the terrorist attacks on the United State on September 11, 2001, and the ensuing anthrax scares. With the sharp decline in travel and tourism amid terrorist fears, the Smithsonian reported a 29 percent decrease in visitors during the first seven months of 2002, with 15.1 million visits. While admission is free, gift shop sales account for a large portion of funding for the facilities and were negatively affected. The federal government provides 70 percent of the Smithsonian's budget, which was $519 million in 2002. Though most state budgets for the arts were dwindling in the early twenty-first century across the United States, in 2003, $2.4 billion in federal and private funds allowed plans for renovations and new museums to be established in Washington, D.C., with the largest plans undertaken by the Smithsonian, adding two new museums and revamping others. The Smithsonian was by far the most visited of all museums and cultural attractions in the early 2000s, with 34 million visitors.

To offset loss of international visitors, which account for a large percentage of some of the major art museums and galleries, some museums and galleries turned their attention to the domestic market. The Guggenheim, with attendance down 30 percent in the fall of 2001, was down just 8 percent in fall 2002. Mounting a Norman Rockwell show, the museum appealed to Americans' sense of patriotism and drew visitors from across the United States. Some museums with a large percentage of local attendees did not fare as well, however. The Brooklyn Museum of Art recorded a 25 percent drop in attendance as of 2002, while the Metropolitan Museum of Art had approximately 1 million fewer visitors.

The Museum of Modern Art opened a location in the New York City borough of Queens to keep its business intact as its main location was being reconstructed, and banked on a blockbuster "Matisse Picasso" exhibit in February 2003, drawing on works from museums and private collections worldwide with an estimated value of $1.5 billion. To recoup costs, the museum charged an unprecedented $20 admission fee that caused controversy, but was also considered to be a trend-setting move. The museum rationalized the increased admission as necessary in light of increased insurance costs on art, which have tripled since 9/11. Indeed, the Guggenheim raised admission to $15 in 2002, and the newly-opened Museum of Sex in New York planned to charge $17, the highest general admission for a museum in New York.

Another trend in this sector was the expansion of gift shop wares. Gift shops were once dominated by postcards and exhibition catalogs but now include jewelry, clothing, home furnishings, books, and toys. While perhaps increasing revenue, the retail end of museum businesses became so large that, in 2003, the Museum of Fine Arts in Boston (MFA) became one of the first museums in the United States to create a separate for-profit retail operation, the MFA-owned Museum Enterprise Partners Inc. Art books became the most important section of the new business. As new museums were designed or redesigned, more emphasis was placed on the amount of retail space to raise revenues. Restaurants became increasingly important as well.

Museums expanded their online presence in the new millennium. Parts of museum collections could be viewed via the Internet, whereas online gift shops provided users access to shop collections. Initially, museums feared that putting their collections online would negatively affect attendance. Instead, they learned that it actually encouraged visits. The Smithsonian has 45 separate Web pages alone, filled with pictures and information. The American Museum of the Moving Image created a website that included its Pinewood Dialogues, an archive of more than 300 film-related interviews with such artists as Mike Nichols, David Cronenberg, and David Lynch.

In the mid-2000s, museums continued to struggle with increased costs and flat attendance numbers. However, while new sources of revenue were explored, organizations continued to have difficulty meeting operating expenses. The AAM estimated that entrance fees at many facilities increased by an average of 50 percent between 1999 and 2003. In 2006, the median cost for museum admission was $6, but the median cost of serving a visitor was $23.35. Private charitable donations accounted for about one-third of operating income, with government funding providing another one-fourth, and investment income accounting for one-tenth.

Another trend was growth in building dollars that was not matched by staffing budgets. In New York City, the American Museum of Natural History opened a renovated Milstein Hall of Ocean Life and added the Arthur Ross Hall of Meteorites, despite staff cuts of 15 percent during the two previous years. The Cleveland Museum of Art planned a $225 million expansion at the same time that it laid off 37 staffers, cut wages, and called a hiring freeze. Nonetheless, renovation and new building projects are seen as important ways for museums to escape the financial crisis. Improved facilities, with more classroom space, technological advances, and multipurpose space that can be used for more than exhibitions will contribute to improved financial health.

A study done by the Association of Art Museum Directors showed improved financial conditions for that segment of the museum industry in 2004. Some 50 percent of responding museums said that fundraising was more successful in 2004 than the year before. Contributing to that increase was growth in donations from individuals. About 45 percent of responding organizations noted an increase in attendance, although a study by the Joyce Foundation and the University of Chicago Cultural Policy Center in 2006 found that most of the visitors to Chicago museums were white, often due to cost and perceived elitism. Nationwide, 20 percent of Americans had never taken their child to a museum of any type as of 2006.

By the late 2000s, the financial landscape had worsened for U.S. museums. Record-high fuel prices in 2007 drove up costs, and in 2008, the U.S. economy sank into the worst recession since the Great Depression of the 1930s. With the economy in shambles and unemployment over 9 percent, many U.S. families cut short or eliminated vacation plans. Those who did attend were likely to spend less at the gift shop and food court. Likewise, state and federal agencies tightened their belts as their own revenue sources dried up. Corporations also cut back on donations. As a result, many museums saw their endowment funds decline, their attendance numbers drop, their expenses increase, and their funding decrease.

Museums responded by cutting costs. Many reduced their hours of operation. Others renegotiated their insurance coverage to include higher deductibles and lower premiums. Yet others were forced to reduce staff. A few shut their doors. Two of the country's most prestigious museums, the Art Institute of Chicago and the Philadelphia Museum of Art, announced an increase in admission prices. In Chicago, the price of an adult ticket increased from $12 to $18, but the effectiveness of the move was questioned because only about 10 percent of the budget was supplied by admission revenues. In November 2009, an inability to raise sufficient funds led the University of California-Berkeley to abandon its plan to build a new Berkeley Art Museum and Pacific Film Archive. Between August and November 2009, the Fresno Art Museum sliced $520,000 from its $1.2 million budget in an effort to keep its doors open. The museum also cut its hours, reduced its staff from full-time to part-time, and announced pay cuts. In addition, fiscal concerns also prompted Fresno Metropolitan Museum to institute winter hours to cut costs.

Although museums in certain states, which were hardest hit by the sharp decline in the residential housing market (such as California), suffered the worst effects of the economic recession, the industry was not entirely without growth. For example, in November 2009, the Museum of Chinese in America opened in New York City. In the same month, the Dallas Museum of Nature & Science broke ground on the new Perot Museum of Nature & Science at Victory Park.

During the late 2000s, along with combating a weak economy, museum curators were also considering how to reach a new generation of museum goers. In a digital era, in which young consumers are tech-savvy and accustomed to instant (and often free) access via the Internet, the industry was looking for ways to attract the younger crowd. Not only was art available via a PC, but such information was mobile. For example, in 2009, the iPhone had numerous applications that allowed users to browse art collections. Both the Brooklyn Museum and the Portland Art Museum had applications for mobile browsing of their collections.

Current Conditions

U.S. museums suffered during the recession of the late 2000s, as Americans cut back on discretionary expenses such as trips to museums as well as donations to such institutions. The government also slashed funding. Although budgets cuts continued to be a challenge for museums into the early 2010s, by 2012 some were optimistic about the future. According to The Art Newspaper in April 2012, "Leading U.S. museums are finally in recovery mode and their directors are much more optimistic about the financial outlook than a year ago, but few are feeling bullish. Endowments may have increased but they have not regained the peak they reached in 2007"

According to a 2012 report by research firm IBISWorld, U.S. museums garnered $9 billion in revenues in 2011 and employed 79,620 people. The report predicted an average annual growth in the industry of 1.5 percent through 2016. Some of the challenges museums faced into the mid-2010s, according to the AAM, included a permanent decline in public support for higher education, the difficulty of obtaining donors for governing boards, the decline of property values, and a shift in philanthropic focus.

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