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The Guggenheim's Scaled-Back Ambition
November 20, 2001
By CELESTINE BOHLEN
In a profession known for its caution, Thomas Krens,
director of the Solomon R. Guggenheim Museum, has always
been something of a high roller, a larger-than-life
character who rides around on a BMW motorcycle and
challenges conventional notions about art, money and museum
management.
Mr. Krens, an imposing 6-foot-5-inch figure with an M.B.A.
in management from Yale, does little halfway. He has made
exhibitions out of motorcycles and Italian suits and turned
them into blockbusters. He gambled on a new museum in a
gritty industrial city in Spain and ended up with
Guggenheim Bilbao, an architectural wonder from Frank Gehry
and a financial success.
But now the hard times have come to the Guggenheim Museum
on Fifth Avenue, and like the good times before them, they
have hit big. Admissions are down by almost 60 percent,
revenue is running about half of what it is supposed to be,
and as of Friday 80 employees - roughly one-fifth of the
staff - had been given pink slips in what Mr. Krens
described as the initial round of layoffs.
Besides the staff cuts, which reportedly may reach 40
percent, the museum has scaled back its exhibit schedule,
postponing exhibitions by Matthew Barney and Kasimir
Malevich. Its SoHo museum on Prince Street will close at
the end of the year, and the fate of its $20 million Web
site, guggenheim.com, is still unclear.
In the old days Mr. Krens's ambitions were global, and his
dreams were of another shimmering palace designed by Mr.
Gehry, this one to be on the southern tip of Manhattan.
That project is very much up in the air; it may still
happen, but for the moment Mr. Krens's sights are set
lower. Now his goal is to "go into 2002 with a balanced
budget," he said in an interview last week.
This is the new Guggenheim after Sept. 11, crippled, Mr.
Krens said, by a devastating drop in out-of-town tourism
and a plunge in donors' portfolios. Other New York museums
have been hit hard by the same downturn, but the Guggenheim
is clearly suffering the most. The question is whether Mr.
Krens, 54, is in part to blame for having reached too far
too fast.
Ever the showman, Mr. Krens has now cast himself as a model
of fiscal responsibility. "I think it is appropriate for an
institute to re-examine its core mission," he said. "This
is an opportunity for us to do that, triggered, perhaps, by
Sept. 11.
"I think the things we are doing are extremely prudent," he
added.
His critics say Mr. Krens's born-again prudence comes a
little late. For years, many of his peers in the Manhattan
museum world have contended that the Guggenheim operation
was a house of cards, a global empire with colonies in
Venice, Bilbao, Berlin and most recently Las Vegas that is
fatally addicted to new streams of revenue to cover old
debts and risky gambles.
Now bets are being called in. "When you are in a good
economy, you can play on the edge," said a finance expert
at another museum. "But when it goes sour, there is a
danger of being caught out."
Some of the Guggenheim's latest ventures have proved
particularly vulnerable. Its two new minimuseums in Las
Vegas, one of them shared with the State Hermitage Museum
in Russia, opened on the weekend in October when the war
began in Afghanistan. Mr. Krens said attendance in the
first month was 3,000, about 40 percent of expectations.
The second venture, an ambitious for- profit Web site,
guggenheim.com that went up last month, has barely taken
flight and is still awaiting a second infusion of venture
capital.
Mr. Krens described himself as cautiously optimistic about
the future of the dot-com, which is financed by private
investors with the Guggenheim Foundation as a majority
stockholder. In 2000 it paid the Guggenheim a substantial
amount of the $5.9 million increase from 1999 in royalties
and other fees received by the museum, said Laurie
Beckelman, deputy director for special projects at the
Guggenheim. A smaller amount was paid in 2001, she said.
The foundation's reliance on the dot-com added to its risk
at a time when financial markets, particularly technology
stocks, went into decline.
Mr. Krens insisted that all of the Guggenheim operations
were self- sustaining. Yet in each of the past two years
the Guggenheim Foundation, which runs the global operations
from separate offices on Fifth Avenue, has shifted money
from its endowment to meet both operating costs and debt
payments. The total amount shifted over the two years was
$23.3 million, of which $10.5 million was taken in 2000 to
help dramatically reduce the museum's outstanding debt, to
$28 million from $42 million.
"The emphasis has been on bringing down the debt," Ms.
Beckelman said. "The markets were strong, and we had a
donor who was willing to take this incredible opportunity
to do it." She did not identify the donor.
Other museums dip into their endowments but usually as a
last resort. By using the endowment for operating expenses,
the Guggenheim has been left with a relatively modest
endowment for a museum of its stature and scope. Mr. Krens
said the endowment is now $58 million, up from $24 million
when he took over in 1988, but his figure includes a $10.5
million contribution for the acquisition of art and other
dedicated gifts. According the stricter interpretations
used in financial statements, the endowment figure as of
Dec. 31, 2000, was $37 million, representing a 54 percent
increase in a period when other funds were soaring and the
Guggenheim was benefiting from an extraordinary wave of
giving.
"Tom was very aggressive," said one former Guggenheim
employee who asked not to be identified because he is still
active in the world of nonprofit organizations. "He was
able to cobble together funds from very large institutions
which have come up with large amounts of money." By all
accounts the largest contributor by far has been Peter B.
Lewis, chairman of the Guggenheim board and head of the
Progressive Corporation, an auto-insurance company in Ohio.
Mr. Lewis could not be reached to discuss his contributions
to the museum, but Mr. Krens said his support for the
planned museum in Lower Manhattan was "absolutely secure."
From the beginning of his tenure Mr. Krens saw that he
would have to carve out a different path for the
Guggenheim, away from the traditional course taken by other
museums in the city.
"I don't think anyone should lose sight of where the museum
was a decade ago," said a museum administrator who worked
closely with Mr. Krens in the early 1990's. "The choice
then was shut down or reduce the museum to a jewel, a kind
of snapshot in time like the Frick. The other alternative
was to do something different and raise its visibility
internationally."
Some of the Guggenheim's international reputation was
literally built into its structures. Its Frank Lloyd Wright
building in New York has long been a stop for foreign
tourists, some of whom may have already known the Venice
museum, housed in a palazzo on the Grand Canal that had
been the home of Peggy Guggenheim.
The huge success of the Gehry building in Bilbao - perhaps
the boldest of the museum's gambles - and Mr. Krens's own
jet-setting ways have added to the Guggenheim's
international reputation and lured major foreign donors to
the board. "The further out you go, the Guggenheim is a
very highly regarded institution," Mr. Krens said.
But that has also made the Guggenheim more vulnerable to
the fickle tides of New York tourism. Of the museum's one
million visitors a year, almost 70 percent are from out of
town, and 50 percent are from abroad, Mr. Krens said. In
addition the Guggenheim is more reliant than most museums
on admission fees, which account for 25 percent of total
revenue, compared with 12 percent at the Metropolitan
Museum of Art.
Its critics see this as a weakness in his management
approach. "They were forced into being a cash machine,"
said one director of a New York museum who asked not to be
identified because he did not want to be seen as
criticizing a rival.
Museum directors have also been critical of Mr. Krens's
curatorial decisions - in particular a lavish exhibition of
fashions by Giorgio Armani, the Italian designer whose
reported $15 million gift to the Guggenheim Foundation was
seen as an unseemly quid pro quo.
Now as he heads into leaner times, Mr. Krens said, he
intends to spend more time building the endowment, but he
also expressed no regrets. "Ask yourself the question, Is
the world better off, or is it worse off as a result," he
said. "Would it be better if we didn't do any programming,
had a staff of 200, didn't build Bilbao, didn't have Berlin
commissioning works of art or let Venice languish?"
One member of the Guggenheim board said that even before
the board's meeting in October, pressure had been put on
Mr. Krens to curb his spending. "Just when everyone was
getting optimistic and feeling that there was some kind of
balance, this happens," he said, referring to the drastic
drop in revenue.
The trustee said the board accepted the new cuts as proof
that Mr. Krens was now ready to face facts. "The easy thing
and the traditional thing would have been to fudge the
finances and move things around," he said. "We went away
from the Oct. 9 meeting feeling that we are facing the
music. It was not a macabre death knell, but it was
sobering reality."
http://www.nytimes.com/2001/11/20/arts/design/20GUGG.html?ex=1007291458&ei=1&en=2c905bc116879c3e
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