This article from NYTimes.com has been sent to you by [log in to unmask] 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 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact Alyson Racer at [log in to unmask] or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to [log in to unmask] Copyright 2001 The New York Times Company ========================================================= Important Subscriber Information: The Museum-L FAQ file is located at http://www.finalchapter.com/museum-l-faq/ . You may obtain detailed information about the listserv commands by sending a one line e-mail message to [log in to unmask] . The body of the message should read "help" (without the quotes). 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