Smithsonian Panel Advises Stronger Link With Business Arm

A task force appointed to examine the Smithsonian Institution's troubled business unit recommended against outsourcing the operation.

Instead, it suggested that the for-profit Smithsonian Business Ventures be more closely tied to the museums.

The review, requested by Acting Secretary Cristián Samper last August, addressed criticisms that SBV had a combative relationship with the museums' curators and administrators.

"Collaboration was sometimes not a characteristic of the commercial enterprise operations in the past," the review said. "The strained relationship between the Smithsonian's content experts and its business professionals was in large part responsible for the actual and perceived failures of SBV."

The report urged greater transparency and accountability. SBV runs Smithsonian publications, stores, IMAX theaters and several other moneymaking operations. Museum directors, especially Samper, had been critical of the varying formulas of profit-sharing the unit had with the museums. The report recommended a model that would be a 50/50 share of the net income.

The study recommended that the unit be renamed, suggesting Smithsonian Enterprises. It would continue to report to the secretary.

"This is definitely a course correction," said Samper, who discussed the report with reporters after a regular meeting of the Board of Regents. He said the restructuring and renaming, as well as putting the museums' mission before profit, were more than cosmetic changes. He emphasized that the new structures would make the museums "shareholders" and would lead to stronger oversight and empowerment of the museum directors.

"The list of principles . . . may look trivial but actually they are profound," said Samper, explaining how the business unit would be brought back in line with the central purposes of the Smithsonian.

The business unit's leadership was investigated by Congress and the Smithsonian inspector general. Its chief executive, Gary M. Beer, was dismissed last year after the inspector general questioned his expenses. SBV also negotiated a controversial agreement with Showtime Networks to produce television programming called Smithsonian Networks, which debuted last fall on a satellite channel.

The Smithsonian's business operations are considered essential to the visitor experience and the institution's budget. They provide unrestricted funds and last year returned $26.6 million, according to the 70-page report. The total budget of the Smithsonian is about $1 billion.

The task force rejected transferring the businesses to an outside operator because "the complexity and diversity of SI retail store assortments would challenge the capabilities of most potential outsource candidates," the report said. "Loss of direct control over mission appropriateness or merchandise and marketing creates a risk."

The Smithsonian's principal profit centers are the magazines and retail stores, which the report said, accounted for 76 percent of business revenues.