Monthly Archive for May, 2009

19. EXHIBITION-RELATED CONSULTANTS

19.1 INTRODUCTION

From time to time, all museums rely on buying-in skills or resources to mount exhibitions. Even large institutions with numerous professional staff, need to retain additional, outside expertise. Accordingly, there is an extensive range of independent museum professionals who provide their services on a project by project basis. The include: exhibition designers, catalogue designers, lighting designers, commissioned contributors to the catalogue, installers, security experts, conservators, photographers and curators.

Even where the museum has this expertise in-house, it may choose to hire a consultant to provide the service. It may do so because its employees are already fully committed with other projects, to promote a new voice or approach or for financial reasons.

All consultants must be properly contracted. The terms of the agreement must very clearly articulate the expectations of both parties. In particular the brief must be fulsome and unambiguous.

19.2 MODEL CONSULTANCY AGREEMENT 

Museums are great users of consultants: they need to be because they have a continual need for diverse skills and no museum, however wonderfully resourced, has the internal intellectual richness to meet the entire range of demands upon it. The following is an agreement drafted for a major museum to use when retaining the services of consultants providing creative services such as the curator or designer of an exhibition or the author of a catalogue essay. The commentary provided, will assist to understand the significance of the clauses.

 

Model Consultancy Agreement with Commentary

Click here to view the Agreement (PDF).


Schedule

The model contract will then have a Schedule that sets out the nitty gritty that assists the administration and supervision of the contract. For example, the above contract may have a Schedule that looks like the following. Just make sure that all of the items set out in the Schedule are actually referred to in the principal agreement.

SCHEDULE
Item 1: CONTRACTOR DETAILS

Name: (referred to as ‘the Consultant’)

Address:

Telephone: Fax: Email:

Key person who is to deliver the Services:

Item 2: BRIEF:

Item 2.1: The Brief: [description of the project/activities for which the Contractor is contracted]

Item 3: PRICE AND DELIVERY
Date(due COB) Deliverables/Milestones Format /Conditions Payment ex GST AUD GST(if applicable)
31 August 20xx Report on visitors to Museum – June – July 20xx Word or compatible format 2 x hard copy version x000.00 x00.00
5 September 20xx Meeting with Museum Executive to brief on outcomes of report To be held in Museum board room Nil
10 days from delivery of the Work by Author. Acceptance by the Museum of all Deliverables x000.00 x00.00

 

Item 6: APPROVED BUDGETED EXPENSES:

Detail of expense Maximum amount to be reimbursed by Museum
TOTAL
Item 7: TRAVEL EXPENSES:
Detail of travel (eg: flights to and from & carrier & class)
Item 8: MATERIAL AND FACILITIES TO BE PROVIDED BY THE MUSEUM:

(eg: access to work facilities, conference rooms, meetings with staff)

Item 9: SPECIAL CONDITIONS:
Item 10: BANK ACCOUNT DETAILS

The Museum will make payment via electronic funds transfer into the following account:

Name of account:
Institution:
Bank State Branch (BSB) no.
Account no:

 

Australian Business Number:

The Consultant’s ABN is ………………………………………………………..

Item 15: REQUIRED INSURANCES

[1] The insurance requirements change depending on the kind of services that are being delivered. These can be specified in the Schedule.

18. PERMISSIONS AND ACKNOWLEDGEMENTS

18.1 COPYRIGHT PERMISSIONS

Every exhibition uses material that is protected by copyright and moral rights. This is so even when the exhibition is of material that is either long out of copyright or in which copyright never subsisted. Exhibitions are always accompanied by vast amounts of contemporary and copyright work: photographs, essays, labels, illustrations, audio recordings, background music, catalogue design, lighting design, exhibition design, press releases, signage, merchandising materials and so on. Accordingly, every exhibition requires a plethora of copyright-related permissions and acknowledgements.

These are frequently not complex legal documents. They are often achieved by a simple exchange of letters or emails whereby one party tells the other what they want to do and the rights owner gives permission. Most exhibiting institutions have pro forma documentation that they ask the party giving permission to complete and sign.

For example, copyright permission must be obtained from the copyright owner for the following uses:

· to reproduce an image on the cover of the catalogue (this is certainly not covered by fair dealing exceptions);

· to reproduce an image within the catalogue (unless it is for the purposes of criticism or review – something that is quite rare unless it is a catalogue raisonné);

· to reproduce an image on any poster, postcard, invitation, flyer, sign, label related to the exhibition whether the use is commercial in nature or not;

· to make a video recording of the work, whether on its own or as part of the exhibition, whether or not it is for non-commercial purposes (such as education or the promotion of the exhibition) or for commercial purposes (such as producing and selling a video or DVD of the exhibition);

· to reproduce educational audio recordings for use by exhibition viewers (assuming that the content is not absolutely owned by the museum).

It is also prudent to obtain any relevant moral rights consents. The principal moral rights for these purposes are (i) the right of attribution (to be acknowledged as the author of the work), and (ii) the right of integrity (to prevent any alteration to the work by the museum or its agents.

No copyright work may be reproduced for exhibition purposes unless the right to do so has been acquired. Assuming that the exhibiting institution is not the owner of the relevant copyright, it will have to get permission.[1] Strange as it may seem, this is not always straightforward. Often if you ask contributors whether they are the owner of copyright, they will respond confidently, affirmatively and erroneously. Many people have no idea of the principles of copyright and make potentially expensive assumptions that are quite wrong.[2] Beliefs constructed on erroneous assumptions may be firmly held and confidently expressed, but are no less wrong for that.

Accordingly, it is important to have a method by which the person has to explain the basis upon which he or she is the copyright owner. This is most easily done in the permission or licence form.

18.2 MORAL RIGHTS PERMISSIONS

A moral rights claim by an author can arise against a person who publishes, exhibits, reproduces or communicates to the public an artistic work,[3] or publishes, reproduces or adapts a written work. For example, you are obliged by the moral rights provisions of copyright law, to give the author proper attribution.[4] To do this, the exhibition organiser must be able to identify the author and the author’s role.

If the person providing a copyright work is not the sole author of it, or a person who has the consent of the author(s) to be attributed as the author, they should be asked to provide as much information as they can to enable the museum to find the author(s).

For these purposes it is important to bear in mind that only individual persons can have moral rights, not businesses or other organisations.

Companies providing copyright material

Where a company provides the material,[5] the moral rights consent must be from the individual who preformed the work for the company. So, to ensure that there is compliance with moral rights law, those claiming to be the author must be either:

· the true author; or

· joint authors (all of them); or

· authorised to make the attribution of authorship by freely given written consents given them by the true individual author(s).[6]

In firms that are in the business of creating and delivering copyright material[7], it is becoming standard practice to obtain standing consents from their staff. Such firms will usually include such consents in their standard agreements with all employees and consultants. The clause should have three limbs. It will:

1. Expressly assign all copyright in the work to the firm;

2. Authorise the firm itself to claim authorship of the work; and

3. Authorise the firm to exercise the moral rights of the author.

If the provider of the material is the copyright owner and has already obtained moral consents from the author(s), it has the right to pass the benefit of that consent on to third parties such as the exhibiting institution. If the provider of the materials does not have those consents already, you must require that it obtains them or at least tell you from whom they should be sought.

Accordingly, where any copyright work is provided for use by the collecting institution, it is prudent to require:

· a written undertaking by the person(s) or organisation that claims to be the author(s) that they are the author(s); or

· a written undertaking that it holds a valid consent to be attributed as the author(s); or

· the identity of the author so that the museum can seek the necessary consents.

18.3 EXAMPLE OF COPYRIGHT PERMISSIONS 

Copyright permissions are relevant to exhibition organisers in two quite different sets of relationships: First, they are essential in the contracts that they have with all of the consultants that are retained to work on an exhibition. Second, they must be obtained from the owners of any copyright in the exhibition material.

Copyright and exhibition consultants

Given that the general rule under the Copyright Act 1968 (Cth) is that the author owns the copyright in his or her work, it is essential that the institution commissioning the work from a consultant or freelancer incudes in the consultancy agreement a clause dealing specifically with the copyright in the deliverables.

8.0 GRANT OF RIGHTS

8.1 All rights (including copyright) in any Deliverables or Material created in the course of the providing the Consultant’s services shall, upon delivery of that Deliverable or Material to the Museum, become the property of the Museum.

8.2 This assignment applies to all present and future rights of copyright, for the full period of copyright including all reversions and extensions, and to all media and technologies, whether now known or yet to be invented.

8.3 The Consultant shall not use any Deliverables for any purpose other than specified in this agreement, without the prior written consent of the Museum.

8.4 Without limiting the effect of clause 8.1, the Museum shall be entitled to make use of the Deliverables:

8.5 in such manner as the Museum shall in its sole discretion think fit including (but not by way of limitation) the right to make changes, substitutions and additions thereto, deletions therefrom and adaptations and rearrangements thereof and translations into any and all languages; and by means of all technologies and all media, whether now known or yet to be invented.

8.6 Early termination will not affect the Museum’s rights under this clause 8.

18.4 EXAMPLE OF MORAL RIGHTS PERMISSIONS

1. MORAL RIGHTS

1.1 Except to the extent specified in this agreement, the Museum will comply with the Museum of XYZ Moral Rights Policy (as amended from time to time).

1.2 The Museum will make best endeavours to ensure that the Consultant is acknowledged as the author of any Materials, consistent with industry custom and practice but any inadvertent breach of this provision shall not be a breach of this agreement.

1.3 The Consultant consent to the Museum, its licensees or assigns:

(a) adapting, modifying, deleting or contextually placing the Material so that the Material may be exploited in any and all media (whether now known or yet to be invented) including without limitation CD-Rom, DVD, on-line, classified, directors-cut, video, in-flight, prequels, sequels, spin-offs, documentaries, ‘making of’ or other versions of the Material, print media, and merchandising;

(b) incorporating advertising into the Material or using the Material in advertising or promotions for the Museum, the Material, the Services or a third party;

(c) to make foreign language versions of the Material including dubbing, translating and subtitling; and

(d) any material alteration required by any agreement between the Museum and any third party.

1.4 The Museum also specifically retains the right to withdraw the whole or any part of the Materials, the Deliverables, from public view (whether by public exhibition, broadcast or any other means or medium of access).

1.5 If the Consultant does not agree with any such action by the Museum, the Consultant’s sole right shall be to request the Museum not to attribute the Consultant as the author. The Museum shall make reasonable efforts to comply with this request but it shall not be obliged to vary any materials already printed and/or distributed.


[1] Also referred to as a ‘licence’.

[2] One former director of a State gallery, now thankfully retired, would forcefully assert, fist hammering on the desk, that if the museum owned the work, it also owned the copyright, notwithstanding the Copyright Act (which he viewed as an unwarranted centralist interference with his rights.)

[3] Artistic work is (relevantly) defined in the Act as a painting, sculpture, drawing, engraving or photograph or a building or a model of a building, whether of artistic quality or not.

[4] Author means the individual person or joint authors who created the project. The term is not defined relevantly in the Copyright (Moral Rights) Act 2000 (Cth), but in most cases, such as for a written work, the meaning is the ordinary meaning. However, in a more complex task such as a building, for example, it is generally accepted to be those who contributed creative effort.

[5] For example a design company commissioned to produce the catalogue or commissioned to design the exhibition itself.

[6] This means all of the people in the firm that were involved in the creative process, whether they are the firm’s partners, directors, employees, subcontractors or consultants.

[7] Such as architects, designers and engineers.

14. EXHIBITION DEVELOPMENT

Panel of Experts:
Mr Michael Crayford
Assistant Director, Collections and Exhibitions, Australian National Maritime Museum
Mr Gary Dufour
Chief Curator & Deputy Director, Art Gallery of Western Australia
Professor Graham Durant
Director, Questacon National Science and Technology Centre
Ms Genevieve Fahey
Manager, Scienceworks Museum
Ms Carol Henry
CEO, Art Exhibitions Australia
Ms Susan Sedgwick
Manager, Exhibitions & Publication, Historic Houses Trust of New South Wales

14.1 EXHIBITIONS DEVELOPED BY ONE INSTITUTION

Where a single institution is organising an exhibition the development process is essentially internal. The process raises no legal issues until third parties are involved.[1] Where the exhibition planning is going to involve the loan of third party material, the organising institution will make enquiries from the owners as to the availability of the material sought and their preparedness to lend. Such enquiries do not have the status of an enforceable contract. In legal terms, they are merely ‘offers to treat’. The contract does not come into force until a proper loan agreement is negotiated and signed. Until that occurs, the borrowing institution must realise that communications are merely indications of preparedness to enter a contract and should not rely on the promise until the formal agreement is signed.

Institutions who answer such enquiries should make it clear that this preliminary discussion cannot form an enforceable contract by stating expressly that the discussions are ‘subject to the parties signing a formal loan agreement’.

14.2 DEVELOPMENT OF JOINT EXHIBITIONs

Introduction

With the ever-increasing cost of mounting exhibitions, it is now common for exhibiting bodies to collaborate in the development and presentation of shows. Sometimes, being able to share the cost (and risk) of exploring the viability of an idea for a show means that the cost is worth bearing.

One of the difficulties in such relationships is devising an agreement that protects both parties: each party needs to be able to pull out if the results of the exploration are not encouraging but each party also needs the certainty that, after a certain stage of development, their collegiate institution will not withdraw, leaving the former partner responsible for everything.

Feasibility Agreement for Joint Development of Exhibition

To avoid this situation, the parties need to enter a preliminary agreement – one that is restricted to the feasibility study. This is a straightforward document that spells out what each party promises to do and to pay. It also provides both parties with certain succour in the event that the other wants to cease the collaboration.[2] If the parties then decide that they wish to move to the next stage of the collaboration and present the exhibition, they will enter a separate agreement.

(Click here to view a PDF of the following Feasibility Agreement)

[Date]

[Name]
[Title]
[Agency]
[Address]

Dear [Name]

Feasibility Agreement for Joint Development of Exhibition

This letter sets out the terms on which [names of the parties] agree to work together to explore the feasibility of developing a joint exhibition (“Feasibility Studies”).

1. The Parties

The parties to this Agreement are:

[FULL CORPORATE NAME OF PARTY 1]

[FULL CORPORATE NAME OF PARTY 2]

[FULL CORPORATE NAME OF PARTY 3]

2. The Purpose

2.1 The purpose of this Agreement is to explore the feasibility of developing an exhibition on the subject of [insert subject or as described in the attachment to this Agreement] (the “Exhibition”).

2.2 This Agreement does not commit any of the parties to presenting the Exhibition. At the end of the feasibility process outlined in this document (the “Feasibility Study”), each party will have the right, but not the obligation, to enter a separate agreement between those institutions that commit to presenting the Exhibition.

3. Obligations of each party

3.1 By signing this document, each party agrees that it will participate fully, and in good faith, in the Feasibility Study including (without limitation);

(a) providing financial contributions as and when required;

(b) providing suitably qualified officers or staff to participate in the activities contemplated by this Agreement;

(c) attending meetings;

(d) complying with any decisions validly made; and

(e) informing all other parties as soon as it becomes aware of any potential or actual circumstances that may or will prevent it from performing its obligations;

(f) ensuring that any information that it supplies to the other parties is accurate and promptly correcting any errors or mistakes in such information; and

(g) acting in the best interests of all the other parties and the Feasibility Study.

4. Establishment of a Steering Committee

4.1 As soon as practicable, but in any case no later than 1 week after the signing of this Agreement, the Parties will develop a steering committee comprised of a [director/nominee of the director] from each party (the “Steering Committee”).

4.2 The Steering Committee will meet either in person or remotely on an as-needs basis, but in any case, at least (monthly/quarterly) The Steering Committee will be responsible for making decisions in relation to:

(a) spending of the Feasibility Budget referred to in clause 7;

(b) the scope of the project;

(c) the budget for the Exhibition;

(d) logistics for sharing responsibilities in relation to the Exhibition;

(e) the dispute resolution process for the direction and content of the Exhibition; and

(f) [##].

4.3 Unless otherwise stated in this Agreement, decisions of the Steering Committee will be made by [unanimous] agreement and each party agrees that once made, those the decisions are binding on it.

5. Establishment of a Project Team

5.1 As soon as practicable after the date of this Agreement, the parties will establish a project team comprised of one senior staff member from each party (the “Curatorial Team”).

5.2 The project Team will be responsible for developing ideas and concepts for an Exhibition and providing recommendations to the Steering Committee based on those ideas or concepts. The Steering Committee is not obliged to accept the recommendations of the Project Committee.

6. Contribution to the Feasibility Budget

6.1 Each party agrees that it will contribute AUD $[insert] (inclusive of GST) towards the budget for undertaking the activities contemplated by this Agreement (the “Feasibility Budget”). If the Steering Committee agrees, additional financial contributions will be made by the parties to the Feasibility Budget in the amounts and on the terms agreed by the Steering Committee.

6.2 The contributions in clause 6.1 will be paid to [name of party or account]. [Name] will operate the account and:

(a) make payments from such funds in accordance with the decisions of the Steering Committee;

(b) keep true and accurate books and records of account and provide those records to the Steering Committee or on the request of any party.

7. Publicity

7.1 No party may make any public announcement or statement or publish or release any information in relation to the activities undertaken under this document without the prior written approval of all the other parties.

8. Confidentiality

8.1 When you receive information from another party marked or notified as confidential information (the “Confidential Information”), you must:

(a) keep the Confidential Information confidential;

(b) not use, disclose or reproduce the Confidential Information for any purpose other than the purposes of this Agreement; and

(c) not, without the disclosing party’s consent, disclose the Confidential Information to any person other than its officers, employees or agents who needs to know the Confidential Information for the purposes of this Agreement and who have agreed to keep the Confidential Information confidential on terms similar to this clause.

8.2 You are not bound by clause 8.1 in relation to Confidential Information which:

(a) becomes generally available to the public without a breach by the receiving party of clause 9.1;

(b) the receiving party can prove by contemporaneous written documentation was already known to the receiving party at the time of disclosure pursuant to this Agreement (unless such knowledge arose from disclosure of information in breach of an obligation of confidentiality);

(c) has been independently acquired from a source other than the disclosing party; or

(d) the receiving party is required to disclose by law.

A receiving party seeking to rely upon any exclusion set out above has the onus of proving that such exclusion applies to the Confidential Information.

9. Warranties

9.1 By signing this Agreement, you are warranting that:

(a) You have the authority to bind your organisation to this Agreement;

(b) Your organisation will be able to perform its obligations under this Agreement; and

(c) Any person that represents your organisation on the Steering Committee will have the authority to make decisions on behalf of your organisation.

10.Disputes, Withdrawal & Abandonment

10.1 In the event of a dispute between the parties, the parties will negotiate their differences in good faith and if there is an odd number of parties, the dispute will be resolved by a majority decision of the Steering Committee. If there is an even number of parties the dispute will be settled by (lot/ the Director of the party responsible for initiating the Feasibility Study)

10.2 If a party decides to withdraw from the Feasibility Study, it has no right to recover any of its contributions to the Feasibility Budget whether those contributions have been spent or not.

10.3 If the Feasibility Study is abandoned by all of the parties, any money remaining unspent after the payment of all expenses, shall be returned to the parties in the same proportions as it was contributed.

11.Relationship between the parties

11.1 The parties are independent contractors and nothing in this Agreement constitutes a relationship of employment, agency, joint venture or partnership between them.

12.No assignment or transfer allowed

12.1 A party may not assign, transfer or novate any rights or obligations under this Agreement without the prior written consent of all the other parties. Such consent shall not be unreasonably withheld.

13.Amendment

13.1 This Agreement may only be amended or varied in writing signed by all parties.

14. Counterparts

14.1 This Agreement may be executed in counterparts and all of those counterparts taken together constitute one instrument.

If you agree with the terms set out above, please sign where provided on the next page. After this Agreement has been signed, any of the parties can ask for a more comprehensive long form agreement. This will contain the essential terms set out above and additional terms usually included in contracts of this kind. In the meantime, once you sign below, this letter will serve as a binding agreement between you and all signatories.

Yours sincerely,

Name
Title

CORPORATE NAME OF PARTY 1

READ UNDERSTOOD AND AGREED:

Date: Date:

SIGNED for and on behalf of [FULL CORPORATE NAME OF PARTY 2] by:……………………………………………………..
Signature of Director……………………………………………………..
Name of Director (print)
SIGNED for and on behalf of [FULL CORPORATE NAME OF PARTY 3] by:…………………………………………………
Signature of Director…………………………………………………
Name of Director (print)


14.3 Exhibition Development Checklist

During the feasibility study, the joint project team will have to devise a template that will help guide them through the evaluation process and ensure that all participants are agreed on the scope and purposes of the feasibility investigation. The starting point for this may be the use of an agreed checklist. The following checklist was drafted for a State museum and a Federal museum that were considering a collaborative international exhibition.

(Click here to view a PDF of the following Exhibition Development Checklist)

PRACTICAL AND LEGAL CONSIDERATIONS FOR COLEGIATE DEVELOPMENT AND ORGANISATION OF INTERNATIONAL EXHIBITIONS

 

 

Purpose and Goals To jointly develop, and deliver an exhibition on the subject of “##“ from [institutional lender]

 

CO-OPERATING INSTITUTIONS CONTACTS AND COMMUNICATIONS
Names of institutions 1.2.
Nominated contact and representative for each museum 1.2.
Strategic matters to be developed o Establishment of joint project team o Business plan for exhibition o Methodology for managing the projecto Loan contract
Legal structure of the venture Letter of agreement between the existing legal entities?Jointly controlled company (and associated shareholders’ agreement)?Formal joint venture agreement?
Quality of communications All negotiations commercial in confidenceEach party to share information fully and promptly
Facilities ## to host an extranet site so that the both parties can share information effectively
PUBLICITY & CONFIDENTIALITY
General principle All deliberations and terms of the collaboration and the loan, are confidential
Mechanism for approving all publicity or disclosures Mutual written sign-off
Who is responsible for WHAT DEVELOPMENT COSTS
General principles Each party pays their own development costs unless otherwise agreed in writing prior to expenditure
Where parties contribute – expected basis is 50/50
Specific exceptions: 1.2.
SELECTION
What is the mechanism for selecting the exhibition material?
How will the lender/partners break selection deadlock?
DECISION MAKING
How are decisions made on behalf of the venture?
Will the institutions appoint representatives to a joint committee? If so, who?
Do the representatives have the power to bind the institution?(If so, are there limits to that power?)
LOGISTICS FOR SHARING RESPONSIBILITIES
Anticipated milestone dates for the exhibition Contract with exhibition owner:Arrival of exhibition at first venueOpening date of first exhibition of tour:Closing date of first exhibition of tour:Departure of exhibition from first venue:

Arrival of exhibition at 2nd venue:

etc

What are the space constraints of each party? 1.2.
What are the conservational constraints of each party? 1.2.
Who will select the exhibition material?
Who will negotiate the loan fee for the exhibition?
Who will negotiate and sign loan agreements?
Who will make transport arrangements?
Who will research the insurance options?
Who will negotiate and place the insurance?
COSTS OF VENTURE DEVELOPMENT
What are the likely development costs?
Who is responsible for drafting the development budget?
Who will pay for what development costs?
WITHDRAWAL FROM VENTURE
Minimum period of notice of withdrawal from venture # months prior to date of intended first opening date of exhibition
Consequences of withdrawal in time Withdrawing museum meets its costs and expenses incurred up to the time of withdrawal
Consequences of withdrawal out of time Withdrawing museum’s share of all exhibition fees and costs is payable (and is reducible only to the extent that a replacement partner meets those expenses.)
Consequence of force majeure Losses fall where they lie
Budget
Who is responsible for developing the budget?
Any budget constraints?
Who will pay for what costs?  
How will each party contribute to the development costs of the exhibition?
Means of authorising changes to approved budget?
Administrative overhead and organizational time
Representation of museums and exhibition to the outside world
Organisational credit lines
Sponsor credit line
Use of logos
Approvals that must be sought from partnering museums for press releases, promotional materials and other published mentions.
Merchandise
Catalogue
Format/characteristics
Who is responsible for designing the catalogue
What is the mechanism for choosing contributors?
Who is responsible for contracting writers
Who is responsible for overseeing writers
Wall and label text
GENERAL
Dispute Resolution
Governing law
Territory
Alternate dispute resolution mechanism

[1]External contractors are more and more frequently engaged to provide a particular expertise that is not available at the developing institution. Contractors may include expert curators, authors, designers, prop makers, filmmakers, lighting designers etc, for more discussion of such contracts see Chapter 19.

[2] I use the term collaboration because some governments have formidable rules relating to their statutory authorities entering ‘joint ventures’. In fact, when one examines the definition of ‘joint venture’ in the relevant regulations, the definitions are very wide and cover most situations in which one government institution wishes to work together with another.

30. SPONSORSHIP

30.1 INTRODUCTION

Names and reputations are valuable. Your name and reputation is directly linked to your ability to make money from sponsorship and endorsements.

One of the features of modern marketing and advertising is the exploitation of a celebrity’s reputation to promote a third party’s products or services. Sometimes the celebrity is an individual; other times it may be an organisation, collection or exhibition. This takes two different forms: sponsorship and endorsement.

Sponsorship usually involves the sponsor doing or providing something (usually old-fashioned money) to assist an organisation, event or activity and, in return, getting some corporate benefit. By contrast, endorsement usually requires a more positive association of the institution’s reputation (or notoriety) to advance the company’s business or product.

Sponsorship is increasingly an important source of income for most collecting institutions. The encouragement being given to such organisations to seek corporate sponsorship is consistent with the recent trends towards a privatisation of support for the arts, sciences and also other social projects. So the pursuit of sponsorship should not be undertaken uncritically and before embarking upon the quest for corporate assistance, it is important to consider why, from whom and how you are going to do it. The most recently published survey of business sponsorship for the arts indicates that while sponsorship of the arts represents only a small proportion of overall sponsorship expenditure in Australia, it none the less represents a significant injection of funds into the sector. More importantly, the survey indicates that business recognises the benefits of sponsorship as going beyond signage and free tickets, to encompass broader ideas about contributions to public good community enhancement. This understanding of the potential benefits to be gained from sponsorship was particularly strong for the smaller businesses surveyed.[1]

Many major exhibitions can take place only because a company has agreed to sponsor the event. This is a fairly new phenomenon in the art world, but it has been commonplace in sport and the theatre for many years. Now, individual artists are beginning to realise that sponsorship can also be sought for their art projects. It is more important to realise that for the most part, large companies do not involve themselves in sponsorships because they think that the objects of the event are worthwhile. They do so because they have a product or service to promote and to sell and the opportunity to do so will be enhanced by an association with the work or event. For this reason it is not difficult to see why most corporate sponsorships in the collection sector have concentrated upon major exhibitions, and the sponsorship of competitions or prizes. It is simply a way of maximising corporate exposure. These are events that have an inherent publicity value; events that will need to be advertised and promoted widely in order to be successful. Promotion of the event means promotion of the sponsor’s public profile that in turn promotes the corporation’s products or services.

Nowadays, however, corporate sponsors can also get very good value by directly supporting the creation of particular works. Such sponsorship is usually given ‘in kind’ rather than in cash, but this can be just as valuable to the artist or organisation. For the company, it is preferable to supply goods or services rather than cash. Moreover, backing one-off projects does not involve the long-term commitment or risk that would be involved in supporting individual artists, and does not involve the large outlay of cash that is inherent in sponsoring major exhibitions. Instead, the company is able to pick small projects of high quality that have a good potential for public exposure.

Perhaps the easiest type of cultural event to attract sponsorship for is an exhibition or one-off project, such as the design and construction of a public artwork. But the planning principles for seeking sponsorship remain the same, even when seeking long-term sponsorship for an organisation. The checklists below can be used in either context, whether the exhibition planned is a major international exhibition, a local exhibition by an artists’ collective, or the ongoing support of an arts organisation or gallery. The checklist principles are just as relevant to all forms or scales of sponsorship but the specific details do need to be targeted according to the project.

30.2 WHY COMPANIES BECOME SPONSORS 

It is important to realise that companies do not usually involve themselves in sponsorships and endorsements because they think that the institution or event is worthwhile. They mostly do so because they have a product or service to promote and to sell or have a specific corporate objective to achieve.[2] The longest lasting sponsorships are those that are most likely to enhance corporate objectives. Regrettably, philanthropy rarely has anything to do with it.

A company that is interested in providing sponsorship has a number of reasons for doing so:

Relationships

For the company, sponsorship is not just about money. It is about relationships. Every successful sponsorship develops links between the humans behind the company and the humans associated with the collection, exhibition or project. Through those relationships, the personal and corporate profits that make for a successful sponsorship will develop.

Image establishment

Companies are often keen to be involved in a sponsorship either when they are new and establishing their profile in the marketplace, or when they have a new product or service that can be promoted by association with particular events, performances or broadcasts.

The classic example of this in the 1990s was been the launch of the Optus telecommunications company and its competition to attract customers from Telstra. Its sponsorship of events (particularly those which have wide television audiences) was been a spectacular exercise. The company is reputed to have spent approximately $65,000,000 just promoting public recognition of its name.

Image definition and brand development

Associating its brandname products with your name and reputation gives the brand a certain image, one that clearly places it in a particular market and at the same time distinguishes it from its rivals. All experts in marketing emphasise that it is important that the image of the brandname must be clearly defined if the brand is to be marketed successfully. The sponsor company is using the institution’s image to identify more clearly its own image and brands in the minds of potential purchasers. An insurance company might sponsor an exhibition because it wants to be associated with the aspiration of the target audience. On the other hand, Coca-Cola uses a star such as Elton John to endorse its product because his popularity crosses so many age groups. Anyone who likes Elton John (no matter what age) is a potential Coca-Cola buyer. In contrast, a computer company is likely to sponsor a project that is associated with innovation and excellence.

Image improvement

Some of the biggest corporate sponsors have supported cultural institutions because this helps to improve their level of acceptance and the character of their profile in the community. The classic examples of this are the tobacco companies, which, each year, spend many millions of dollars sponsoring sporting and cultural events. The mining companies are also useful examples. For the last 10 years, certain oil companies have been among the largest corporate sponsors of cultural and scientific organisations, and this has helped change the community’s general perception of them from rapacious multinationals to companies concerned for Australia and its quality of life.[3]

Association with excellence

The Coca Cola – Elton John endorsement also provides an insight into another reason companies sponsor cultural institutions; they benefit from association with excellence. Even if particular listeners don’t like the music performed, if the artist has a proven record of popularity it can be assumed that it is, within its own genre, excellent. It is similar with exhibitions: the corporate sponsor seeks to be associated with an organisation with a public reputation for excellence.

Client networking and staff relations

Never ever underestimate the importance that the company will attach to the opportunity that the sponsorship provides for entertaining and networking. Exhibition openings and specially organised sponsor events all provide valuable opportunities for networking. Providing the opportunity to meet movers and shakers is important for both for ego and business needs. For example, the boards and patrons of collecting organisations include many of the most powerful figures in the community, and a major sponsorship will be attractive if it ensures social access (and thus potential business access) to this social circle, which is otherwise so hard to penetrate.

The company that sponsors an institution or a project will also be looking for opportunities to improve staff or client relations by inviting them to exhibitions and even ‘behind the scenes’ opportunities. This is the exciting and personal part of the pay back.

30.3 HOW THE COMPANY DECIDES HOW MUCH 

The detail that corporations insist upon when entering sponsorship and endorsement deals is not familiar to many in the cultural sector. The corporation will only spend its money on your institution or project if, after analysing the sorts of issues raised above, it thinks that by spending that money it will better achieve its corporate goals.

The amount of money that a sponsorship is worth to the company is influenced by:

· the degree of exclusivity;

· whether the endorsement will be direct or indirect (or in other words the level of artist activity in company promotion).

· the means of identification that will be permitted.

· the value that the company perceives in the association.

Once this is understood it is obvious that any proposal must spell out what the institution will physically permit or provide for the company, for example:

· the right to hang banners and other signage bearing the corporate name, logo or product identification;

· the permitted areas of such signage (including the institution’s website);

· the inclusion of company name, logo and advertising in any program, educational materials, tickets;

· the placement of such inclusions;

· the provision of tickets at reduced or no cost to company personnel or clients;

· the right to produce merchandise such as T-shirts, flags, etc., which will identify the event or institution with the corporate sponsor;

· availability and preparedness of the ‘stars’ publicly to acknowledge the sponsorship;

· the right to use the name and image of the institution or project in its own advertising and promotional material.

30.4 A MOMENT’S REFLECTION

Sponsorship is so hard to find that we often don’t ask ourselves whether the particular corporate association will be good for the reputation of the institution or project. Remember that you are lending your institution’s reputation and image to the company; the association might benefit the company but will it benefit the organisation in the long term?

Assume that you have a three-year sponsorship deal and in year two your sponsor is publicly associated with products that are made by children and women in Asia under appalling conditions or which cause brain tumours or birth defects. What if criminal charges are brought against the senior management of the company? All of these sorts of occurrences are likely to alienate the institution’s public because the association is a two-way street.

Because of this, you should always have an exit clause in the event that the company reputation deteriorates in a way that may damage your organisation’s reputation. Companies always include such parachute clauses; so should you. Image exchange and association are sometimes unforeseeable and not always favourable.

30.5 PLANNING THE SPONSORSHIP ARRANGEMET

Doing the research

One of the most crucial aspects of planning a sponsorship arrangement is allowing enough lead-time. Many companies will allocate funds to projects a considerable time in advance. There is no point turning up with a proposal that needs funds tomorrow and expecting a sponsor to be won over by the urgency. Take the time to identify the companies or sponsors that might be suitable for your organisation and project. There are a number of registers or sources of information about potential sponsors available to arts organisations.[4]

When you have identified a number of ‘targets’, contact those potential sponsors to find out how they make decisions about sponsorship, ask to make an appointment to discuss your project, but do not try to sell it to them over the phone. If you obtain an appointment, make sure you can go the first meeting with a concrete proposal and a specified amount of funds (or equivalent goods or services) that you are requesting. Sponsors are much more likely to respond to a targeted and concrete proposal. Vague requests for support get neither party anywhere.

1. What will be the benefits for the organisation?

What most collecting institutions are looking for is money. This may seem to be stating the obvious but in fact it is so obvious that many less experienced organisations look no further.

Obviously money is nice. However, it is not necessary for the sponsorship agreement to be limited to cash. Indeed, non-cash support is often easier to obtain and more valuable in the establishment of a working relationship. Accordingly, consider whether the sponsor has specific skills or resources that could be useful to the organisation. For example a company might offer the use of the resources of one of its departments, such as a marketing department, for a specified amount of time or for a particular project. Or a building supplies company or audio-visual company could be asked to supply specific materials or services for an installation or an exhibition opening. Similarly, when radio stations sponsor an event, they get their name over everything but, in return, provide the event with hugely expensive airtime that few exhibition organisers can afford. Similar deals have been done with airlines, car companies, freight companies, communications companies, and even advertising agencies. These are all straightforward sponsorship deals, but no money changes hands. Both parties benefit from the association.

Sometimes the benefit that the institution seeks is not even so directly linked to the product of the sponsor. For example, if the group needs administrative resources, a large company with these capabilities already on staff may provide company staff, computer time, printing facilities and so on, in lieu of cash. Look at the need and how best to fill it. Money is not necessarily the only or the best solution.

If the deal is to be ‘in-kind’, make sure you set an appropriate value on the goods or services received and factor that in when considering what you offer the sponsor in return. The sponsor will still expect to see value in the association. It is not philanthropy.

2. What will be the drawbacks for the organisation?

It is important for collecting institutions to consider whether and how a sponsorship may disadvantage the organisation. It is important to ensure that the sponsorship arrangement will not compromise the independence of the organisation. Similarly, is the company’s profile compatible with the aims, objectives or intended audience of the collection or project? What is the reputation of the sponsor? How financially stable is the sponsor?[5] How much time, realistically, will need to be spent maintaining the sponsorship arrangement? What will be the cost of providing the promised signage, hospitality, free tickets? While it may be true to say that when seeking sponsorship the primary focus will be what the relationship will deliver to the sponsor, organisations looking for sponsorship should not be blind to the costs of the proposed arrangement to themselves. For this reason it is appropriate for an organisation to develop a sponsorship policy that outlines the organisation’s principles and objectives so as to identify potential conflicts and concerns within the organisation, before beginning the process of seeking sponsorship.[6]

30.6 PREPARATION OF THE PROPOSAL

In analysing the attractiveness of a proposition for sponsorship, a company will look at a number of difference factors. These include the type of event they are being asked to sponsor; the projected audience; the tangible and intangible benefits that the sponsorship can offer to the company. When planning the proposal, it is important to look at the project from the point of view of the sponsor and target your proposal accordingly.

(a) Quality of the event or project

No-one wishes to be associated with inferior projects or events that are dreary and unexciting. Sponsors seek to improve their corporate image and that of their products by an association with excellence. The company that manufactures ill-designed, physically dangerous or merely boring products finds no attraction in sponsoring art events that have similar characteristics.

(b) Reputation and prestige of the institution, venue or associated individuals

Large public institutions can use the reputation that they have developed over the years. (Properly handled, this reputation is something as valuable to the company as the money is to the institution). If instead, the organiser is an artist run space, one may make an effort to show the importance of the purpose of such a space, the acceptance it has achieved from its own community and accolades from those individuals with already established reputations. It is sad, but no potential sponsor is going to risk reputation or money on a project in trouble.

(c) Number of people expected to view the event or work

These sorts of statistics impress marketing people. The surveys show that in Australia more people go to museums and galleries in a year than go to the football. This extraordinary fact underlies the potential attractiveness of cultural institutions to corporate sponsors. After all, a basis of advertising is market exposure.

(d) Demographic profile of the expected viewers

Careful consideration will be given to the type of viewer who is likely to attend the proposed event in comparison with those of the company’s target market. Organisations seeking sponsorship should expect to conduct some of their own research identifying the demographics of their past audiences.

(e) Standard of management of organisers

The corporate decision makers are going to need assurance that the project that they are backing will run smoothly and that their corporate goals will be thus achieved. It is one thing to promise and another to deliver. Sponsoring corporations will expect delivery as promised.

(f) Cost and timing of the sponsorship

It will be no surprise that cost is an important factor in any sponsorship decision. Large sponsorships require companies with large marketing budgets. The direct costs are important but so too are the indirect costs such as associated food and beverage costs, printing, personnel expenses and paid advertising support.

Just as important, is the timing of the request. Many large corporations make such commitments at least one financial year ahead. Although there are lucky times when a company reaches the end of its financial year with a budget surplus that it is looking to spend, it is dangerous to rely on serendipity. Planning must be long-term and companies usually require quite long lead times to plan how they might fully take advantage of their sponsorship relation with your organisation or project.

(g) Budget for and methods of publicity

Sponsors will want to see properly considered and constructed budgets. If the budget is non-existent or indefensible, you will be lucky to get even a cup of tea from the company.

Those working in the cultural sector can be excellent at devising novel forms of publicity. Often though, the group does not have the resources for proper marketing. However, this is something for which big companies are both geared and adept. Sometimes groups should consider approaching companies, not for money, but for help in promotion and publicity. This is expensive for small fry to obtain but simple, cheap and interesting for companies with an already established marketing machine.

(h) Degree of exclusivity as sponsor

If a company can obtain naming rights for an event (such as ‘The Mobil Modern Masters’) the sponsorship will be more attractive than if the company is only one of many on the list of contributors. The more individual publicity is given to the company, the more there is in it for the company. On the other hand, the greater the exclusivity, the greater the reward.

(i) Product identification permitted

Is the company allowed to use the event, the institution, the work or the individual, in its advertising? If so, in what ways? The right to hang banners and other signage bearing the corporate name, logo or product identification; the permitted areas of such signage; the inclusion of company name, logo and advertising in the catalogue and on all printed material such as tickets; the placement of such inclusions, the right to produce merchandise such as T-shirts, flags etc., which will identify the event or the work with the corporate sponsor; the availability and preparedness of the event organiser or featured guests to publicly acknowledge the sponsorship and thus associate the event, institution or individual with the company. (Thanks in the opening speech is one thing, but an acknowledgment in television advertising is quite another.)

(j) Degree of product endorsement involved

Identification and endorsement are related but different. Many people and institutions are happy to be generally associated with certain products or companies but would shy away from endorsing them. Some may see this distinction as somewhat naive, but the fact remains that endorsement is more expensive than mere association. Endorsements differ from sponsorships only in the degree of association. As the old saying goes, ‘when it comes to bacon and eggs, the hen is involved but the pig is committed.’

When Ray Charles sings for Pepsi or Elton John sings for Coca-Cola, each is directly affixing his name and reputation to the product. He is endorsing it. Saying it is a Good Thing. The association with the company’s product is direct and the amount of money paid to such artists reflects the perceived benefit of that association. In the collecting sector, endorsement contracts are rare because the institutions are rightly wary of positively endorsing third party products and services.

In recent years, the complexity of endorsement contracts has increased in direct proportion to their importance as forms of product promotion and the monetary value of the deals – and in direct proportion to the increased legal liability of those making the endorsement.

Endorsement contracts must be negotiated and drafted with care. There is no standard deal. As with all other important legal commitments entered, the contract should be read and negotiated by a lawyer who is familiar with such deals. You must be assured that the needs of the institution will be protected and that the corporate advantage sought by the company will be compatible with the institution’s ethics and image.

(k) Benefits to employees and clients

These will include things such as the provision of entry at reduced or no cost to the sponsor’s personnel; the use of the venue for a special company function or other ways in which the sponsorship can be used to benefit either staff or client relations.

(l) Other factors

To the list may be added the personal interest of the company’s chief executive, but that usually is a factor that will only enable the person seeking the sponsorship to get a foot in the door; it is not likely to result in a major sponsorship unless the commercial value is also apparent.

30.7 THE SPONSORSHIP CONTRACT 

In recent years, the complexity of sponsorship contracts has increased in direct proportion to its importance as a form of product promotion and the monetary value of the sponsorships. Those seeking sponsorship can be certain that the sponsorship contract will be drafted by the company’s lawyer and that its terms will be calculated to further the interests of the company. It is not the sponsor’s obligation to be even-handed. As with all other important legal commitments, the institution must ensure that a lawyer who is familiar with such deals reads the contract. The institution must be assured that its needs will be protected and that the corporate advantage sought by the company will be compatible with its own ethics, image and public purpose.

All sponsorship contracts must be negotiated and drafted with care. The checklist below indicates the range of issues that must be considered in the sponsorship agreement.[7]

One of the recent developments that needs to taken into account is the potential GST implications of the arrangement. The tax system presumes that both parties are either receiving goods or a ‘service’ as a result of the agreement unless the sponsored organisation is under no obligation at all to provide anything to the sponsor (in which case the agreement is better characterised as a donation. If the sponsored organisation has any obligations under the agreement, GST will be payable. This applies whether the sponsorship is in kind or in cash. No collecting organisation wants to be left with an obligation to pay GST that eats into their valuable sponsorship dollars while for the sponsor the payment of the GST is merely a matter of cash flow and timing. For this reason, the practice is that sponsorships are usually described on a ‘sponsorship amount plus GST’ basis.

If the transaction is to remain GST neutral,

· if the sponsorship is ‘in cash’ then the services that the sponsored organisation is providing (advertising, signage, tickets to opening night) need to be accorded a value that is reasonably equivalent to the amount being paid by the sponsor, and

· if the sponsorship is ‘in kind’ then the same type of valuation of the transaction needs to occur for the agreement.

REPRODUCED FROM THE ARTS LAW CENTRE OF AUSTRALIA INFORMATION SHEET except for sections in bold italics. (Click here to view a PDF of the following Information Sheet.)

What should I include in my sponsorship agreement? The following is a list of essential clauses in any sponsorship agreement:

1. The parties – the actual parties to the agreement will need to be defined. If the artist is represented by a manager or agent they will usually be the contracting party but in doing so the agent or manager is contracting on behalf of the artist, so it is the artist who will be responsible for fulfilling the contract and will also be entitled to the benefit of it.

2. The event – the precise form and nature of the event or activity should be clearly documented to include any special features which the parties have agreed upon.

3. Term – the parties must consider the term of the sponsorship. Is it a one-off occasion or to occur over a certain time period eg. monthly, quarterly etc.? The territory (location) of the agreement will also have to be defined.

4. Obligations of the sponsor – the primary obligation of the sponsor is the raison d’être of the sponsorship agreement – payment, whether it be in money, goods or services. If payment is by instalments and the sponsorship is for ongoing activities, allowance should be made for termination of the contract if payment of an instalment is not received within a defined period. If use of artwork is involved – e.g. a postering campaign – you need to confirm who will pay for the costs of producing the work and whether you have any control over the form or content of the finished artwork.

5. Rights of the sponsor – the sponsor will want its rights under the agreement clearly delineated. It will want to know exactly how its company name and/or logo will be used – for example, whether it has naming rights for the event (‘Acme Proudly Presents …’) and whether these rights are exclusive or non-exclusive. The sponsor may require its name or logo to be promoted in a variety of ways: on front covers of catalogues and invitations, by the use of banners and bunting, the distribution of promotion leaflets and merchandise or by means of direct or indirect product endorsement. It is important to clarify this as a project could be compromised or trivialised if it is seen as purely pandering to commercial interests. If necessary, annex a diagram indicating where such banners, naming rights etc can be positioned.

6. Copyright – a sponsor may request that it be able to use your work to promote directly or indirectly its product or service. If approval is given then you will need to set out whether the authority to reproduce an artwork is exclusive or non-exclusive, its term, its territory and the type of use allowed. Consideration should also be given to moral rights issues such as receiving an appropriate credit and ensuring that the work is not altered or treated so as to trivialise your reputation. Musicians and writers, in particular, should carefully check the terms of any publishing contracts and other agreements with third parties as there may be a restriction on granting these rights. For further assistance on copyright law contact the Centre or the Australian Copyright Council on telephone: (02) 9318 1788.

7. Termination – there should be a termination clause that provides for termination by written notice in the event that either party fails to perform its obligations in accordance with the terms of the contract. This may be for failure of the sponsor to pay an instalment or where the event is cancelled or significantly varied.

8. GST – sponsorship contracts are subject to GST if there are any conditions attached to the sponsorship. So if the sponsor is obtaining any benefit from the sponsorship arrangement in tangible terms, such as free tickets, publicity, naming rights or advertising, then both the payment by the sponsor and the services provided by the sponsored organisation are considered ‘taxable supply’. This means that provision for the payment of GST needs to be included in the agreement so that the value of the sponsorship is not diminished.

9. Disputes – the Arts Law Centre has established a mediation service for a quick, cost-effective way of handling disputes. For further information see its pamphlet ‘Resolving Disputes in the Arts’.

30.8 RESOURCES AND FURTHER READING 

There are a number of publications that can assist collecting organisations to identify and target their proposals more effectively. Some are written specifically for the cultural sector; others focus on sporting sponsorships but may offer general guidance.

Sharon Dickman, What’s My Plan? A Guide to Developing Arts Marketing Plans (Australia Council for the Arts: Sydney 2000)

Sharon Dickman, Arts marketing: the Pocket Guide (Australia Council for the Arts and the Centre for Professional Development: 1997)

Sue Foster, The Art of Self Promotion (Allen & Unwin and the Australia Council: Sydney 1993)

Anne-Marie Grey & Kim Skildum-Reid, The Sponsorship Seeker’s Toolkit (McGraw-Hill Australia: Sydney 1999)

Pascale G Quester & Beverley Thompson, An Experimental Study of Arts Sponsorship Effectiveness: The Case of the 1998 Adelaide Festival of the Arts (School of Marketing, International Business & Asian Studies, UWS Nepean 1999)

Craig Richards, Structuring Effective Sponsorships (LBC Information Services: Sydney 1999)

Arts Law Centre of Australia, Guide to Sponsorship Agreements (Sydney 1999)

Arts Law Centre of Australia, Sponsorship Agreements: Information Sheet (Sydney 1994)

Australia Council for the Arts, You and Your Sponsors: A Guide to Arranging Business Sponsorship for the Arts (Australia Council: Sydney 1993)

Australia Foundation for Culture and the Humanities The Business Case for Cultural Investment (2000), <http://www.afch.org.au>

Australia Foundation for Culture and the Humanities The Cultural Products Menu (2000): <http://www.afch.org.au>

Australian Bureau of Statistics, Business Sponsorship of Cultural Activities 1993-94: a report for the Department of the Communications and the Arts (Canberra 1996)

Australian Bureau of Statistics, Business Sponsorship of Cultural Activities 1996-97: a report for the Department of the Communications and the Arts (Canberra 1999)

Australia Foundation for Culture and the Humanities: <http://www.afch.org.au>


[1] See Business Sponsorship of Arts and Cultural Activities: 1996–97 (Cultural Trends Series No 8) (Australian Bureau of Statistics: Canberra 1999). Total value of all sponsorship during the survey period was calculated to be $466.5 million (with 6.4% of all businesses sponsoring either an individual or an organisation). However, the amount spent specifically in sponsoring the art and cultural industries was only $29.2 million (2900 businesses, representing 0.5% of all businesses). The survey included sponsorship of both organisations and individuals, with the vast majority of funds going to sponsor sporting activities.

[2] Examples of the latter include companies who support an institution or project to facilitate a corporate-to-corporate or a corporate-to-government relationship.

[3] Who said, ‘Can’t buy me love’?

[4] For example publications by the Philanthropy Council, or websites such as <http://www.fuel4arts.com> and <http://www.artsinfo.net.au>. In the other direction the Australia Foundation for Culture and the Humanities has produced The Cultural Products Menu (2000) <http://www.afch.org.au>, which allows potential sponsors to identify arts organisations seeking sponsorship. NAVA administers the award of a Marketing Grant to NSW artists seeking to promote their work.

[5] Do you remember all those famous Australians who lent their faces to Ansett’s ‘Absolutely’ campaign – just weeks before the company went to the wall? Or organisations sponsored by ‘Froggy.com’ before it went into administration and its principal sent to jail?

[6] See Anne-Marie Grey & Kim Skildum-Reid, The Sponsorship Seeker’s Toolkit (McGraw-Hill Australia: Sydney 1999) at 5ff.

[7] Anne-Marie Grey & Kim Skildum-Reid, The Sponsorship Seeker’s Toolkit (McGraw-Hill Australia: Sydney 1999) contains a sample sponsorship agreement that can be adapted and used as the basis for a specific sponsorship contract, though the authors stress that this agreement is not a substitute for specialised advice.

29. MERCHANDISING

29.1 INTRODUCTION

Merchandising is part of the ‘auxiliary’ funding, relied on by museums to fund their capital and recurrent financing needs. Almost all public museums in Australia rely primarily on government funding but none could continue to deliver the same level of public service if they were wholly reliant on that source. Few can they rely on philanthropy to make up the difference between government money and institutional expenditure. They are expected to earn it.

The primary sources of funding available to museums are: statutory revenues, gifts, bequests and endowments, admissions and auxiliary activities. Auxiliary activities include things such as museum and exhibition merchandising, facility rental, parking and cafes.

Merchandising is seen as crucial to the budget of exhibitions in particular and museums in general. It can be fun, it can be informative and it can be beautiful. In Australia, it is estimated that museums make many millions of dollars each year from merchandising. It has become a highly sophisticated, professional retail component of every major museum.

In an important study of the economic benefit of merchandising to American museum revenues over 10 years (from 1989 to 1999), Toepler & Kirchberg[1] found that auxiliary income made up 21–23% of gross operating revenues. However, when that seeming attractive figure was analysed, it only contributed 3% of adjusted operating revenues (i.e. total operating revenues minus gross auxiliary revenues plus net auxiliary revenues). In other words, for all the effort that went into making the money, auxiliary income only contributed 3% of the funds available for running the museum.

Of course one might say that there is no imperative on the museum to allocate overhead costs to such sources as they would be incurred in any event: the auxiliary activity is merely a financially effective use of existing resources. However, with many museums currently examining the possibility of excising their commercial activities so that they are stand-alone, this is an issue that will come into ever sharper focus. Quite simply, it is one thing to say that the museum is using its existing assets to make up for a shortfall in government endowment, and quite another to say that the auxiliary income is being earned as though it was subject to the same cost impediments of independent commercial businesses.

Nevertheless, irrespective of the true cost of earning auxiliary income, there is no doubt that it is seen as an important source of funding for all major museums. In an era in which public institutions are under pressure to abolish admission fees, any way of recouping that lost income must be embraced – and merchandising is an obvious option. All museums that abolish admission fees observe that there is an enormous increase in public attendance and in the sales of museum merchandise. Why is this? Perhaps it is simply that people are more inclined to part with their money after they have had the experience than before. We buy merchandising on the way out of a show; rarely on the way in. Then, it is no longer seen as the cost of the experience, it is the cost of taking away a permanent memory of it.

Museum merchandising is not just about making money. Good merchandising should further, or at least be consistent with, the purposes of the museum. It may support the educative purposes (through the sale of catalogues, books, audio and audio-visual materials, intelligent games etc.) or may act to promote the museum in general or the exhibition in particular.[2] The range of museum and exhibition-related merchandise is limited only by the creativity and good taste of the retailers and by the appropriateness of the product as something that represents the museum and furthers its purposes.

From a legal perspective, museum merchandising is no different from establishing and operating any other kind of shop: obtaining the premises, hiring staff, insurance, purchase and sale of stock, security, advertising and promotion using a range of media, and so on. The purpose of this chapter is not to provide a primer on the legal issues of those running a shop. Rather, it focuses on the intellectual property issues that attend the association of a name, image or reputation with a product. At its heart, that’s what merchandising is.

29.2 TYPES OF MERCHANDISING

Sophistication of merchandising varies according to the size and resources of the museum. Any discussion of museum merchandising must take this into account. The ability to merchandise is a continuum, from the small, volunteer run museums where the greatest asset is the devotion and creativity of its volunteers, through to the State and Federal institutions that have the resources to develop retail strategies and, just as importantly, they have collections and exhibitions that are ripe for commercial exploitation. In this section, the focus is on the merchandising undertaken by the larger institutions for this best illustrates the range of possibilities, some of which can be adapted for use by the smaller, less advantaged museums.

Exhibition merchandising

When the general public refers to museum merchandising, this is what they are thinking of: the gauntlet that awaits them when they complete the viewing of an exhibition and pass through the door marked ‘Exit’. It is exhibition specific. A Monet show will sprout not only books and postcards of Monet but other publications relating to the period. There will be glasses and crockery, ties scarves and jewellery, board games featuring Monet paintings and anything else that can be tied into the theme. The price range will permit the small child to purchase a souvenir from her pocket money and tempt the affluent visitor to abuse their gold card. It is a retail exercise that relies on the power of the exhibition to stimulate the desire in its visitors to take a little bit of the show home with them.

In planning these temporary retail outlets, obtaining appropriate stock is crucial. Some of the goods can be sourced commercially but often the museum has to undertake a commissioning program from artists, craftspeople and manufacturers to create goods specific to the theme of the exhibition. Often, in association with major loans, the owner of the loan material requires the borrower to take their related merchandise.

Some of the goods can be obtained on a sale or return basis but sometimes, the stock has to be purchased outright. Clearly, the latter is commercially riskier and if the exhibition does not stimulate the anticipated volume of sales, the cost of unsold stock can eat much of the profits. Exhibition retail is high risk because the most important factor is the drawing power and impact of the exhibition – something that is out of the control of those responsible for the retail operation. It is the flea on the elephant.

Retailing from the Museum shop

The museum shop has the advantage of being a long-term tenant in a prime retail position. It is not dependent on any particular exhibition. Its success is determined by principles that are shared with many other specialty shops outside the museum precinct.

External retail merchandising

This involves selling the concept to a retailer (for example, marketing and selling a range of goods that is associated with the museum, an exhibition or something from the museum’s collection), then licensing a wholesaler, which, in turn, contracts with a manufacturer to make the products. Smaller retailers may choose to contract the manufacturer directly and cut out the wholesaler, but the larger ones will even specify the wholesalers with whom they prefer to deal.

Instead of being educative, promotional and income earning opportunities geographically sited within the museum precinct, museums have thrown off the shackles of geography and are now selling their merchandise internationally through franchised stores: In Sydney one can buy at the Metropolitan Museum of Art,[3] these stores are completely disarticulated from the physical presence of their host.

Mail order

This is still in its infancy in Australia but is big business in the USA. Magazines, trade newspapers, television and radio advertisements are commonly used by mail order merchandisers but other possibilities are starting to be explored. Again, it is useful to look at the experience of related fields such as the music industry: Merchandisers in England have been successful in using inserts in CD sleeves to market their goods. This form of marketing elicits an average 2% response with average £8 return. If your album sells 500,000 units, you can expect a return from merchandising of £80,000! Not bad for an insert in a product that the fan has already purchased.

Web merchandising

If mail order is in its infancy, web merchandising is barely conceived. It’s more a glint in the manager’s eye. Most of the larger museums now have an on-line retail presence – the ‘on-line museum shop’. Most are still fairly embryonic, reasonably unattractive places to wander.

E-commerce has not yet proven to be the gold mine that was predicted but museums should take notice of other related areas of cultural commerce.[4]

29.3 LICENSING CHECKLIST

When entering licences it is almost always worth getting expert legal advice. The following is provided to give you an idea of the sorts of issues that should be considered when licensing the copyright in an artistic work. The details will vary when licensing other material but the principals will be analogous.

(Click here to view a PDF of the License Checklist.)

 

LICENCE CHECKLIST
1. Designer/Copyright Owner· Details?· Is the designer the owner of copyright?· If not, who is? Name, address, ABN, telephone, fax & email.Never assume that the designer is the copyright owner. Copyright is the very heart of this transaction and you must never assume anything in relation to it. The person that conceives of the design and the owner of the rights in it, are often different entities.
2. Manufacturer· Details?· Who is sourcing the manufacturer (museum or designer)· Who will administer the manufacturing and supply process? Name, address, ABN, telephone, fax & emailSometimes this is done by the museum, other times by the designers. It depends on the size of the job, the experience of the parties and the cost and convenience that to the overall project.
3. Distributor Name, address, ABN, telephone, fax & emailThis will only be relevant where the product is to be distributed beyond the museum retail precincts. If there are no third party retailers then this is not as issue. However, if the museum intends to sell through, say, department stores, who is responsible for undertaking that process?
4. The Design/Work· title· description· dimensions· number· supply

· application

 

Describe the work that is being licensed as accurately as possible. Is it an existing work; is it a new one specifically created for the museum? How many options do you expect?Be clear as to the form and medium in which you expect to receive the design: transparency, a digital image or a design on paper.How will it be delivered? And how is it to be applied: will it be the design of an object (design of a mug) or is it to be applied to an object (design on a mug)?
5. Term of Licence• Initial term: from:to:• Any option: from:to: This assumes that the museum is not commissioning AND OWNING the rights in the design. It costs less to license than to buy the rights (at least in the short term.) Remember, the term of the licence limits the period during which you can reproduce the design – not the period during which you can sell the products.
6. Territory of Licence You usually will not need world rights. Australia/NZ will usually do the trick – unless there is a real possibility of sub-licensing the product (for example where the show is moving on to another venue in another country).
7. Advance Will there be an advance?How will it be calculated? Is it recoupable or non-recoupable?Will there be an extension of Term in the event that it is unrecouped?
8. Fees· flat fee or performance based?· fee upon receipt of each design?· timing of payments? There are three options: a fee; a royalty; a mixture of fee and royalty. There is no right answer as to which is most appropriate. It depends on how much you are expecting the other party to participate in your risk (and thus your profit.)
9. Royalty· $ per number of articles sold or manufactured?· Australia / Rest of world The royalty rates depend on the fee structure (whether there is a fee etc), the nature of the product involved. International rates are always less (or calculated differently) because of the greater costs or different basis of such deals.
10. Royalty Statements/Accounting· frequency· accounting period· number of articles sold· price per article· sales by territory

· amount owing to artist

· audit rights

This is the engine-room of the licensing deal. Remember that licensing companies (like museum collections) are of very variable standards. You must have rigorous standards of financial reporting and accountability.
11. Payment Will payment be simultaneous with the rendering of accounts?
12. Termination· Grounds:- overdue payment- poor quality of manufacture- ceasing production- notice in writing

· time to dispose of or sell-off stock

· time to account to rights owner

· time to return

On what basis can either party get out of the deal and what are the consequences of doing so?
13. Registration of Design· who pays for lodgement· who prepares forms Remember that if the design is to be applied ‘industrially’ (more than 50 copies), it may not be protected by copyright and it may be prudent to register the design. This is easy enough to do.
13. Permitted Uses· detail manner of application of design
14. Quality Control / Samples:· approval criteria· number of samples· date of delivery for approval· consequences of approval/rejection What is the mechanism by which the institution can ensure the quality of the merchandise?This is the insurance policy for the museum by which it ensures that the products associated with its name, are of suitable quality. You can never spend too much time getting this part right.
15. Sales Efforts How are the goods to be sold? Where? Is there an agreed style guide? Are there any objective minimum performance measures?
16. Inventory Leftovers At the end of the Term, what is to happen to the unsold stock?
17. Alternate Dispute resolution It is sensible to provide a procedure for working through disputes without having to go to court to have someone else decide the issue for you. There are several bodies that supply alternative dispute resolution assistance. The Dispute Resolution Service of the Arts Law Centre of Australia is a cheap and useful option.
18. Jurisdiction This is important if the players are in different States or different countries. If there is a court case, which laws will apply and in what place will the dispute be heard? Home ground is always best.

29.4 OUTSOURCED LICENSING

Some museums may undertake the licensing process themselves; others outsource this to specialist merchandising companies. Many museums license manufacturers to make reproductions of works or objects held within the collection or related to individual exhibitions.

Where copyright is relevant, the permission of the copyright owner must first be obtained but in many instances the copyright will have long expired (if indeed it ever subsisted).

The following matters should be considered when negotiating a merchandising deal:

Term

How long will the relationship be? If the purpose of the deal is to exploit a particular exhibition, the term will be quite short. (Usually it will be the period of the exhibition). If, instead, the merchandising is intended to promote the museum generally, or to advertise a service offered, or to exploit interesting items in the museum’s permanent collection, the term may be much longer.

The merchandising company will try and obtain a long period but is usually in the interests of the museum to keep the period short. The company needs a certain period in order to recoup its investment and make its commercially essential profit. The museum too, wishes to make a profit from the venture, but it must ensure that the deal does not deleteriously effect the reputation of the museum.

The best compromise between these conflicting interests is to negotiate a reasonably short period which can be extended by option periods, should both parties agree.

If there is an Option to extend the term, sometimes this is structured so that the museum is obliged, at the end of the exhibition, to give the merchandiser the first right to negotiate for the tour of the exhibition. In this way the merchandiser has the opportunity to continue its development of products and strategies, while the museum ensures that the terms of the deal are regularly reviewed, to take into account any development in the exhibition’s merchandising value. Museums want short periods with lots of opportunity to assess the effectiveness of the merchandiser’s efforts: The merchandiser wants the term to be for as long as possible (but with an ability to bale out.)

Advance

The museum should negotiate an advance on royalties. Factors that will be relevant to the calculation of the advance will include:

· How many people are likely to visit the museum during the period of the contract?

· How much are those visitors likely to spend in merchandising dollars?

· What type of exhibitions or other attractions will there be at the museum during the contract period?

· What degree of publicity is planned for the museum or its attractions during that period?

Even with all this, the calculation of the advance is a matter of informed guesswork. Experienced merchandisers know what a particular type of exhibition is likely to gross per visitor head. With this in mind, the merchandiser will estimate the number of people who will attend the exhibition. They may then discount the figure to take into account the nature and lay-out of the exhibition venues.

Once they have their estimate of heads, they multiply that number by the estimated dollar return per head. When you divide that figure by two, you have a rough idea of the advance.

To protect themselves further, merchandisers who are putting up a large advance will often build two further factors into a deal to protect themselves from being too badly burned. First, if the advance is really large, the merchandiser will demand a guarantee (e.g. if a figure is based on the exhibition having 300,000 visitors and there are only 50,000, a portion of the advance may be repayable.)

Second, the size of the advance influences the term of the deal, because the merchandiser will need a reasonable period in which to recoup and make a profit. The bigger the advance, the longer the term is likely to be.

1. Extension of term for unrecoupment of advance

The museum should never agree to a deal in which the term extends until recoupment of all outstanding advances. Advances are a calculated gamble for both parties, but no museum wants to be tied to an unsuccessful merchandiser. Cap the period of extension (if there must be one) and insist on the right (not the duty) to repay any unrecoupment should you want to bring the deal to an end even sooner. If you have had a $50,000 advance and the merchandiser has recouped $45,000, you don’t want the term to extend for another year just because of $5,000. In such a case, the merchandiser would have done very well out of the deal even though it has not completely recouped, so you will usually find them very willing to negotiate a new deal when you go to repay the unrecouped balance.

Often the museum’s buy-out right is subject to the merchandiser’s right to match another offer. After all, you usually won’t want to buy your way out of the deal unless there is another company offering you a better deal. The company will often insist that it should have the right to match that better offer but that if it chooses not to do so, the museum can then exercise its buy-out right. Resist this. If you thought that it was worth staying with that merchandising company, your eye would not be wandering to alternative companies.

2. Timing of advance payments

Advances are usually paid according to a schedule. They are not paid all up front. An advance may be payable on signing, another at the beginning of the exhibition, a further advance after so many thousand people have attended and so on.

3. Recoupable and/or repayable advances

Merchandising advances are always recoupable from income. You should never have an obligation to repay unrecouped advances at the end of the term. Many agreements state that the term will continue until full recoupment. As discussed earlier, you should insist on a cap to that extension and the right to repay any unrecouped advances so that you can get out of the deal at the end of the term if you so wish.

Merchandisers believe that repayable guarantees provide some protection from miscalculation so that if the exhibition or the product fails, the merchandiser has a chance of getting its money back. It is in the museum’s interests to refuse or limit this. No party should be acting as the insurer of the other in this risky business.

It is quite common for merchandising advances to be partly repayable and partly non-repayable. For example, there may be a non-recoupable signing-on fee, an initial advance that is recoupable but non-repayable and later advances which are recoupable but repayable. There are no rules. It all depends on your negotiating strength and skill.

The institution’s share

There are two methods of paying the collection institution: a percentage of sales income or a set dollar amount per unit. These percentages are usually paid on the gross retail sales less only GST and customs duty. Retail merchandising deals generally provide a set amount per unit when the duration of the deal is reasonably short and the range of goods is very limited; e.g. it may be used in a one year agreement which licenses a company to produce posters of the museum. This works because posters sell for fairly standard prices, and the retail price is unlikely to change much in just one year.

In more complicated deals, where the term is longer or the range of goods is larger, a percentage is safer. After all, a percentage arrangement automatically takes factors such as inflation or unexpected mark-ups into account.

Assuming that you opt for a percentage deal, what are you really getting? A percentage of what? It may be based on wholesale or retail sales. It is also usually based on ‘net sales’. How is ‘net’ defined? What deductions will be permitted? These are not simple matters and your agreement must cover them all.

In retail merchandising (unlike exhibition merchandising), percentages are usually based on wholesale receipts. Accordingly, you make far less selling merchandise through retail outlets than you do from the exhibition venue. Just compare getting 30% of retail selling price of a T-shirt from an exhibition sale and 10% of the wholesale price from a retailer. The latter has to take into account the greater number of people involved, each one having their own overheads to recover.

Perhaps the question most often asked of a lawyer briefed to negotiate a merchandising deal is, ‘What is the standard royalty?’ The truth is that there are no ‘standard royalties’. The rates vary enormously depending on the name and status of the museum and the show, the advance structure, the guaranteed minimum royalty, as well as the type of product, territory and duration of the deal.

That said, retail licensing can be roughly divided into two categories: clothing; and everything else. The museum’s share of clothing sales is usually 10% to 12.5%. On everything else it is one step higher: 12.5% to 15%. Sometimes you may negotiate a couple of extra percentage points for the use of your own designs, as there will be lower costs involved in getting clearances to reproduce the artwork.

Quality control

The organisation must make every effort to ensure the consistent quality of merchandising and the publicity relating to the sale of the merchandising. It may be very damaging to the institution’s reputation if the workmanship is shoddy or the publicity is tacky.

Accordingly, you should have the right of prior approval over the nature of the goods, artwork, designs and manufacturing standard. You should sign-off on all samples.

Inventory leftovers

Although a good merchandiser will not have much left over at the end of the contract period, it should be determined at the outset what will happen to such material. Will it be sold or destroyed? If it is to be sold will it be for full price or junked? Can the museum buy-in any left over stock at junk prices?

Accounting

The licensor should agree to account monthly to the museum, showing the sales made during the last month and including an itemised list of the kinds and quantities and prices of articles sold.

Payment

Simultaneous with the rendering of the accounts, the merchandiser should pay the museum the royalties due.

Sales efforts

If the merchandiser is also going to be the seller of the goods, the museum will require control over how the goods are to be sold. It may require a promise from the merchandiser that it will make its best endeavours to market the goods. This may include an advertising campaign or other promotional efforts, in which case the institution will want to have the right of approval over such material. To do this you should require a marketing plan from the merchandiser. This needs to include a timetable setting out the dates on which various marketing methods will start and where, release dates of products, together with a cash-flow projection. This marketing plan should be subject to your approval.

Similarly, the institution will want control over where the goods are sold. Will it be only from the museum shop or will the distribution be wider? If it is wider, it is in the museum’s interests to consider which outlets would be in keeping with the institution’s public profile and limit the merchandiser to such outlets.

There should also be an agreed style-guide, setting out the only permitted form, style and colours the merchandiser may use for the merchandise, together with any trade marks or other copyright notices that must be included on the goods. This is particularly important with retail merchandising, but only the biggest exhibitions go to the trouble of style-guides for exhibition merchandise. Where there is no style-guide, you must have to have the right to sign-off on all samples if you want to be able to ensure control of quality and use.

The contract will also specify that the merchandiser will make its best endeavours to market the goods and may stipulate various minimum standards. This may include an advertising campaign or other promotional efforts. If it does, the institution should have the right of prior approval of marketing.

Similarly, you will want control over where the goods are sold. Will sales be only from particular retail locations or will the distribution be wider? If it is wider, it is in your interests to consider which outlets would be in keeping with your public profile and limit the merchandiser to such outlets. The sales territory can cause problems if you have other merchandisers in place, e.g. if you have licensed various retailers to sell products, you may have promised them a certain degree of exclusivity. If so, you will have a duty to ensure that your exhibition merchandiser doesn’t sell any inventory outside its authorised territory, otherwise it may be causing you to breach your agreement with the other merchandiser.

29.5 Doing Your Own Merchandising

Instead of out-sourcing, many collecting institutions do it themselves. This is either because they are so small that no professional merchandiser would be interested or because they are large and has the internal resources and skills to do it.

If the organisation is a small one, you should consider doing it yourself. You can design the merchandise yourself or have a friend of the collection do it for you. You can hire vendors on an hourly rate or have volunteers provide the sales team.

Usually, the biggest problem is in scraping together the money to pay the manufacturer for the first order. Still, as the volumes are not likely to be great, the amount of money involved is not huge. Once you’ve established the identity and extent of your market, you will be able to judge better your likely sales and may then be able to cash flow your orders from sales.

Because you have control of the whole process, you can ensure that the quality of the merchandise is high. This is most important. The quality of the merchandise is irretrievably linked to that of the museum.

Best of all, you can keep your prices reasonable and still make more money because there is no middleman. You are both the wholesaler and the retailer!

Doing it yourself needs considerable administrative supervision. If you don’t oversee it closely, you will incur a lot of expense and not make any money.

Treat your merchandising as a separate business from the organisation’s core business and deal with it as a separate profit centre. Keep books, keep invoices. Keep a record of all your deals, no matter how small. Don’t forget to make sure that your GST obligations are met. After six months or so, you should examine the business and examine how it can be improved or whether it is worth continuing.

Treating it as a separate business does not mean that it should be a separate legal entity from the organisation. Some public museums and galleries take the approach that if the shop is a separate legal entity, it is more answerable for its effectiveness (in that institutional core funding cannot be used to subsidise the operation or obscure its failures.) It is also argued that being separate allows the staff to be on packages that are competitive with the retail world rather than based on public service scales. Also, decisions, so it is argued, are faster if the decision-making chain is shorter and public sector protocols do not have to be complied with.

On the other hand, there are very real tax benefits in having the shop a structural part of the institution; the staff may not be paid a large weekly salary but, at least in the government institutions, will have the benefit of public service conditions of work (much complained about but much lamented when lost.)

When asked whether the Smithsonian Institution (a giant of museum merchandising) had considered separating its retailing function from its other activities, one of its in-house legal counsel replied: ‘It’s been given a lot of thought; we looked at all the arguments but at the end of the day we could not come up with a satisfactory answer the question: “Why would we?”’

Most of the advantages of separation can be achieved as a function of quality management (not just of the retail operation but that of the wider museum enterprise. Legal separation does not, of itself, provide a panacea to flaccid or inattentive management. Moreover, any advantage that might be gained from separation is likely to be overwhelmed by the disadvantages of the tax consequences.

29.6 RETAIL MERCHANDISING

In this context, what is meant by ‘retail merchandising’ is not selling through the institution’s shop but rather, selling in third party shops and department stores. In Australia this is not particularly significant for most museums. Most merchandising sales are achieved as part of the experience of visiting the museum. However, some institutions have found that there is a market for collection-related merchandise in traditional retail outlets as well as at the in-house shop.

You can either do deals directly with individual retail outlets or you can retain an agent to seek out and negotiate deals on your behalf. There are very few museums with sufficient administrative resources to put these deals together. Usually, it is more cost-effective to retain an agent who already has both a wide network of retailing contacts and an established supervision and administration system.

Most of the points discussed in relation to outsourced licensing are relevant to retail merchandising and they won’t be repeated here.

The agent’s commission

The commission charged by licensing agents varies from agent to agent and client to client. The rate will be between 20% and 35% of the gross receipts. So, if you license a poster manufacturer at 15%, on sales of 5000 units at a retail price of $12 (+GST), the museum’s royalty will be: 5000 x $12 x 15% = $9000. This will be paid to the agent which then deducts its (say) 30% ($2,700) and pays-through to the museum the remaining $6300.

The agent’s role

Assuming that you appoint a licensing agent, you will need to retain the right of approval over all sub-licensees, all deals and all products. The agent’s job is to find, negotiate, make recommendations about and administer these deals. You will notice that it is not the agent’s responsibility to enter the deals on your behalf! You would be asking for trouble if you duck your responsibility and leaves the whole process to your agent. It may be less stressful to remain aloof from the responsibilities of decision-making, but it could be very costly.

You must also retain all the rights of approval discussed earlier. These must be spelled out in the licence agreement. Usually, your contract with the licensing agent will specify the matters that must be included in any sub-licensing deals.

Often, the agent’s contract will have appended to it an approved licence agreement. This is the basic licence agreement that the museum has approved for use by the agent. It will contain all the essential protections such as approvals of photographs, merchandise types, designs and quality of product. Providing a standard form licence makes it easier for the agent to show the prospective retailer or manufacturer the general terms of the deal without having to get separate museum approvals for basic terms.

The agents’ rights

In retail merchandising you must limit the goods licensed as narrowly as possible. You would not grant an exclusive licence to a manufacturer to make ‘toys’. You would specify a particular toy. Similarly with clothing, you would specify the range say; girls clothing (ages 14–19) or boys shoes (sizes 3–8). This allows you to grant licences to other manufacturers to produce related but non-competing products that can make you additional income.

If the retailer wants a wide range of exclusivity it has to pay for it. It must also have the ability to produce, distribute and market that wide range of goods throughout the territory. If it does not, no juicy advance will make up for your loss of sales. Very few companies have market power in a wide range of goods. Find out what the company is really good at, and license it to do that task.

29.7 The Place of Shopping Within Collecting Institutions

One of the significant changes in the commercialisation of collections has been the development of retailing. The traditional real-estate based ‘museum store’ has long been a significant source of income for collections.[5] This has seen the increase in floor-space devoted to commercialisation, the increased sophistication of the product lines and product presentation, and the attachment of specialised merchandising to individual exhibitions. Perhaps most interesting of all, has been the emergence of on-line retailing whereby collections are using the power of their brand to develop the store component of their web sites.

Most of the legal issues concerning retail outlets are no different from those that affect any shop. The general commercial law of the land applies.

Should the shop be part of the collecting institution or should it be independent of it? There are a number of legal and quasi-legal issues relevant to this question.

If the store is a part of the institution, then:

1. the staff of the shop are employees of the museum and are therefore bound by the employment rules that apply to all other employees of the institution;[6]

2. as well as getting the benefit of any profits, the institution is liable for the losses incurred by the shop;

3. the institution is potentially liable for damage, injury, loss or death caused by any of the products sold in the shop;

4. the budget required to meet the overheads of the shop and to purchase its inventory, directly affect the budget of the institution;

5. the institution incurs greater administrative and accounting expenses.

If the store is not a part of the institution but is function that is sub-contracted out, then:

1. the shop has greater flexibility in employment of staff;

2. the institution is relieved of much legal responsibility for the staff;

3. the potential legal liability for defective products is reduced;

4. the institution is not liable for losses or for providing capital;

5. administrative expenses are reduced; but

6. the institution loses a great degree of control over:

· the staff selection, training and presentation;

· the quality of the merchandise;

· the relevance of merchandise to the institution’s exhibition and education programs; and

· the look and feel of presentation.

Until one arrives at point 6, it would seem that all shops should be separate legal entities from the collecting institution. However, many institutions see it as absolutely important to maintain those levers of control so that quality, relevance and reputation can be better protected. This is particularly important now that on-line shops have become standard practice.

With on-line shopping, every collection has a new way of promoting its brand. On-line shops are not just retail outlets; they are not just secondary income sources; they are international promotion devices; they are part of the public access strategy of the institution. Many people who may not otherwise think of visiting a museum, gallery or library find themselves exposed to the collection through its on-line presence. Shopping is now part of web-life; and thus shopping has become one of the strategies for promoting public awareness of and access to collections.


[1] Stefan Toepler, Volker Kirchberg ‘Museums, Merchandising and Non-profit Commercialization’ <http://www.nationalcne.org/papers/museum.htm>. This article is essential reading. It is one of the few pieces of economic analysis as to the true financial benefits of merchandising to the museum.

[2] After all, merchandising is an effective way of promoting both the specific exhibitions and the institution itself. Someone wearing one of the museum’s T-shirts is a walking, self-funding billboard.

[3] There are 19 Metropolitan Museum of Art shops across the United States, and 13 in Europe, Mexico, Asia, and Australia.

[4] The music industry is undoubtedly the most developed: Have a look at <http://www.garthstores.com> to see how Garth Brooks does it.

[5] There is considerable debate as to the true profit of such ventures when all of the silent overheads are taken into account.

[6] Is it desirable to have the retailer working to the same rules as a curator or technician? Are retailers likely to perform better if a bonus scheme is available?




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