Chapter Abstract

NONPROFIT DOES NOT MEAN “NO PROFIT”: AN OVERVIEW OF SMITHSONIAN ENTERPRISES

The United States museum industry comprises for-profit and nonprofit organizations and is valued at $15.4B as of 2022. With unique funding models supporting the vast array of exhibits, programs, and community activities around the country, many museums employ innovative business solutions to add unrestricted revenue to their earnings portfolios. In the nonprofit museum sector, fundraising activities and earned revenue represent 60% and 40%, respectively. Such reliance on earned revenue challenges many organizations to innovate at the intersection of curation and consumer economics by ensuring that museum visitation yields revenue through admissions and other onsite and online purchases. The Smithsonian Institution, the world’s largest education complex, presents an example of how profit-generating business solutions can be effectively leveraged in a nonprofit organizational structure as Smithsonian Enterprises (formerly Smithsonian Business Ventures) adds considerable unrestricted revenue to the organization’s portfolio annually.

Introduction

This chapter analyzes the structure, business operations, partnerships, organizational structure, financial management, and challenges of Smithsonian Enterprises and its contributions to further the Smithsonian Institution’s mission. 

Founded with a sizable estate donation by English scientist James Smithson for the “…increase and diffusion of Knowledge among men…,” the Smithsonian Institution came to be by vote of the United States Congress in 1846. In its more than 176-year history, the Smithsonian Institution has become the world’s largest museum, education, and research complex with 21 museums, the National Zoo, and nine research facilities worldwide. The Smithsonian Institution has an annual budget of $1.5B and represents a unique funding model that includes federal appropriations, contributions and grants, endowment proceeds, and revenue from business activities. With federal appropriations, contributions and grants, endowment proceeds, and other revenue composing just over 88% of the organization’s annual budget, the Smithsonian Institution heavily relies on revenue generated from its business operations as an unrestricted revenue source. In 1998, the Smithsonian Institution Board of Regents authorized the creation of Smithsonian Business Ventures– to combine the organization’s distinct business operations, including retail, food and beverage, movie theater, travel, and Smithsonian Magazine operations, into a single business unit. Since its inception, Smithsonian Business Ventures (renamed Smithsonian Enterprises in 2008) has grown from $30M to over $100M, or 12% of the Smithsonian’s annual revenue. Today, Smithsonian Enterprises represents such brands as Smithsonian Retail & Concessions, Smithsonian Store, Smithsonian Licensed Products, Smithsonian Books, Smithsonian Theaters, Smithsonian Magazine, Air & Space Magazine, Smithsonian Channel, Smithsonian Journeys, and Student Travel. The diversity of business operations within Smithsonian Enterprises and the importance of each brand’s success to the Institution demand diligent attention to market conditions, business drivers, key performance indicators, and profitability. As such, Smithsonian Enterprises employs a staff of business professionals that manage day-to-day operations, accounting, financial planning and analysis, and executive management functions with oversight from the Institution’s Secretary and Board of Regents. While separate from the Smithsonian Institution, Smithsonian Enterprises is closely aligned with the mission, goals, and strategy of the Institution and views its business operations as an extension of the organization’s quality guest experience in all facets.

Chapter Overview:

1.1 Introduction & Smithsonian Institution Overview 

1.2 Smithsonian Institution Financial Overview 

1.3 Smithsonian Enterprises History & Organizational Structure 

1.4 Smithsonian Enterprises Key Business Drivers & Challenges – COVID-19 Impacts 

1.5 Conclusion

Keywords:

museum, business operations, nonprofit revenue, unrestricted income, organizational structure, Smithsonian Institution, Smithsonian Enterprises, net gain, profit, museum profitability, museum sustainability, strategic planning, retail, concessions, Smithsonian Magazine, Smithsonian Travel, Smithsonian Retail Group, Smithsonian Media Group, Smithsonian Travel, Smithsonian Channel

Sources:

si.edu, publicly available Smithsonian reports and data, GuideStar, academic research, current & former Smithsonian staff interviews, United States Congressional transcripts, various media outlets, and publications