For New York Art Group’s Failed Catalogue, Lack of Money Mattered

Running a business, even if it appears to be headed toward success, can be fraught with perils for non-profit organizations.

That lesson was learned recently by the leaders of Art Matters, a New York group that provides small grants to support individual artists. Created in 1985 with an endowment provided by Laura Donnelley-Morton — a member of the telephone-directory-publishing family — Art Matters awarded nearly $3-million in grants in its first decade.

But by 1994, responding to suggestions from foundation program officers, the organization was seeking ways to become self-sufficient. “We realized that the money we had at our disposal was not nearly enough to meet the needs of artists,” recalls Cee Scott Brown, who was then executive vice-president of Art Matters.

Initially, the group decided to try direct-mail fund raising, but it then changed course.

The Art Matters Board of Directors reasoned that it could draw upon the talents of its contacts in the art world — successful painters, photographers, and designers — to support struggling artists. To do that, the group developed a mail-order catalogue offering products designed and produced by American artists exclusively for Art Matters.

The Art Matters catalogue was filled with equal parts beauty and whimsy — graceful and colorful angels for Christmas trees and a ceramic plate decorated with a photograph of William Wegman’s dog, Man Ray. Some artists were paid a fee for each item sold, some earned flat fees for designing objects, and others donated their work to Art Matters.

The response to the first catalogue, in the fall of 1995, was immediate and overwhelming. The publication won design awards from others in the direct-marketing business. But more important, it persuaded many people to buy items. Two per cent of recipients bought something — a promising figure for a new catalogue — and the average order, $72, was a bit more than that of the Metropolitan Museum of Art’s catalogue customers, says Mr. Brown.

To expand its operations to meet the demand, Art Matters asked foundations for an investment of $2.5-million. At first, Mr. Brown says, he was hopeful, because many foundation program officers had begun to exhort non-profit arts groups to become more entrepreneurial. But that hope was short-lived, he says.

“A lot of that was just lip service, just buzz words,” he says. Foundation program officers talked about being venture capitalists for society, but in reality, they could not make or keep financial commitments as investors, he says. “They don’t have the ability to convince the boards to follow them,” he observes. Even those foundations that offered loans and other so-called program-related investments to charities turned down Art Matters’ requests.

Robert Crane, president of the Joyce Mertz-Gilmore Foundation in New York, says that the Art Matters catalogue was especially unlikely to garner foundation support. “Art Matters had never had great success getting foundation support for their normal mission, and typically, program-related investments follow grants made to support a group’s core mission,” says Mr. Crane, whose foundation had provided general operating grants to Art Matters.

Besides, he says, given the uncertainty of the catalogue industry, “I am not sure the financial prospects were good enough to support the risk.”

Another non-profit group that has ventured into the catalogue business, but in a different manner, is Opera America, a Washington organization that represents opera companies across the country.

In 1996, David Lutyens, the owner of Opera World, a for-profit mail-order catalogue company that sells opera videocassettes and compact discs, approached Opera America to see if it would be interested in purchasing the business. As an incentive, Mr. Lutyens agreed to finance the sale by letting the arts group make payments from future profits, thus keeping its immediate costs to a minimum.

Eager to find new ways to generate income, Opera America jumped at the chance to acquire the moderately profitable enterprise on such terms.

Since the catalogue was already successful, Opera America did not make any radical changes in design or management. The group, which has mailed three editions of the catalogue since acquiring it, has hired an executive vice-president to manage the business’s day-to-day affairs but otherwise has continued to operate the catalogue the same way its previous owner did.

Marc Scorca, Opera America’s executive director and president of the catalogue company, hopes to increase the catalogue’s profits. But more important, he says, he hopes that the catalogue will serve as a link to new audiences for the organization’s member companies.

He says the catalogue’s potential was underscored by findings in a survey by the National Endowment for the Arts, which found that just over 3 per cent of Americans attended live performances of opera but that over 18 per cent listened to opera on radio, television, compact discs, and videocassettes.

“The more we studied it, the more we saw that this deal gave us a connection to a vast audience we have never been connected to,” explains Mr. Scorca.

In the future, Opera America intends to create joint marketing agreements between the catalogue and the association’s member companies that could provide new customers for both sides, he says.

Opera America may succeed in running a catalogue where Art Matters failed in part because Opera World was already a profitable company with a track record and a large base of customers. By contrast, the inability of Art Matters to build its catalogue stemmed largely from its inability to obtain financing.

Difficulty attracting funds is common among non-profit groups that attempt to start successful business ventures, says Jed Emerson, executive director of the Roberts Economic Development Fund, founded by George R. Roberts, a financier based in Menlo Park, Cal. “For the growing sector of social entrepreneurial start-ups, there are no meaningful capital markets to which one may turn,” he says.

Ultimately, when Art Matters could not find additional financing, it had to give up on its nascent business. The organization’s leaders reluctantly pulled the plug on the venture in October 1996, before mailing out the second catalogue. The organization is reassessing its overall situtation and considering whether and how it can continue to make grants.

Mr. Brown left the non-profit world, and he now sells residential real estate to artists. Looking back on the demise of the Art Matters catalogue, he says, “It was very frustrating not to be able to make it happen.”