Revenue Diversification for Museums

The latest cuts in the government budget for the arts and culture have forced Dutch museums to reconsider their finances and revenue strategies. Museums in the Netherlands are considered to be too reliant on public support and the government wishes to stimulate more independence and entrepreneurship in the sector. Museums, on the other hand, appear reluctant to adopt such an approach and feel that commercialization will lead the mission-drift and distraction from their core cultural and social values. In academic literature, however, it has been suggested that revenue diversification, i.e. an equal balance between multiple income sources in the revenue portfolio of nonprofit organizations, will lead to increased financial stability. In this thesis the revenue diversification strategy, which stems from the financial Modern Portfolio Theory, is tested as a potential revenue strategy for museums in the Netherlands. The question is whether a more diversified, well-balanced revenue portfolio for museums will increase their financial stability in terms of reduced revenue volatility. Moreover, the implications of a more market-oriented revenue strategy are investigated. The research focuses on the annual reports from the years 2002-2011 of two museums in Amsterdam, the Rijksmuseum and the Van Gogh Museum, which both receive subsidies from the state via the Ministry of Education, Culture and Science (MinOCW). Given the limited amount of data no significant conclusions could be drawn with respect to the impact of revenue diversification on revenue volatility. By comparing the financial positions of the two museums, however, evidence was found pointing at the positive effect of a more commercial, market-oriented revenue strategy on museum finances. In general, this thesis was aimed at exploring new opportunities in revenue strategies for museums and some first steps have been made in this respect. However, further research is required, using larger data sets, to gain more information about the topic.