Best Practices Study of Museum
CD-ROM Production

5. Partnership Arrangements

5.1 Overview of Practices
5.2 Critical Success Factors in Working with Partners

5.1 Overview of Practices

Partnership structures tend to vary widely, but there are few common patterns. All institutions interviewed and all except one of those that responded to the survey had used various types of partnership arrangements. Possible partners and their roles in the project can include the following:

• In addition to the above, many others may become involved in a production, although they may be subcontractors instead of partners. For example, researchers, actors or writers may be contracted to contribute to the content development. Depending on the content and the parties involved, other groups may become logical partners or involved in the process. For example, the Bell family descendants reviewed material for Alexander Graham Bell and one descendent was featured in clips in the production.
• Generally, the term 'partner' suggests some sharing of equity, risk or revenue in the project. Museums may view multimedia companies as co-producers and/or co-developers, depending on the role the institution adopts. The roles can overlap. Some producers are also developers and publishers.
• Revenue sharing formulae will usually reflect the degree of involvement, equity and risk sharing among the partners.
• Partners may be involved at several levels in return for product or a share of the revenues, by contributing to content development or production, or by offering financial help.
• In the case of the ARTIFICE project, the York Board of Education is a partner that is contributing to content development and is likely to be a user of the final product.

Role of the Museum

In most of the cases examined, the museum's role was concerned largely with production and development. Publishing and distribution were always handled by outside suppliers, many of which were known to the multimedia company. The use of publishers and distributors is addressed in Section 7.

The museum or the commercial partner can assume the leadership role in the project. This section contains a discussion of the advantages and disadvantages — as well as some of the financial risks —associated with various forms of this relationship.

The relationship can assume one of the following forms:

1. Museum as Lead or Executive Producer
2. Multimedia Company as Lead or Executive Producer
3. Museum as Co-Producer or Co-Developer
4. Museum Co-Producing with Other Museums
5. Publisher Initiated and Financed, Museum as Lead Producer

1. Museum as Lead or Executive Producer

In this case, the museum is likely to have originated the idea for the project and has an influential role in all aspects of content development and production.

The advantages and disadvantages of this relationship is as follows:

• Advantages: The museum can retain control over all aspects of the production. Potentially, due to the degree of equity retained in the project, the museum can increase its rewards or revenues.
• Disadvantages: The museum must invest substantially more time, money and risk.

2. Multimedia Company as Lead or Executive Producer

In this situation, the multimedia company takes the lead in producing and developing the product. The museum assumes a more passive role, which includes monitoring content at key points in the process.

The advantages and disadvantages of this relationship are as follows:

• Advantages: The museum invests minimal time and commitment to the project, and the risk in reduced.
• Disadvantages: The museum does risk losing control over content development and production. As previously noted, museums have withdrawn from projects in which they found the quality of production and content did not meet their standards.

Quite often, the museum and its partner share the responsibility for production and/or development. While it may seem logical for the museum to retain responsibility for content development, this does not need to be the case. Both parties may suggest ways of organizing or presenting the material, particularly given the ease with which digitization and multimedia lend themselves to new creative possibilities. The responsibility for content development can also become blurred since the developers may originate ideas for the project, which they should review and discuss with the museum.

3. Museum as Co-Producer or Co-Developer

There are many examples of museums that have worked collaboratively with other partners. Sometimes, the partners include other museums. Usually, the co-producer or developer is a multimedia company that is responsible for integrating the content with the software. It is common for the multimedia company to work with other multimedia companies with specialized skills. The multimedia company may commit its own time and resources to a project, in addition to the funds and resources it receives from the museum.

The advantages and disadvantages of this relationship are as follows:

• Advantages: The museum and its partners share the risk and the effort. Each partner offers the developed skills and competencies of their field.
• Disadvantages: The project can become more complex and costly with the addition of multiple partners. Effective project management and communications are required throughout the process.

4. Museums Co-Producing with Other Museums

It is also possible for museums to cooperate with other museums in different ways. The CD-ROM Balloon Age was a collaboration of three museums: Musée David Stewart, the National Museum of Science and Technology, and le Musée de l'Air et de l'Espace du Bourget, in France. In this example, the French Musée de l'Air sold the rights to its material for approximately $3 000, and the two Canadian museums are each entitled to a share of revenues.

The advantages and disadvantages of this relationship are as follows:

• Advantages: The risk is shared between the partners.
• Disadvantages: Multiple partnerships are likely to require considerably more time than if the CD-ROM was developed produced totally in-house.

5. Publisher Initiated and Financed, Museum as Lead Producer

This model emerged from the OMSI example, and has been used by publishers working with the Smithsonian on CD-ROM development. In this model, the publisher has the original idea and forms a contract with the museum, who takes the responsibility for developing the product. The publisher advances funds to the museum to develop the product. The museum may retain a share of royalties. Respondents in the US indicate that this process was more common in the early days of CD-ROM development, but is now less common, since publishers have had difficulty earning a return on their investment.

The advantages and disadvantages of this relationship are as follows:

• Advantages: The publisher bears the majority of the financial risk and finances the overall development of the CD-ROM. The museum can retain control over the content, because the museum is developing it.
• Disadvantage: The museum staff must be committed to a project which may not be a high institutional priority for the museum. This risk is compounded if the project takes longer than the initial budget predicted, in which case the museum staff may be subsidizing the publisher's development costs.

Financial Partners

•    Canadian museums can seek financial partners from several sources within the public, private and Crown Corporation sectors. While museums are not currently eligible for many grants directly, the production and private sector partners may be able to qualify for some of this funding. The following organizations and agencies have provided grants and contributions to Canadian museums and their partners:

• Department of Canadian Heritage (Museum Assistance Program)
• Canada Council (for translation)
• Telefilm Canada (for production and marketing)
• Canadian Studies Directorate of the Department of Canadian Heritage
• Multiculturalism Directorate of the Department of Canadian Heritage
• Provincial and territorial governments (for economic development and tourism)

•    In addition to the above sources, museums have approached the private sector directly for partnership opportunities. For example, Bell Canada was involved with the Alexander Graham Bell and ARTIFICE CD-ROMs. The Crown Corporation Canada Post helped to finance Stampville. Typically, these corporations will fund a portion of development by guaranteeing a large purchase of the CD-ROMs. Their guarantee is in the form of funds that are used for the CD-ROM development. Apart from these examples, there appears to be limited involvement from the private sector in financing the development of CD-ROMs.

Summary

• Many different partnership models have emerged from the cases examined. Each partnership was based on the skills, competencies and assets of each participant. There are advantages and disadvantages associated with different partnership arrangements.
• The addition of partners adds to the skills and resources which can be used in the project. However, the addition of partners can make the project more complicated, more time consuming and therefore more costly. The revenue sharing must be split between the partners and the museum may receive a smaller share. To be successful, the project will require effective project management over the partners, who may have different mandates and objectives.
• In most of the cases examined for this study, the museums assumed a large role in producing and developing the CD-ROM, and committed its own time and resources in return for a share of the revenue.
• The museum may be exposing itself to more risk when it lends its name to a venture which is largely the idea of a commercial developer. In this case, the commercial developer often has the original concept, develops the product. The museum is in a more passive role than if it were responsible for all aspects of production. For this relationship to work, the museum must retain sufficient leverage in order to influence the overall content and quality of the final product.
• The role of the museum in the production of Alexander Graham Bell was a passive one, and the commercial supplier took prime responsibility for the project. The museum provided input and editorial content at key points. Despite the risk the museum took in lending its name to the project, the project was successful and the museum is entitled to royalty income from the venture.
• The museum can generate a financial return in both an active or passive role. In any partnership model, it is imperative that the partners work with a shared vision of the final product and communicate with each other on a regular basis. The executive producer must be an effective project manager over the various participants and their activities.
• Many of the partners committed considerably more time and resources to the project than anticipated at the outset. The staff time is the largest component of CD-ROM cost. The partners, particularly the developer, must have a prepared strategy if development time takes much longer than originally planned. When the museum is the lead developer, the extra time value may be borne by the institution as part of the developer's normal salary, for which the institution may or may have formally budgeted. When the commercial partner is the lead developer and the development budget is fixed, the developer may be unable to recover the extra time value in the event of an overrun. In this case, the commercial developer has two choices: to commit more paid staff time to the project; or, work long hours in order to use as much unpaid time as possible and try to keep to the original project timelines. In either event, the developer's recoverable fees per hours worked drops. The use of an equity arrangement when the partnership agreement is developed appears to provide for the possibility of project overruns without committing additional funds to finance the additional time required. In this case, the additional time needed to complete the project is the risk each partner is prepared to accept up front. In a sense, the risk of additional time is a form of 'sweat equity' which is contributed in return for a share of revenues.
• Some museums are reconsidering their approach to working with private sector partners in order to guarantee increased funding at the outset. The private sector pays the museum royalties for the use of the museum content and for the time the museum contributed in working with them. This approach removes some of the risk from the museum's involvement and provides a better possible return to the museum.
• One museum estimates that the value of each of its images is approximately $35. For example, a CD-ROM with 1 600 images, the museum contributes assets worth $56,000 to a CD-ROM with 1 600 images. This formula helps the museum negotiate a contract and justify its 50% of gross revenues with private multimedia partners.
• Museums should use legal assistance in developing and reviewing contracts with partners. Despite goodwill on all sides and the best intentions of all parties, the museum must ensure that its interests are protected. Protected interests become even more critical once the museum considers the rapidly changing laws for multimedia and intellectual property.

5.2 Critical Success Factors in Working with Partners

Several considerations of partnership opportunities are worth emphasizing. These considerations will undoubtedly be necessary to accomplish success with CD-ROM development. As a general comment, it is important for partners to mutually respect one another's skills, to share a vision of the final product and to treat each other in the spirit of fairness, especially since the partner relationships could easily extend for years. The following are several points that emerged from the interviews.

Critical Success Factors in Working with Partners

• Take time to research potential partners prior to selecting one.
• Conduct reference checks with regard to all partners' technical and business successes in similar ventures.
• Be prepared to take the lead in managing your relationship with partners.
• Start with clearly defined goals and objectives for each party.
• Make sure you understand the risks and rewards inherent in different types of revenue sharing arrangements.
• Take your revenues from gross rather than net sales if possible.
• Design a system using a share of gross revenue model to ensure you obtain to revenue to which your institution is entitled, if the partner has not recovered its costs.
• Ensure you have a proper auditing mechanism to obtain agreement on revenue sharing calculations.
• Obtain qualified legal advice in developing a contract with partners.
• Review CHIN's Sample CD-ROM Licensing Agreement for Museums: Canadian Common Law Edition, 1997, (or Quebec Civil Law Edition) as a possible model in structuring your agreement.
• Assign a value to the artifacts and their digitized images. Consider the associated rights in your collections when negotiating with private sector partners.
• Ensure that ownership of the multimedia product, related products and the rights are clarified and incorporated into the agreement, including the rights to use digitized images.
• Clarify which party holds the rights to use any spin-off technologies, products or intellectual property.
• If partners are in a subcontractor role, ensure deliverables are specified to your satisfaction.
• Retain control over the content and the use of museum branding at all stages.
• Ensure that you communicate regularly with your partners at all stages.
• Ensure that senior management in the management company is committed to your venture.
• Develop a project management system to which you and partners adhere.

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