United States Government Accountability Office

GAO Report to the Subcommittee on 

Interior, Environment, and Related 

Agencies, Committee on 

Appropriations, House of 

Representatives 

SMITHSONIAN 

INSTITUTION 

Additional 

Information Should Be 

Developed and 

Provided to 

Filmmakers on the 

Impact of the 

Showtime Contract 

December 2006 

 

GAO-07-275 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2006

SMITHSONIAN INSTITUTION 

Additional Information Should Be 

Developed and Provided to Filmmakers 

on the Impact of the Showtime Contract 

Highlights of GAO-07-275, a report to the 

Subcommittee on Interior, Environment, 

and Related Agencies, Committee on 

Appropriations, House of Representatives

In March 2006, the Smithsonian

Institution (Smithsonian)

announced that it had entered into

a 30-year contract with Showtime

Networks Inc., (Showtime) to

create a digital on-demand

television channel. Members of 

Congress and other interested 

parties, particularly filmmakers, 

raised issues about the contract’s 

potential effects on public access 

to and use of the Smithsonian’s 

collections, its confidential nature, 

and the process by which the 

Smithsonian negotiated it. This 

report discusses (1) the extent to

which the Smithsonian followed its

internal contracting guidelines, (2) 

what the Smithsonian gave up and

received in return under the 

contract, (3) the Smithsonian’s 

implementation of the contract,

and (4) the contract’s potential

impact on outside parties. GAO 

reviewed the contract and 

pertinent documents, and 

interviewed Smithsonian and 

Showtime officials. 

What GAO Recommends

GAO recommends that the 

Smithsonian better document its 

key decisions regarding filming

applications and that it update the

“Frequently Asked Questions about 

Filming at the Smithsonian 

Institution” on its Web site to better 

describe what the contract means 

for filmmakers. 

The Smithsonian generally agreed

with GAO’s findings and 

recommendations. 

The Smithsonian followed its internal contracting guidelines regarding 

competition, oversight, and conflicts of interest. When it began exploring a 

television venture in 2002, it approached 18 major media companies and 

negotiated with two before reaching a deal with Showtime. The process was 

overseen by Smithsonian Business Ventures’ (SBV) Board of Directors and 

the Smithsonian’s Board of Regents, who approved the contract in 

November 2005. When SBV’s Chief Executive Officer disclosed a potential 

conflict of interest, the Smithsonian’s Ethics Officer reviewed the disclosure 

in accordance with Smithsonian policies and concluded that no conflict 

existed. GAO’s Ethics Officer concurred with the Smithsonian’s decision. 

The Smithsonian granted the new venture a 30-year, semiexclusive right to 

produce and commercially distribute audiovisual programs using 

Smithsonian trademarks and/or content in exchange for national television 

exposure and new revenue. The Smithsonian projects that the new channel 

will reach more than 31 million households by 2010 and will have a total 

value of over $150 million after 10 years. The Smithsonian’s major 

concession is a noncompete clause that generally prohibits it from engaging 

in activities that would compete with the new venture. The Smithsonian 

negotiated exceptions for various news and educational programs. 

The Smithsonian has been working to implement policies and procedures 

necessary under the contract since it became effective in January 2006, but 

the information that it has provided to interested parties has been 

insufficient. The Smithsonian and Showtime waited until March 2006 to 

publicly announce the new venture and did not implement internal 

processes to review filming requests for compliance with the contract until 

after the public announcement. The Smithsonian has created a committee to 

review filming requests, but does not document in detail its rationale for key 

decisions or attempt to synthesize these decisions over time. Also, the 

“Frequently Asked Questions” on the Smithsonian’s Web site provides little 

information for filmmakers about the new contract. 

 

It is too early to determine the long-term impact of the contract. Access to 

the Smithsonian’s collections and staff for research purposes remains 

unchanged, but the direct impact on filmmakers will depend largely on how 

many request permission to use a substantial amount of Smithsonian 

content. So far, 6 of 117 filming requests have involved a substantial amount 

of Smithsonian content—2 were denied and 4 were approved as exceptions. 

The Smithsonian contends that it will be able to accommodate the same 

level of filming activity as it has in the past based on its historical analysis of 

filming contracts. GAO found that this analysis was unreliable because it 

was based on incomplete data and oversimplified criteria. In addition, 

concerns have been raised about damage to the Smithsonian’s image and the 

appropriateness of limiting the use of the collections held in trust for the 

American public. 

www.gao.gov/cgi-bin/getrpt?GAO-07-275.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robin M. 

Nazzaro at (202) 512-3841 or 

nazzaror@gao.gov. 
Contents 

Letter 1

Results in Brief 7

Background 10

In Negotiating the Contract with Showtime, the Smithsonian 

Generally Followed Its Internal Guidelines Regarding 

Competition, Oversight, and Conflicts of Interest 14 

The Smithsonian Traded Semiexclusive Commercial Distribution 

Rights to Produce and Distribute Certain Audiovisual Programs 

Using Smithsonian Content for 30 Years for National Exposure 

and a New Revenue Stream 19 

The Smithsonian Has Been Working to Implement the Contract, 

but It Has Provided Insufficient Information to Interested 

Parties 22

The Impact of the Contract on Interested Parties Is Uncertain 27 

Conclusions 34

Recommendations for Executive Action 35 

Agency Comments and Our Evaluation 35 

Appendix I Objectives, Scope, and Methodology 37 

Appendix II Smithsonian’s Filming Application Review Process 39 

Appendix III Comments from the Smithsonian Institution 41 

Appendix IV Comments from Showtime Networks Inc. 48 

Appendix V GAO Contact and Staff Acknowledgments 50 

Table 

Table 1: Filming Application Decisions from January 1, 2006, 

through September 30, 2006 28 

Page i GAO-07-275 Smithsonian's Contract with Showtime
Figures 

Figure 1: Timeline of Key Negotiation and Oversight Actions 16 

Figure 2: Timeline of Key Contract Implementation and Related 

Events 26

Figure 3: Annual Distribution of 29 Programs from 2000 through 

2005 with More than Incidental Use Based on Smithsonian 

Filming Contracts 32 

Abbreviations 

CEO Chief Executive Officer

FAR Federal Acquisition Regulation 

PIO Public Information Officer 

SBV Smithsonian Business Ventures 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page ii GAO-07-275 Smithsonian's Contract with Showtime
United States Government Accountability Office

Washington, DC 20548 

December 15, 2006 

The Honorable Charles H. Taylor 

Chairman 

The Honorable Norman D. Dicks 

Ranking Minority Member 

Subcommittee on Interior, Environment, and Related Agencies 

Committee on Appropriations 

House of Representatives 

On December 22, 2005, the Smithsonian Institution (Smithsonian) entered 

into a 30-year contract with Showtime Networks Inc., (Showtime) to form 

a limited liability company that would create new television channels and 

related businesses, the first of which is intended to be a digital on-demand

channel called Smithsonian on Demand. The new on-demand channel will 

feature, among other things, programs developed using Smithsonian 

content, including the Smithsonian’s vast archives, collections, and 

experts. Smithsonian Networks (the new venture) is a new independent 

joint venture between the Smithsonian and Showtime, and it was created

to develop, launch, and operate the new channel.

1

 After the public 

announcement of the contract in March 2006, filmmakers, historians, 

archivists, librarians, and others began raising issues about the potential

effects of the contract on the public’s continued access to and use of the 

Smithsonian’s collections. These interested parties and some in Congress 

have also questioned the confidential nature of the contract and the 

process by which Smithsonian officials solicited and negotiated the 

contract. Smithsonian officials stated that they were surprised by the 

reaction to the contract. The Smithsonian believes that keeping contract 

provisions confidential is necessary to prevent the disclosure of 

proprietary business information. Furthermore, officials believe that the 

 1

The creation and operation of the new venture is memorialized primarily in four separate 

agreements: (1) an agreement between the Smithsonian and Showtime to create a limited 

liability company that will, among other things, create a new digital on-demand television 

channel called Smithsonian on Demand; (2) a licensing agreement from the Smithsonian to

the new venture for the use of Smithsonian content and Smithsonian trademarks; (3) an 

agreement between the Smithsonian and the new venture that governs the new venture’s 

access to Smithsonian content; and (4) a management agreement between Showtime and 

the new venture for the management of the new venture. We will refer to these four 

separate agreements collectively as the contract for purposes of this report. In the contract, 

the legal name of the new venture is SNI/SI Networks L.L.C. 

Page 1 GAO-07-275 Smithsonian's Contract with Showtime
venture provides an excellent opportunity to harness new digital 

technology to further the Smithsonian’s mission while generating revenue 

to support other activities. The contract illustrates the delicate balance 

entrusted to stewards of a public trust—managing collections for the 

public good, while at the same time utilizing that resource to creatively 

generate revenue to support those stewardship responsibilities. 

Congress established the Smithsonian in 1846 to administer a large 

bequest left to the United States by James Smithson, an English scientist. 

In accordance with James Smithson’s will, Congress established the 

institution in Washington, D.C., “for the increase and diffusion of 

knowledge among men.” To that end, the act provided for the 

administration of the trust by a Board of Regents and a Secretary, who 

were given broad discretion to carry out the business of the Smithsonian.2

The Board of Regents is composed of 17 members.3

 The board’s bylaws 

provide that it “shall hold meetings at such times and places as [it] may 

from time to time determine,” and, as such, the board generally holds three 

business meetings annually. In addition, the Board of Regents’ Executive 

Committee––composed of three Board of Regents members elected by the 

full board––can exercise all powers of the Board of Regents when the full

board is not in session. 

While the Smithsonian has grown greatly since its founding 160 years ago, 

it retains its essential character as a trust establishment of the United 

States, and it is often referred to as “the nation’s attic.” The Smithsonian is 

now the world’s largest museum and research complex, consisting of 19 

museums and galleries, the National Zoo, and 9 research facilities. In fiscal 

year 2005, the Smithsonian had operating revenues of just under $1 billion, 

with about 75 percent from federal sources and the remaining 25 percent

from other sources, including revenues from business activities. The 

Smithsonian’s business activities include Smithsonian and Air & Space

magazines, museum stores, restaurants, IMAX theaters, the Smithsonian 

Gift Catalogue, consumer product licensing, e-commerce, and commercial 

media enterprises. 

 2

Act of August 10, 1846, ch. 178, 9 Stat. 102 (1846) (codified at 20 U.S.C. §41). A trust is a 

property interest held by one entity for the benefit of another. 

3

The board is composed of the Chief Justice of the United States, the Vice President, three 

senators appointed by the President of the Senate, three representatives appointed by the 

Speaker of the House, and nine citizens appointed by Joint Resolution of Congress—two 

from the District of Columbia and seven from the states. 

Page 2 GAO-07-275 Smithsonian's Contract with Showtime
In 1998, the Board of Regents authorized the Secretary of the Smithsonian 

to reorganize the various business activities within the Smithsonian into a 

centralized business entity, Smithsonian Business Ventures (SBV). SBV’s 

mission is to generate revenue from business activities to support the 

Smithsonian’s mission. SBV is funded by the revenue from its business 

activities and does not use federal funds for any of its activities, including 

employee salaries. SBV’s structure is very similar to that of a private 

company, with a chief executive officer, chief financial officer, and a 

board of directors. The SBV board of directors acts within the authority 

granted to it by the Board of Regents to provide advice and 

recommendations to the Board of Regents and Secretary concerning the 

operation of SBV. In addition, the chief executive officer must consult with 

and seek the recommendations of the SBV board of directors concerning 

issues including, but not limited to, industry standard business deals, joint 

ventures, licensing, and perceived trade-offs between commercial and

traditional approaches to accomplishing the overall mission of the 

Smithsonian. The Smithsonian’s Board of Regents exercises its authority 

over SBV by reviewing plans for and approving major new initiatives. SBV,

in conjunction with the Smithsonian’s Office of General Counsel, were the 

primary Smithsonian entities involved with negotiating the contract. 

The new venture brings together, in a public-private partnership, the 

Smithsonian’s wealth of staff resources and collections with Showtime’s 

production and distribution capabilities and experience. Because the 

Smithsonian’s contract with Showtime was not a federal procurement 

contract, standard federal contracting guidelines that the Smithsonian 

generally uses for guidance for contracts involving federal funds, such as 

the Federal Acquisition Regulation (FAR), were not used.4

 The 

Smithsonian does not have any written guidance regarding how 

nonprocurement contract negotiations should be conducted; however, 

SBV’s guidelines state that SBV should follow commercial business 

practices in its contracting. While SBV’s guidelines do not define 

commercial business practices, according to SBV, the underlying 

principles include, among other things, fostering competition, leveraging

 4

The Smithsonian manages two different types of funds—federal funds and trust funds, 

which are nonfederal funds arising from donations, revenue-generating activities, interest 

on investments, and other sources. The Smithsonian has elected to follow the FAR 

provisions for contracts involving the expenditure of federal funds. For business contracts

that involve neither the expenditure nor receipt of federal funds and for which the FAR is

inapplicable, such as the contract with Showtime, the Smithsonian has elected to follow 

commercial business practices. 

Page 3 GAO-07-275 Smithsonian's Contract with Showtime
purchasing power to get the best value, and operating in a highly ethical 

manner. In the absence of specific Smithsonian-wide guidelines or 

policies, SBV works closely with the Office of General Counsel and the 

Office of Contracting to negotiate contracts. 

According to Smithsonian officials, every year hundreds of people request 

to film or photograph the Smithsonian’s premises, collections, or staff. In 

2001, the Smithsonian created institutionwide guidance to streamline 

procedures and standardize fees for processing and approving these 

filming and photography requests across the institution. This included a 

standard application that filmmakers had to submit to the museum Public 

Information Officer (PIO). When reviewing these applications, museum 

PIOs considered several factors such as compatibility with Smithsonian’s 

mission and availability of staff, before deciding whether to approve or 

decline the request. While the policies and procedures governing filming 

requests are still in effect, they have been supplemented by new 

procedures developed since the contract became effective. Audiovisual 

programs developed with footage of Smithsonian content are now 

classified into several categories: news, public affairs, academic, 

curriculum-based, scholarly, and commercial programs.5

The contract specifies that the Smithsonian cannot engage in activities 

that would compete with the new venture, nor can it allow other 

filmmakers to use Smithsonian content to produce programs for 

commercial distribution that would directly compete. Direct competitors 

include, but are not limited to, Public Broadcasting Service (PBS), Arts 

and Entertainment (A&E), The History Channel, National Geographic 

Channel, and The Discovery Channel. In addition, the contract limits the 

number of programs that can be accessed on a single Smithsonian Web 

page within a Smithsonian Web site, since the availability of a collection of 

programs via the Internet is also considered competition with the new 

venture. These provisions are generally referred to as the noncompete 

clauses. Key exceptions to the noncompete provisions include (1) 

nonrecurring news and public affairs programs; (2) academic, curriculumbased, and scholarly programs; (3) programs with only incidental use of 

 5

Scholarly programs are defined in the contract as programs that are (1) developed in

conjunction with a scholar, academic, or expert who is employed by the Smithsonian or

otherwise formally associated with the Smithsonian; (2) derived from the scholar’s, 

academic’s, or expert’s work in association with the Smithsonian; and (3) developed for 

educational purposes and that would, to a reasonable person, appear to be of interest 

primarily to scholarly and academic viewers.

Page 4 GAO-07-275 Smithsonian's Contract with Showtime
Smithsonian content;6

 and (4) an initial annual allotment of six programs 

that the Smithsonian can produce with entities other than the new 

venture, referred to as one-offs. While the contract contains definitions for 

the terms academic, curriculum-based, and scholarly, it does not 

specifically define incidental use. 

Following the inception of the new venture with Showtime in 2006, the 

Smithsonian updated the guidelines for processing and approving filming 

and photography requests to align them with the noncompete clauses of 

the contract. For nonrecurring news and public affairs programs, the 

process that was in place before the contract has not changed. Filming 

applications are not required for nonrecurring news and public affairs 

programs, and decisions regarding acceptance of those requests are still 

made at the museum level. For the other types of requests—academic, 

curriculum-based, scholarly, and commercial—a filming application is still 

required and an additional review step has been added. If the museum PIO 

reviews the application and determines that the museum can 

accommodate the request, the PIO forwards the application to the Office 

of Public Affairs review committee—composed of three PIOs and two 

museum representatives—which decides on a case-by-case basis whether 

or not the proposed film falls within one of the exceptions to the 

noncompete clauses.7

 The review committee approves filming applications 

that fall within one of the exceptions and must either deny those that do 

not or pursue the film as a one-off. For applications that the committee 

chooses not to pursue as a one-off and denies because the request is to use 

more than an incidental amount of Smithsonian content, filmmakers have 

the option of reducing the amount of Smithsonian content to incidental, or 

they may independently contact the new venture to discuss producing the 

film. Appendix II contains a flowchart illustrating the Smithsonian’s 

filming application review process. 

Filmmakers and other interested parties have raised issues about the 

Smithsonian’s process of entering into the contract with Showtime, as well 

as the changes in the Smithsonian’s filming procedures and other potential 

 6

Smithsonian content includes Smithsonian collections, exhibitions, archival materials, 

research materials, publications, audiovisual works, Web site content, and other works of 

authorship; Smithsonian personnel; Smithsonian events; and Smithsonian buildings and 

grounds. 

7

A proposed use is excepted from these rules when it is for an academic, curriculum-based,

scholarly, or news program, or a program that will not be distributed by a commercial 

distributor. In these cases, more than incidental use of Smithsonian content is permitted. 

Page 5 GAO-07-275 Smithsonian's Contract with Showtime
impacts resulting from the contract. In this context, you asked us to (1) 

evaluate the extent to which Smithsonian followed its internal guidelines 

with respect to competition, oversight, and protecting against conflicts of 

interest when negotiating the contract with Showtime; (2) identify what

the Smithsonian gave up and received in return under the contract; (3) 

evaluate the Smithsonian’s implementation of the contract; and (4) identify

what, if any, impacts the contract has had on outside parties. This report is 

nearly identical to the sensitive, but unclassified report you received on 

December 15, 2006. However, the original report contains confidential, 

business sensitive information identified by the Smithsonian and 

Showtime. Therefore, certain details, such as specific dollar amounts, 

percentages, and time frames related to the financial value of the contract,

have been generalized or omitted to enable the public release of this 

document. In total, eight numbers were generalized and three sentences 

were omitted. 

To examine the extent to which the Smithsonian followed its internal 

guidelines for competition, oversight, and conflicts of interest, we 

obtained and reviewed meeting minutes for the Smithsonian’s Board of 

Regents and SBV’s Board of Directors, as well as Smithsonian guidelines 

regarding conflicts of interest and contracting. We also interviewed the 

Smithsonian and Showtime officials involved in negotiating the contract.

To determine what the Smithsonian gave up and received in return, we 

reviewed the contract and other Smithsonian documents, interviewed 

Smithsonian and Showtime officials that were involved in the contract 

negotiations, and conducted an independent economic analysis to 

estimate the value of the contract. We also attempted to identify contracts

of a similar nature for comparison, but we were not able to find suitable 

analogies. To examine how the Smithsonian has implemented the contract 

and what, if any, impact it has had on the Smithsonian’s operations and 

outside parties, we reviewed relevant Smithsonian documents, analyzed 

historical and current film request data, and interviewed Smithsonian staff 

that have been involved with implementing changes resulting from the 

contract. We also reviewed position papers and interviewed a selective 

sample of interested parties that could potentially be affected by the 

contract. We selected the individuals with whom we spoke from a wide 

range of disciplines, including filmmakers, curators, and historians. 

Appendix I provides a more detailed description of our scope and 

methodology. We conducted our work from June to November 2006 in 

accordance with generally accepted government auditing standards. 

Page 6 GAO-07-275 Smithsonian's Contract with Showtime
In entering into the contract, the Smithsonian generally followed its 

internal guidelines regarding competition, oversight, and conflicts of 

interest. In adhering with the commercial business practice of fostering 

competition, the Smithsonian reached out to 18 major media companies 

when it began exploring the idea for a television venture in 2002. The

Smithsonian negotiated for nearly a year with the only company that 

expressed interest at that time. When that deal fell through, the 

Smithsonian was approached by and had preliminary discussions with a 

second interested company that ultimately decided not to pursue the 

opportunity because it was concerned that developing a new Smithsonian 

channel might undercut its existing channel. Finally, in 2004, a third 

company—Showtime—expressed an interest in the idea, and the two 

entities engaged in serious negotiations for more than a year to finalize the 

contract. According to SBV officials, the Board of Regents oversight for 

the Showtime contract was similar to its oversight on other contracts. The 

board gave approval for SBV to pursue the venture in 2002. Since that 

time, the minutes of the Board of Regents meetings show that the board 

was periodically informed of the efforts to find a suitable business partner 

and enter into a contract, and these minutes were provided to Congress. In 

November 2005, the board approved the contract based on a summary 

sheet of the key provisions. During the contract negotiations, SBV’s Chief 

Executive Officer disclosed a potential conflict of interest regarding his 

indirect ownership interest in the Sundance Channel. One of the owners of 

the Sundance Channel, through which the SBV Chief Executive Officer 

had his interest in the channel, was in negotiations with Showtime and the 

other owner of the Sundance Channel to sell his interest. In accordance 

with Smithsonian policies, the Smithsonian’s Ethics Officer reviewed the 

disclosure and concluded that no conflict existed as long as SBV’s Chief 

Executive Officer was only a silent partner and did not participate in the 

Sundance Channel sales negotiations. GAO’s Ethics Officer reviewed the 

documentation and the Smithsonian’s decision and concurred with the 

findings. 

Results in Brief 

The Smithsonian granted the new venture a 30-year, semiexclusive right to 

produce and commercially distribute certain audiovisual programs using 

Smithsonian trademarks and/or content in exchange for national television 

exposure and a new revenue stream. The Smithsonian projects that the 

new channel will reach more than 31 million households by 2010, and it is

hoping that the increased national television exposure will increase its 

brand recognition and have a synergistic effect on other revenues by 

increasing memberships, merchandise sales, and concession sales through 

increased visitation to the museums. The Smithsonian’s new revenue 

stream from the contract includes four components: (1) minimum annual 

Page 7 GAO-07-275 Smithsonian's Contract with Showtime
payments of $500,000 for the early years that gradually increase to millions 

of dollars per year as the contract progresses (undiscounted and nominal); 

(2) a share of revenues to the extent that the share exceeds the minimum 

annual payment; (3) an initial 10 percent equity interest in the venture; and 

(4) an option to acquire an additional equity interest. The annual payments

will total a minimum of $99 million (undiscounted and nominal) over the 

30-year term of the contract. The Smithsonian estimates that the 

cumulative value of the contract after 10 years will be more than $150 

million, of which only a small portion will be from the minimum annual 

payments. The major contract concession by the Smithsonian is the 

noncompete clauses. While most of these provisions are relatively 

straightforward, Smithsonian and Showtime officials had different 

understandings of a provision on the commercial use of scholarly 

programs. The provision states that before scholarly programs can be 

distributed by a commercial distributor, they must first be offered to the 

new venture; but the language is silent about whether it applies only to 

Smithsonian-generated scholarly programs, or if it also applies to thirdparty generated scholarly programs. Smithsonian officials stated that it 

was their intent and understanding that the provision would not apply to 

third-party generated programs, whereas Showtime officials had a 

different view. Upon raising this issue during our review, the Smithsonian 

and Showtime reached an agreement that the provision does not apply to

third-party generated scholarly programs. 

Since the contract became effective in January 2006, the Smithsonian has 

been working to put in place policies and procedures necessary to 

implement the contract, but the information it has provided about the 

contract’s impact to interested parties has been insufficient. The 

Smithsonian and Showtime waited more than 2 months after the contract

became effective to publicly announce the creation of the new venture. 

The Smithsonian did not establish a central committee in the Office of 

Public Affairs to review filming requests for compliance with the contract 

and make determinations about the incidental use of Smithsonian content

until March 2006, so decisions regarding filming requests received in early

2006 were delayed. The committee has since developed a spreadsheet to 

track filming requests, but it does not contain a detailed rationale for 

decisions in which a film request is either denied due to more than 

incidental use or pursued as a one-off. As a result, it may be difficult for 

the Smithsonian to provide useful information to filmmakers about what 

constitutes incidental use and ensure accountability with consistent 

decision making over the term of the contract. Some of the key 

characteristics of effective and efficient government programs are 

transparency and clear criteria that are consistently applied. However, the 

Page 8 GAO-07-275 Smithsonian's Contract with Showtime
Smithsonian has not yet developed a mechanism or process to synthesize 

its decisions over time into a record of precedents that would provide 

filmmakers with additional guidance for their use in developing future 

filming requests. The review committee members mentioned that they 

direct filmmakers to the Smithsonian’s Web site for answers to 

“Frequently Asked Questions,” but the site provides little information 

about Smithsonian on Demand. As a result, filmmakers and other 

interested parties remain uncertain about the Smithsonian’s criteria for 

making decisions about filming requests and about the contract’s impact in 

general. More recently, in August 2006, the Smithsonian established a 

separate Smithsonian on Demand Committee to provide recommendations 

regarding content review and approval of programs for the new channel. 

Since this newest committee had not reviewed any films as of September 

30, 2006, it is not clear how the review and approval issues will be 

resolved. 

The impact of the contract on interested parties is uncertain because it 

only has been in effect since January 1, 2006, and it is still too early to tell

what the long-term impact of the contract will be. While access to the 

Smithsonian’s collections and staff for research purposes remains 

unchanged, the direct impact on filmmakers will depend largely on how 

many filming applications the Smithsonian receives annually requesting to

use a substantial amount of Smithsonian content that are not otherwise 

permitted by the noncompete clauses. If the number of those requests is 

small and the Smithsonian decides to accommodate them within their 

annual allotment of one-offs, then any direct impact on filmmakers will be 

minimal. However, if the number of those requests is large, then some 

filmmakers’ requests will be denied. During the first 9 months of the 

contract, from January 1, 2006, through September 30, 2006, 2 out of 117 

filming requests were denied due to the contract, and 4 were approved as 

one-offs. Based on an historical analysis of filming contracts over a 6-year

period from 2000 through 2005, the Smithsonian contends that it will be 

able to accommodate the same level of filming activity as it has in the past.

However, we found that this analysis was unreliable for the purpose of 

estimating the contract’s potential impact because it was based on 

incomplete data and oversimplified criteria. For example, in some cases, 

projected run-time was not available on the spreadsheet used for the 

analysis. Moreover, the criterion used in the analysis was not the same as 

the criteria being used in practice by the review committee. In the analysis, 

the Smithsonian defined incidental use as 15 percent or less of projected 

run-time of Smithsonian content in the film. However, the review 

committee considers multiple factors about the proposed use of 

Smithsonian content in making the actual decisions about incidental use.

Page 9 GAO-07-275 Smithsonian's Contract with Showtime
Aside from direct potential impacts on filmmakers, larger concerns have

been raised about damage to the Smithsonian’s image and goodwill. 

Concerns have been raised by filmmakers, curators, and other interested

parties regarding the appropriateness of the Smithsonian limiting the use 

of the collections held in trust for the American public, as well as other 

potential impacts, including hampering collaborative partnerships and 

future donations. 

To improve the implementation of the contract and increase the 

information available to interested parties, we recommend that the 

Secretary of the Smithsonian (1) fully document decisions for filming 

applications that are denied because they involve more than incidental use

or are approved as one-offs to establish a record of precedents, which will 

define over time what constitutes incidental use and help to ensure 

consistent decision making by the review committee, and (2) update the 

“Frequently Asked Questions about Filming at the Smithsonian Institution” 

on the Smithsonian’s Web site to better describe what the contract means 

for filmmakers, especially as it relates to incidental use of Smithsonian 

content. We requested comments on the draft report from the Smithsonian 

and Showtime. The Smithsonian commented in writing that it generally

agrees with our findings and recommendations and will take actions to 

implement our recommendations. Showtime also generally agreed with 

the report and endorsed the Smithsonian’s comments. The Smithsonian’s 

and Showtime’s written comments are in appendixes III and IV, 

respectively. The Smithsonian and Showtime also provided joint technical 

comments, which we incorporated as appropriate. 

The Smithsonian is a unique entity possessing a dual nature, described by

former Chief Justice Taft, the Chancellor of the Board of Regents in 1927, 

as a “private institution under the guardianship of the Government.” 

Initially established by Congress in 1846 to carry out the federal 

government’s trust responsibilities under the bequest of James Smithson, 

the Smithsonian is a privately endowed institution, largely funded by 

federal appropriations and governed by a Board of Regents composed of 

federal officials and private citizens. In fiscal year 2005, the Smithsonian 

had operating revenues of just under $1 billion and about 6,000 employees. 

Approximately 75 percent of the Smithsonian’s operating revenues were 

from federal sources—60 percent from direct congressional 

appropriations and 15 percent from government grants and contracts—

and the remaining 25 percent was from restricted and unrestricted trust 

funds. Restricted trust funds include gifts, grants, and earnings on 

endowments from individuals, foundations, organizations, and 

Background 

Page 10 GAO-07-275 Smithsonian's Contract with Showtime
corporations that specify the purpose of the funds. Generally, they support 

a particular exhibit or program, or are used to manage the collections or 

support research projects. Sources of unrestricted trust funds include 

investment income, earnings on unrestricted endowments, membership 

programs, and net proceeds from business activities. Unrestricted trust 

funds can be used to support any Smithsonian activity or need. Revenue

generated by the contract with Showtime will be unrestricted trust fund 

revenue. 

The Smithsonian has about 136.5 million objects in its collections, but only 

a small percentage of the objects are on display in the museums at any 

given time. The museums recorded about 24 million visits in fiscal year 

2005, which was down significantly from the 33.7 million visits recorded in

fiscal year 2001. In the years since the 9/11 terrorist attacks, visitation has 

fluctuated around 20 million to 25 million annually. While most of the 

Smithsonian’s exhibited collections are in or around Washington, D.C., 

Smithsonian content was viewed by 109 million visitors to its 447 Web 

sites in fiscal year 2005—12 million more Web visitors than in 2004. In 

addition, Smithsonian magazine has a readership of more than 7 million 

monthly. Smithsonian officials saw the new channel as an opportunity to 

bring more Smithsonian content to a television viewing audience. 

A Smithsonian directive on collections management states that the 

Smithsonian will provide reasonable access to its collections and 

collections information, consistent with its stewardship responsibilities.8

Access, as defined by this directive, is the opportunity for the general 

public, scholars, and Smithsonian staff to utilize the diverse collection 

resources of the Smithsonian. To carry out its mission “for the increase 

and diffusion of knowledge among men,” the directive states that the 

Smithsonian promotes access to its collections and associated information 

through research opportunities, traditional and electronic exhibitions, 

educational programs and publications, reference systems, loan exchange

of collections, and electronic information services. Smithsonian directives 

allow access fees to be charged and also allow restrictions to accessing 

collections and collections information due to resource limitations, object 

availability, intellectual property rights, applicable restrictions, and 

 8

Smithsonian Directive SD-600: Collections Management defines collections to include

objects, natural specimens, artifacts, and other items that are acquired, preserved, and 

maintained for public exhibition, education, and study. 

Page 11 GAO-07-275 Smithsonian's Contract with Showtime
preservation constraints. The Board of Regents retains ultimate oversight 

authority and fiduciary responsibility for Smithsonian collections. 

The Smithsonian’s statutory charter gives broad discretion in the conduct

of its affairs, including managing the Smithsonian’s authority to enter into 

contracts. In 1846, Congress authorized the Board of Regents to conduct 

the “business of the Institution.”9

 The Board of Regents has the authority 

to accept funds from private sources, use the interest earned on the trust 

fund to further the Smithsonian’s purpose, and acquire, display, restore, 

loan, sell, or otherwise dispose of items of historical or artistic interest. 

These authorities have been delegated to various individuals within the 

Smithsonian, including the Deputy Secretary/Chief Operating Officer of 

the Smithsonian, SBV’s Chief Executive Officer, and the Office of General 

Counsel. 

The new venture is tasked with creating new programming services, the

first of which is expected to be a digital on-demand television channel—

Smithsonian on Demand. Digital television is a new television delivery 

technology that uses digital technology to capture images and sounds, in 

contrast to traditional analog television service. Digital television allows a 

broadcaster to offer multiple programs (multicasting) or a single program 

of high definition television. Images and sound are captured using digital 

technology, providing a better picture resolution, a wider screen, CDquality sound, and better color rendition. This technology represents the 

most significant development in television technology since the advent of

color television in the 1950s. In February 2006, the Digital Television 

Transition and Public Safety Act of 2005 established a deadline of 

February 17, 2009, for the complete transition from analog television to 

digital television.10 A full-power television broadcast license that 

authorizes analog television service may not be renewed to authorize such 

service for a period that extends beyond February 17, 2009. In February 

2005, we reported that about 86 million households view television via a 

cable service or have a subscription to a direct broadcast satellite service, 

 9

Act of August 10, 1846, ch. 178, §3, 9 Stat. 103 (1846) (codified at 20 U.S.C. §42). 

10Pub. L. No. 109-171, title III, § 3002(b), 120 Stat. 21 (2006). 

Page 12 GAO-07-275 Smithsonian's Contract with Showtime
and approximately 21 million households rely exclusively on free over-theair broadcasting.11

As of September 2006, the new venture had developed a list of 74 potential 

programs for the new channel’s initial season. The list included (1) 15 

“mission critical” programs selected by the new venture from a list of 30 

potential programs proposed by the Smithsonian; (2) 36 programs that the 

new venture was working on with individual Smithsonian units and a few 

existing programs that contain Smithsonian content that the new venture 

proposed acquiring the rights to; and (3) 23 programs to be acquired that 

contain no Smithsonian content but feature content with which the 

Smithsonian is generally associated, such as arts and culture, history, and 

science. On or around June 1 of each calendar year, during the first 29 

years of the contract, the Smithsonian will provide the new venture with 

30 or more written program ideas.12 The new venture is required to select

at least one-half, but no more than 15 of the program ideas to develop, 

produce, and exhibit during the next calendar year. The Smithsonian also 

generally has the right to review rough and final program cuts to ensure 

that the program’s content is factually, historically, and scientifically 

accurate and in compliance with the other quality control requirements in 

the contract, including consistency with the high standards, quality, and 

image of the Smithsonian. 

While the Smithsonian has not earmarked how the revenue from the new 

venture will be spent, it has a number of pressing funding needs. For 

example, in April 2005, we reported on the deteriorated condition of 

several of the Smithsonian’s facilities.13 At that time, the Smithsonian 

estimated that its planned capital and maintenance projects for 2005 

through 2013 would cost about $2.3 billion. However, we cautioned that 

this estimate could grow because it was largely based on preliminary 

assessments. We also noted that the Smithsonian’s historical funding 

levels, from federal appropriations and trust funds, would be insufficient 

to cover the facility projects planned for 2005 through 2013. We 

 11GAO, Digital Broadcast Television Transition: Estimated Cost of Supporting Set-Top 

Boxes to Help Advance the DTV Transition, GAO-05-258T (Washington, D.C.: Feb. 17,

2005). 

12Should the Smithsonian submit fewer than 30 program treatments, the new venture’s

obligations are reduced proportionately. 

13GAO, Smithsonian Institution: Facilities Management Reorganization Is Progressing,

but Funding Remains a Challenge, GAO-05-369 (Washington, D.C.: Apr. 25, 2005). 

Page 13 GAO-07-275 Smithsonian's Contract with Showtime
recommended that the Smithsonian establish a process for exploring 

funding options with the Administration and the Congress, leading to the 

development and implementation of a strategic funding plan to address 

the Smithsonian’s revitalization, construction, and maintenance needs. 

The Smithsonian agreed with our findings and recommendation and 

informed us that Smithsonian’s Board of Regents has established an ad 

hoc committee to identify various ways to raise additional funds for the 

Smithsonian. The committee’s work is ongoing. 

In entering into the contract with Showtime, the Smithsonian generally

followed its internal guidelines regarding competition, oversight, and 

conflicts of interest. Regarding competition, only SBV’s limited written 

contracting guidance, which promotes the use of commercial business 

practices and consultation with the Office of General Counsel, was 

applicable to the solicitation of a strategic business partner in this case. 

SBV officials applied a general principle of commercial business 

practices—fostering competition—by initially reaching out to multiple 

major media companies, and they relied heavily on consultation with the 

Office of General Counsel to guide their actions. In addition, the Board of

Regents has broad oversight responsibility for all Smithsonian programs 

and activities, including the establishment of any new program or activity. 

The Board of Regents exercised this authority over SBV by periodically 

reviewing documents related to the contract terms and approving the final 

contract terms. SBV’s Board of Directors acts under the authority granted 

to it by the Board of Regents to provide advice to the chief executive

officer on a variety of issues. Finally, the potential conflict of interest that 

arose during the contract negotiations was disclosed and reviewed in 

accordance with the Smithsonian’s Standards of Conduct for employees. 

In Negotiating the 

Contract with 

Showtime, the 

Smithsonian 

Generally Followed 

Its Internal Guidelines 

Regarding 

Competition, 

Oversight, and 

Conflicts of Interest 

In adhering with the commercial business practice of fostering 

competition, SBV reached out to 18 major media companies when they 

began exploring the idea for a television venture in the spring of 2002. This

initiated a 3-year search process for a strategic business partner and a final 

deal (see fig. 1). In August 2002, one company expressed interest in 

proceeding beyond initial discussions toward developing a more definitive 

structure and offered terms that the Smithsonian found favorable. For the 

next 9 months, SBV and the media company negotiated a term sheet and 

letter of intent. While SBV and the company were negotiating the final 

terms of the agreement, the company’s board declined to proceed with the

investment, and the deal fell through. In the final months of 2003 and early 

months of 2004, the Smithsonian had conversations with a second 

company, which also ended without reaching an agreement because the 

company became concerned that developing a new Smithsonian channel 

Page 14 GAO-07-275 Smithsonian's Contract with Showtime
may undercut its existing channel. Soon after this, the Smithsonian was 

approached by, and had preliminary discussions with, several companies 

that expressed renewed interest. Finally, in August 2004, the Smithsonian 

began negotiations with Showtime because its initial investment offer was 

the most favorable. The two entities engaged in serious negotiations for 

more than a year to finalize the contract; the final terms of which are 

comparable with, or in some cases more favorable than, the deal that

Smithsonian had previously negotiated in 2003. 

Page 15 GAO-07-275 Smithsonian's Contract with Showtime
Figure 1: Timeline of Key Negotiation and Oversight Actions

August 2002

Negotiations commenced with the one company that expressed interest in developing a more definitive structure and offered initial terms favorable to the Smithsonian.

Spring 2002

SBV developed a preliminary business plan for a television venture.

June 2003

SBV and media company signed formal term sheet.

Late spring 2002

SBV developed a concept package and sent it out to prospective media partners.

Summer 2002

SBV explored the concept with 18 major media companies.

September 3, 2002

SBV Board of Directors meeting: Board members discussed the video on demand 

television initiative.

November 18, 2002

SBV Board of Directors meeting: SBV CEO presented potential business

opportunities for SBV, including the video on demand television initiative.

January 27, 2003

SBV Board of Directors meeting: SBV CEO reported the receipt of a letter of intent 

from one of the top three cable television companies. He stated that his intent was

to finalize the letter and bring it back to the board for approval. He also said that he 

would consult with the Secretary and members of the Board of Regents.

March 5, 2003

SBV Board of Directors meeting: The board discussed issues related to the video 

on demand initiative and letter of intent including tax and political implications of the 

Smithsonian owning an equity interest in a for-profit entity and whether this was the 

best deal the Smithsonian could get. The board unanimously consented to a

resolution endorsing the proposal.

April 28, 2003

SBV Board of Directors meeting: SBV CEO reported that the video on demand 

proposal is pending the consent of the Board of Regents, to be considered at its

meeting on May 5, 2003.

May 5, 2003

Board of Regents meeting: SBV CEO reported that he had been in negotiations with 

a company for 9 months and that it was the only company of those solicited that 

offered to provide the degree of investment in programming and distribution needed, 

while also allowing the Smithsonian to share in the revenue stream and retain 

certain editorial controls. 

Board authorized the Secretary to enter into a licensing and joint venture agreement 

as proposed with the media company for the formation and operation of a television 

channel.

June 17, 2002

Board of Regents meeting: SBV Chief Executive Officer (CEO) introduced the 

concept of “Smithsonian on Demand” television.

Smithsonian Board of Regents actions SBV Board of Directors actions

September 29, 2003

SBV Board of Directors meeting: SBV CEO reported that finalization of the video on 

demand deal has been delayed by the company with which SBV was negotiating.

September 22, 2003

Board of Regents meeting: Secretary and SBV CEO updated the board on the 

negotiations. The board reviewed the preliminary term sheet and deemed it 

consistent with the structure and principal business terms contemplated at the last 

Board of Regents’ meeting.

Page 16 GAO-07-275 Smithsonian's Contract with Showtime
November 2003

Media company board of directors declined to proceed with the proposed investment and discussions with the Smithsonian ceased.

February 2005

Term sheet between SBV and Showtime approved by Board of Regents.

August 2004

Serious discussions commenced with Showtime.

January 1, 2006

Contract with Showtime became effective.

January 19, 2005

SBV Board of Directors meeting: SBV CEO reported on the status of negotiations.

November 12, 2003

SBV Board of Directors meeting: SBV CEO reported that the company with which 

SBV was negotiating ultimately declined to invest in the video on demand initiative.

January 26, 2004

SBV Board of Directors meeting: SBV CEO reported that he had contacted a

number of media companies that had formerly expressed interest and that he 

remained optimistic that the Smithsonian would find a suitable business partner.

April 26, 2004

SBV Board of Directors meeting: SBV CEO reported that the video on demand 

proposal was being discussed with a second company.

March 24, 2005

SBV Board of Directors meeting: SBV CEO reported that SBV had reached an 

agreement in principle with Showtime that conformed substantially to the agreement 

reached in 2003 approved by both the SBV board and the Board of Regents, with 

key financial terms being more favorable to the Smithsonian. SBV board approved a

motion recommending that SBV proceed to definitive agreements with Showtime.

December 22, 2005

SBV and Showtime executed definitive agreements (signed the contract) to form the new venture effective January 1, 2006.

September 26, 2005

SBV Board of Directors meeting: An SBV official reported that SBV had reached an 

agreement with Showtime with the exception of a few points still under review. Key 

terms were discussed, and the complicated link between the term of the contract, the 

nature of the Smithsonian, and the economics of the business was recognized. 

Despite the complexity and potential impact, Smithsonian management was prepared 

to endorse the deal and move forward.

June 20, 2005

SBV Board of Directors meeting: SBV CEO reported on the status of negotiations, 

and urged management to focus on the operational strategy for implementation of the 

venture within the Smithsonian. 

May 4, 2004

Board of Regents meeting: A Regent reported that there is additional renewed 

interest in the Smithsonian cable television initiative and that it had attracted interest 

from the two largest cable distributors.

January 5, 2004

Board of Regents meeting: SBV CEO reported that discussions with the first media

company fell through, but indicated that other companies expressed continued 

interest and have reopened discussions with SBV.

May 9, 2005

Board of Regents meeting: Board of Regents authorized its Executive Committee to 

empower the Secretary to enter into definitive agreements with Showtime.

September 19, 2005

Board of Regents meeting: SBV CEO reported on the state of final negotiations with 

Showtime and indicated that the terms of the agreement would be presented to the 

Regents’ Executive Committee within weeks.

November 22, 2005

Regents’ Executive Committee meeting: Regents’ Executive Committee voted 

unanimously to approve final terms of the contract.

Source: GAO analysis of Smithsonian data.

Smithsonian Board of Regents actions SBV Board of Directors actions

Actions in the contract negotiations process Smithsonian Board of Regents actions SBV Board of Directors actions

Page 17 GAO-07-275 Smithsonian's Contract with Showtime
Smithsonian’s Board of Regents and SBV’s Board of Directors provided 

oversight of the activities regarding the television venture in accordance

with their respective bylaws. The Board of Regents’ meeting minutes show 

that the board was periodically informed of SBV’s efforts to find a strategic 

business partner. Furthermore, SBV’s Board of Directors’ meeting minutes

show that it was also engaged in the process (see fig. 1). SBV’s Chief 

Executive Officer presented a business plan for the proposed venture to 

the Board of Regents in June 2002. In May 2003, the Board of Regents 

authorized the Secretary to enter into an agreement for the formation and 

operation of a television channel with the first company. SBV provided 

interim status updates to both its Board of Directors and the Board of 

Regents on its efforts to secure another partner for the initiative between

the time that the first deal fell through and when it began negotiating with 

Showtime. The SBV Board of Directors forwarded a motion to the 

Secretary recommending that SBV finalize agreements with Showtime on

terms as presented by the Chief Executive Officer. In May 2005, the Board 

of Regents signaled its agreement and authorized the Executive 

Committee to empower the Secretary to enter into definitive agreements 

with Showtime to form a joint venture. Six months later, the Board of 

Regents’ Executive Committee approved the final terms of the agreement. 

A potential conflict of interest that surfaced during contract negotiations 

was handled according to the Smithsonian’s Standards of Conduct.14 Prior 

to working for the Smithsonian, SBV’s Chief Executive Officer helped 

establish the Sundance Channel, a company in which Showtime is one of 

three owners. As part of that endeavor, he received an equity interest in 

the Sundance Channel from one of the two non-Showtime owners and 

retained that interest when he came to the Smithsonian. During the 

Smithsonian’s negotiations with Showtime, one of the owners of the 

Sundance Channel—through which the SBV Chief Executive Officer had 

his interest in the channel—was in negotiations to sell some of his 

interests, with Showtime and the other owner of the Sundance Channel 

being potential buyers. SBV’s Chief Executive Officer disclosed this 

potential conflict of interest to the Smithsonian’s Ethics Officer. The 

Ethics Officer reviewed the disclosure and concluded that the interest did 

not represent a conflict under the Smithsonian’s Standards of Conduct or a 

prohibited financial interest under federal law because SBV’s Chief 

 14Smithsonian Directive SD-103: Smithsonian Institution Standards of Conduct, dated 

March 3, 1993, was in effect during the Smithsonian’s contract negotiations with Showtime. 

A more current version, dated February 13, 2006, is now in effect. 

Page 18 GAO-07-275 Smithsonian's Contract with Showtime
Executive Officer did not have a general partnership interest in the 

Sundance Channel and was not participating in negotiations concerning

the sale of interests in the channel.15 SBV’s Chief Executive Officer 

confirmed that he had no role, and did not participate, in the sale 

negotiations involving the Sundance Channel. GAO’s Ethics Officer 

reviewed the documentation and the Smithsonian’s decision and 

concurred with the findings. 

The Smithsonian granted the new venture a 30-year, semiexclusive right to 

produce and commercially distribute certain audiovisual programs using 

Smithsonian trademarks and/or content in exchange for national television 

exposure and a new revenue stream. According to a Smithsonian official,

the goal was to extend the reach of the Smithsonian nationwide by 

participating in the development of programming about the Smithsonian’s 

national collections and its research. The new channel is projected to 

reach more than 31 million households by 2010, which the Smithsonian 

hopes will increase its brand recognition and have a synergistic effect on 

other revenues by increasing memberships, merchandise sales, and 

concession sales through increased visitation to the museums. In soliciting 

a suitable business partner, the Smithsonian wanted to find a company 

that would support the Smithsonian’s mission and have the financial and 

technical ability to develop new programs and launch a new digital 

television channel. Showtime was attracted to the vast amount of 

Smithsonian content and the Smithsonian’s good reputation and widely 

recognized brand name. Both parties characterized the contract as unique 

and the year-long negotiations as long and hard fought. Terms of particular 

interest have been the contract’s length, opportunities for contract 

termination, and the public’s ability to access and use the collections, in 

contrast with the rights the Smithsonian retains over programming 

content, the revenue Smithsonian will receive, and the expectation of 

increased exposure to the Smithsonian brand. 

The Smithsonian 

Traded Semiexclusive 

Commercial 

Distribution Rights to 

Produce and 

Distribute Certain 

Audiovisual Programs 

Using Smithsonian 

Content for 30 Years 

for National Exposure 

and a New Revenue 

Stream

The 30-year contract term raised many questions with members of 

Congress and the public because in relation to other contracts, particularly

those that the Smithsonian has entered into for other business activities, it

is unprecedented. However, according to officials involved in the contract

negotiations, Showtime’s joint venture contracts are normally in 

perpetuity. Generally––and in this case––this is because starting a new 

 1518 U.S.C. § 208. 

Page 19 GAO-07-275 Smithsonian's Contract with Showtime
channel is a high-risk endeavor that requires a significant investment. 

Showtime is investing 100 percent of the initial capital in the partnership 

and is therefore accepting all of the financial risk of the new venture. 

While Showtime agreed to a shorter term than most of its other media 

contracts, it has the right, through the new venture, to terminate the 

contract at certain intervals with or without cause. The Smithsonian may 

not terminate the contract without cause. However, the Smithsonian 

negotiated performance benchmarks in the contract that the new venture

must meet. The Smithsonian may terminate the contract if the new venture 

fails to (1) launch its first channel by a specific date, (2) invest a minimum 

amount of money in programming to be exhibited on the new channel 

within an initial phase of the contract, and (3) earn a specific amount of 

average gross revenues by a specific date. 

Another question raised has been continued access to and use of the 

collections by the public. The contract contains no restrictions on public 

access to the collections. However, the noncompete clauses generally 

prohibit the Smithsonian from entering into agreements or engaging in 

activities that would compete with the new venture. Of particular concern

is that PBS is identified as a directly competitive service. Additional 

noncompete clauses provide that the Smithsonian must: 

• cease operation of a Smithsonian Web portal called Smithsonian.tv, 

which was an aggregation of programming available through the 

Smithsonian’s Web site;16

• not allow others to produce programs of The Smithsonian Associates’ 

“Campus on the Mall” events; and 

• not provide any other provider of audiovisual programming with panInstitutional, “priority” guided access to Smithsonian content similar to 

that provided to the new venture. 

In return, the Smithsonian negotiated a number of exceptions to these 

noncompete clauses, which are designed to eliminate or minimize their 

impact on the Smithsonian’s normal programming activities. For example, 

nonrecurring news and public affairs programs; academic and curriculumbased programs; and in certain cases scholarly programs, were all deemed 

 16According to Smithsonian officials, this content is being moved elsewhere on Smithsonian 

Web sites but in a nonaggregated format, which does not compete with the look and feel of

an on-demand channel. 

Page 20 GAO-07-275 Smithsonian's Contract with Showtime
not to compete. The Smithsonian was also able to negotiate an exception 

that allows it to produce a fixed number of programs annually with other 

entities (one-offs). Initially the Smithsonian is allowed six one-offs 

annually, but the number is reduced to five when the new channel is 

available to at least 25 million households. There are a number of other 

detailed parameters regarding the one-off programs. 

While most of the noncompete provisions are relatively straightforward, a 

provision related to the commercial distribution of scholarly programs 

was unclear, and Smithsonian and Showtime officials had different 

understandings of this provision. Under section 6.2.4, the distribution of 

scholarly materials generally does not constitute competition, with the 

following limitation: 

[the Smithsonian] will not permit any Scholarly Program to be exhibited or exploited by a 

Commercial Distributor unless [the Smithsonian] first offers such Scholarly Program to the

[new venture] for no additional charge to the [new venture], for exhibition and/or

distribution by the [new venture]. 

The provision states that before scholarly programs can be distributed by 

a commercial distributor, they must first be offered to the venture, but the 

language is silent about whether it applies only to Smithsonian-generated 

scholarly programs, or if it also applies to third-party generated scholarly 

programs. Smithsonian officials stated that it was their intent and 

understanding that the provision would not apply to third party-generated 

programs. In contrast, Showtime officials stated that it was their intent to 

cover the unlikely possibility, however remote, that a scholarly program 

would be marketed commercially after it was distributed for scholarly 

purposes. According to Showtime’s interpretation, even if the idea for the 

program was generated by a third party, the Smithsonian would be 

required to acquire the commercial distribution rights to this program and 

offer them to the new venture at no cost or not allow the third party to 

commercially distribute the program. After we raised this issue during our

review, the Smithsonian and Showtime reached an agreement stating that 

the Smithsonian is not required to offer third-party generated scholarly 

programs to the venture, but it does stipulate that if such program is 

commercially distributed, it will be counted as a one-off. 

In exchange for the concessions made by the Smithsonian and the rights 

granted to the new venture, the Smithsonian also received a new revenue

stream that consists of four components: (1) minimum annual payments 

starting at $500,000 for the early years and growing to millions of dollars 

per year as the contract progresses; (2) a share of revenues to the extent 

Page 21 GAO-07-275 Smithsonian's Contract with Showtime
that the share exceeds the minimum annual payment; (3) an initial 10 

percent equity interest in the venture; and (4) an option to acquire an 

additional equity interest. The annual payments will total a minimum of 

$99 million over the 30-year term of the contract.17 The net present value of

the minimum required annual payments is $45 million.18 However, a 

significant amount of the contract’s value is more likely to be in the 

revenue sharing and equity interest components. In addition to the 

minimum annual payments, the Smithsonian is entitled to a percentage of

gross revenues to the extent it exceeds the minimum annual payment. The 

Smithsonian has the right to sell its equity interest to Showtime for cash 

for a period after each of the 8th, 10th and 12th anniversaries, subject to 

certain restrictions. If the Smithsonian exercised this right in year 10, it 

estimates that the cumulative value of the contract would be more than 

$150 million, assuming that it acquired the additional equity in year 5 and 

sells its total equity in year 10. Of the total estimate, only a small portion 

would be from the minimum annual payments. 

Since the contract became effective in January 2006, the Smithsonian has 

been working to put in place policies and procedures necessary to 

implement the contract, but the information it has provided about the 

contract’s impact to interested parties has been insufficient. The contract

was signed on Thursday, December 22, 2005, and it became effective 10

days later on January 1, 2006. The Smithsonian did not have in place the 

policies and procedures necessary to implement the contract when it 

became effective on January 1, 2006, and it did not publicly announce the 

creation of the new venture with Showtime until March 9, 2006. As a 

result, decisions on some filming requests received in early 2006 were 

delayed until March 2006 when the Smithsonian established a central 

review committee in the Office of Public Affairs to review filming requests 

for compliance with the contract and began informing its PIOs about the 

changes to the filming application process. 

The Smithsonian Has 

Been Working to 

Implement the 

Contract, but It Has 

Provided Insufficient 

Information to 

Interested Parties 

 17All dollar values in this report are undiscounted and not adjusted for inflation, except

when otherwise noted. 

18A 4.55 percent discount rate was used to calculate the present value of the stream of 

minimum annual payments the Smithsonian will receive under the contract. The source for 

this discount rate is the nominal (not inflation-adjusted) yield (interest rate) on a U.S.

Treasury 30-year bill at the time the contract was signed. See the table “Treasury Bonds, 

Notes and Bills, January 3, 2006,” The Wall Street Journal, Jan. 4, 2006, p. C11. 

Page 22 GAO-07-275 Smithsonian's Contract with Showtime
The news of the contract was first reported in The New York Times and

The Washington Post on March 31, 2006, and April 4, 2006, respectively.

19

These and subsequent newspaper articles expressed a number of concerns

by filmmakers and other interested parties about the contract. In addition, 

in late April 2006, the Smithsonian received correspondence from 

Congress and a group of more than 200 filmmakers, producers, academics,

and others expressing concerns about the lack of transparency in the 

Smithsonian’s process and their understanding of certain contract terms. 

The group noted that there has been an explosion in the creation of 

documentary films in recent years and that limiting the use of Smithsonian 

resources will have a chilling effect on creativity, and it argued that the 

contract violates the mission and purpose of the Smithsonian. In a 

separate letter to the Smithsonian, the American Historical Association 

expressed concerns regarding the secretive nature of the contract and the 

potential violation of the trust of Americans who have donated materials 

to which they believed the public would have free, open, equal, and 

nondiscriminatory access in perpetuity. 

In response to these concerns and growing criticism of the contract, the 

Smithsonian responded with letters and mounted a public affairs initiative. 

In April 2006, the Smithsonian issued a “Statement on Smithsonian on 

Demand,” and on May 4, 2006, it issued a fact sheet on Smithsonian on 

Demand. The Smithsonian also posted on its Web site a revised list of 

“Frequently Asked Questions about Filming at the Smithsonian Institution” 

along with a new filming application form. In response to congressional 

concerns, the Smithsonian provided a copy of the contract to Congress; 

and the Secretary of the Smithsonian, along with other Smithsonian staff, 

appeared before the House Committee on Administration on May 25, 2006, 

at a hearing about the contract. However, the information that has been

disseminated has lacked the specificity necessary to dispel the concerns of 

interested parties, whether legitimate or based on misinformation; and it

has, in some cases, failed to reassure them that the impact will be as 

limited as the Smithsonian has repeatedly asserted. 

To monitor the impact of the contract on filmmakers, the review 

committee that was established in March 2006 to review filming 

applications for compliance with the Smithsonian’s obligations under the 

 19The New York Times, “Smithsonian-Showtime TV Deal Raises Concerns,” by Edward

Wyatt (Mar. 31, 2006); and The Washington Post, “Smithsonian Deal With Showtime 

Restricts Access By Filmmakers,” by Jacqueline Trescott (Apr. 4, 2006). 

Page 23 GAO-07-275 Smithsonian's Contract with Showtime
contract developed a spreadsheet to track filming requests. The tracking

spreadsheet includes basic information about each filming application, 

such as the name of the film, producer, distributor, date requested, 

proposed run-time of Smithsonian content, description of the program, 

and the review committee’s decision to approve or deny an application.

While there is a place for the committee to record why an application was 

declined, the committee does not provide a detailed rationale for decisions 

in which a film request is either denied because it involved more than 

incidental use or approved as a one-off. Since the contract does not define 

the term incidental use, Smithsonian officials said it will be interpreted 

over time, in practice, by the precedents that the review committee will set 

with its decisions on individual filming applications. The vast majority of 

the filming applications involve minimal use of Smithsonian content, so 

the rationale used for decisions on these applications is not particularly 

useful in defining what constitutes incidental use. Conversely, the handful 

of decisions each year in which the review committee determines that 

more than incidental use is being requested by a filmmaker will be useful 

in clarifying the Smithsonian’s interpretation of incidental use. If the 

Smithsonian does not document these key decisions in detail, it may be 

difficult to provide useful information to filmmakers about what 

constitutes incidental use and ensure accountability with consistent 

decision making over the term of the contract. 

Some of the key characteristics of effective and efficient government 

programs are transparency and clear criteria that are consistently applied 

to ensure accountability. Similarly, the Smithsonian should have a process 

in place for reviewing filming requests that, to the extent possible, is 

transparent to filmmakers and that has clear criteria that are consistently 

applied over the term of the contract. However, the Smithsonian has not 

yet developed a mechanism or process to synthesize its decisions over 

time to provide filmmakers with additional guidance for their use in 

developing future filming requests. A review committee member 

mentioned that the committee directs filmmakers to the Smithsonian’s 

Web site for answers to “Frequently Asked Questions,” but it provides little 

information about Smithsonian on Demand. As a result, filmmakers and 

other interested parties remain uncertain about what factors the 

Smithsonian will use in its decision-making process regarding filming 

requests and in general about the impact of the contract. 

In August 2006, the Smithsonian established a separate Smithsonian on 

Demand Committee to coordinate the Smithsonian’s program concepts for 

submission to the venture, coordinate the Smithsonian’s review of 

programming content, and provide recommendations regarding content

Page 24 GAO-07-275 Smithsonian's Contract with Showtime
review and other administrative issues related to the contract. As of 

September 30, 2006, this committee had not had its first meeting to discuss 

the list of initial programs proposed by the new venture, so it is too early 

to assess how well this process will work. See figure 2 for a timeline 

summarizing some of the key events that have occurred during the first 9

months of the contract. 

Page 25 GAO-07-275 Smithsonian's Contract with Showtime
Figure 2: Timeline of Key Contract Implementation and Related Events 

The Smithsonian’s contract with Showtime became effective.

The New York Times printed article “Smithsonian-Showtime TV Deal Raises Concerns.” 

SBV and the Office of General Counsel conducted several meetings with individual units to explain and answer questions about the 

venture. 

The Smithsonian reexamined and enhanced its previous historical use analysis of films (which was conducted for contract negotiation 

purposes in November and December 2005) to determine how many would have been subject to the terms of the contract.

The Washington Post printed article “Smithsonian Deal With Showtime Restricts Access By Filmmakers.”

The American Historical Association expressed concerns regarding the secretive nature of the contract and the potential violation of the 

trust of Americans who have donated materials to which they believed the public would have free, open, equal, and nondiscriminatory 

access in perpetuity.

In a letter to the Secretary of the Smithsonian, the House Appropriations Subcommittee on Interior, Environment, and Related Agencies

requested that the Board of Regents review the contract to determine if it violated the spirit of the Trust.

Committee was formed to review filming requests for incidental use.

More than 200 filmmakers, producers, academics, and others expressed concerns about the lack of transparency in the Smithsonian’s

process and their understanding of certain contract terms in a letter to the Smithsonian.

The Office of Public Affairs held its second internal meeting with PIO’s to provide information and answer questions about the contract 

and how it will affect filming requests.

The Smithsonian provided copies of the contract to the six members of Congress on the Board of Regents.

The Board of Regents responded to the House Interior Appropriations Subcommittee’s April 27, 2006, letter and stated that the contract 

was consistent with the Smithsonian’s mission.

The Office of Public Affairs held its third internal meeting with PIO’s to provide information and answer questions about the contract and 

how it will affect filming requests.

The Office of Public Affairs distributed a fact sheet to the news media regarding the new venture.

The Office of Public Affairs sent a memorandum to PIOs emphasizing the new guidelines for filming at the Smithsonian. The 

Smithsonian provided redacted copies of the contract to its congressional oversight and appropriations committees.

The Smithsonian provided an unredacted copy of the contract to the Committee on House Administration and offered the same to its

other oversight and appropriations committees.

The Smithsonian sent a written reply to the American Historical Association.

A revision of Smithsonian’s standard filming agreement was put into use.

The Smithsonian established a Smithsonian on Demand Committee to develop program ideas, coordinate the Smithsonian’s review of 

programming content, and provide recommendations regarding content review and other administrative issues related to the contract.

The Committee on House Administration held a public hearing on the contract.

The Smithsonian and Showtime publicly announced the new venture.

The Smithsonian distributed an internal memorandum regarding implementation of the new contract, and the Office of Public Affairs held 

its first internal meeting with PIO’s to provide information and answer questions about the contract and how it would affect filming 

requests.

2006 Action taken

January 

1

27

27

24

14

17

16

10

19

19

25

24

4

5

9

4

31

9

Early

Late March/

Early April

March to

June

March

April

May

June

August

Source: GAO analysis of Smithsonian data.

Page 26 GAO-07-275 Smithsonian's Contract with Showtime
In general, the Smithsonian has been working to implement the contract.

The first priority was to get a process in place to resolve filming requests 

and now other policies and procedures are being implemented to deal with

actual production issues with the new venture. While the Smithsonian on 

Demand Committee had not yet met to discuss the list of proposed 

programs as of September 30, 2006, committee members had seen the list 

and requested additional information on eight of the programs that the 

new venture is considering for possible exhibition on the new channel that 

do not involve any Smithsonian content. The provisions of the contract 

state that, the Smithsonian can comment on the factual, historical, and 

scientific accuracy of a program and whether the program is consistent 

with the reputation of the Smithsonian. In response to the Smithsonian’s 

comments on these topics, the new venture must either (1) edit the 

programs based on the Smithsonian’s comments or (2) choose not to 

exhibit the program. Again, it is too early to know how those discussions 

and negotiations will play out regarding these eight programs. 

The impact of the contract on interested parties is uncertain because it 

only has been in effect since January 1, 2006, and it is still too early to tell

what the long-term impact of the contract will be. Specifically, we 

reviewed the impact, or potential impact, of the contract in three areas: (1) 

the direct impact on filmmakers during the first 9 months of the contract;

(2) the projected impact on filmmakers based on the Smithsonian’s 

historical analysis of filming contracts for a 6-year period, from 2000 

through 2005; and (3) other potential impacts raised by interested parties.

During the first 9 months of the contract, from January 1, 2006, through 

September 30, 2006, two filming requests were denied due to the contract 

and four were approved as one-offs out of a total of 117 filming requests 

reviewed by the central review committee. However, it is too early to 

assess the total impact of the first year of the contract until the remaining 

3 months of the year are concluded. Regarding the Smithsonian’s historical 

analysis of filming contracts, we found the Smithsonian’s analysis to be 

unreliable for the purpose of estimating the contract’s potential impact, 

primarily due to incomplete data and oversimplified selection criteria. For 

example, in some cases, projected run-time was not available on the 

spreadsheet used for the analysis. Moreover, the criterion used in the 

analysis was not the same as the criteria being used in practice by the 

review committee. In the analysis, the Smithsonian defined incidental use 

as less than 15 percent of projected run-time of Smithsonian content in the 

film. However, the review committee considers multiple factors about the 

proposed use of Smithsonian content in making the actual decisions about 

incidental use. Aside from direct potential impacts on filmmakers, larger 

The Impact of the 

Contract on 

Interested Parties Is 

Uncertain 

Page 27 GAO-07-275 Smithsonian's Contract with Showtime
concerns have been raised about damage to the Smithsonian’s image and

goodwill. Concerns have been raised by filmmakers, curators, and other 

interested parties regarding the appropriateness of the Smithsonian 

limiting the use of the collections held in trust for the American public, as 

well as other potential impacts, including hampering collaborative 

partnerships and future donations. 

Direct Impact on 

Filmmakers during the 

First 9 Months Was 

Minimal 

The direct impact to filmmakers during the first 9 months of the contract

has been minimal because, for the requests it has wanted to pursue, the 

Smithsonian has been able to accommodate those involving more than 

incidental use of Smithsonian content within its annual allotment of oneoffs. During the first 9 months of the contract, the Smithsonian’s central 

review committee reviewed 117 filming applications, of which 2 were 

denied due to the contract and 4 were approved as one-offs. The four oneoffs were approved to air in various years—one in 2006, one in 2007, and

two in 2008. See table 1 for the decisions on remaining applications 

through September 30, 2006. It is too early to assess the total impact of the

first year of the contract until the remaining 3 months of the year are 

concluded.

Table 1: Filming Application Decisions from January 1, 2006, through September 

30, 2006 

Action taken on filming application

Number of 

applications

Percent of

applications

Accepted 48 41%

Accepted as a one-off 4 3

Denied for reasons unrelated to the contracta34 29

Denied due to the contract 2 2

Withdrawn or closedb26 22

Pending 3 3

Total 117 100%

Source: GAO analysis of Smithsonian data. 

a

Reasons for denials at the museum level unrelated to the contract include issues regarding 

availability of collections or staff or appropriateness of the request. 

b

Applications may be withdrawn or closed for reasons such as the filmmaker deciding that they are 

not going to pursue the film or the Smithsonian not receiving the required information from the 

filmmaker. 

Some interested parties have raised the issue that having a cap on the 

number of one-offs will cause the Smithsonian to be more selective in the 

Page 28 GAO-07-275 Smithsonian's Contract with Showtime
programs it approves. The Smithsonian has denied two requests due to the 

contract, even though there was still space available under its one-off 

allocation. The contract initially included separate limits for “branded” and 

“nonbranded” one-off programs. A branded program is defined by the 

contract as a program containing a Smithsonian mark in its title, in its 

main credits, or, under certain circumstances, in its end credits. The 

contract originally specified that the initial allotment of six one-offs 

annually could include no more than three branded and no more than 

three nonbranded programs. To obtain more flexibility under the contract, 

the Smithsonian recently reached an agreement with Showtime on new 

contract language that would eliminate the current requirement that no 

more than three one-offs can be nonbranded in any given year. Under this 

agreement up to the total annual allotment of one-offs could be

nonbranded, but the number of branded one-offs would still be limited. In 

addition, during any time period in which the distribution of the new 

channel reaches 25 million households, the number of branded one-offs 

allowed is reduced from three to two, and the total annual allotment of 

one-offs is reduced from six to five. Furthermore, these two branded oneoffs can only be exhibited via a broadcast outlet, which is defined as “free, 

over-the-air broadcast television networks and local television stations.” 

The initial business plan for the new channel projected that it would reach

the threshold of 25 million households by 2008. If the Smithsonian’s 

projection for the distribution of the new channel is realized, the 

Smithsonian will only be able to approve three more one-offs for initial 

airing during 2008. 

The Smithsonian’s

Historical Analysis of 

Filming Contracts Is 

Unreliable and It Should 

Not Be Used to Estimate 

the Contract’s Potential 

Impact 

On the basis of a historical analysis of filming contracts over a 6-year 

period from 2000 through 2005, the Smithsonian contends that it will be 

able to accommodate the same level of filming activity as it has in the past.

However, we found the Smithsonian’s analysis to be unreliable for 

estimating the potential impact of the contract, primarily due to 

incomplete data and oversimplified selection criteria. In April 2006, the 

Smithsonian conducted an in-depth historical analysis of about 350 filming 

contracts from 2000 through 2005 utilizing information provided in a 

spreadsheet by the Smithsonian’s Office of Contracting, with input from 

the Office of General Counsel, to estimate the number of programs that 

contained more than incidental use of Smithsonian content. In some cases, 

the actual filming contracts were reviewed by Smithsonian staff to confirm 

and supplement the information in the spreadsheet. The following criteria 

were applied to the 350 filming contracts to identify programs with more 

than incidental use of Smithsonian content: 

Page 29 GAO-07-275 Smithsonian's Contract with Showtime
• news, public affairs, academic, curriculum-based, scholarly, and local 

access programs were excluded from the analysis; 

• programs distributed exclusively on DVD/home video, as a streaming 

video or webcam or by a foreign distributor without a domestic partner 

were excluded from the analysis; and 

• of the remaining programs, those projected to use Smithsonian content

during more than 15 percent of the program’s total run-time were 

identified as using more than incidental use of Smithsonian content 

(i.e., 6 minutes of Smithsonian content in a 60-minute program would 

equal a run-time of 10 percent). 

Upon completion of this review, the Smithsonian initially determined that 

filming contracts for 17 programs involved more than incidental use of 

Smithsonian content over the 6-year period. This analysis has been a 

cornerstone of the Smithsonian’s assertion that its annual allotment of six 

one-offs, totaling 36 programs over 6 years, would more than 

accommodate future demand from filmmakers who wish to use more than 

an incidental amount of Smithsonian content. The Smithsonian later 

revised the number of programs on the list from 17 to 23, after asking its 

museums in June 2006 to provide any additional programs they thought 

contained more than incidental use that were not accounted for in the 

original analysis. The individual museums provided six additional 

contracts that neither the Smithsonian Office of Contracting or the Office

of General Counsel had record of. 

When we attempted to replicate the Smithsonian’s analysis, we found 

several problems with the analysis, which led us to conclude that it is not a 

reliable measure of the contract’s potential impacts. Specifically, we found

that the data used in the analysis were incomplete and the selection 

criteria were oversimplified. Calculating run-times of Smithsonian content 

was an integral part of the analysis, however run-times were not available 

for some of the entries in the spreadsheet. Also, some of the filming 

contracts could not be located to verify or supplement the information in 

the spreadsheet; and when the filming contracts were available, they did

not consistently contain projected run-times for Smithsonian content. 

Furthermore, the run-times used in the analysis were projected run-times 

based on the filming contracts and not the actual run-times of Smithsonian 

content in the final programs. Examples of the oversimplified selection 

criteria include the following: 

Page 30 GAO-07-275 Smithsonian's Contract with Showtime
• The Smithsonian used a projected run-time of 15 percent or less of 

Smithsonian content as its definition for incidental use. However, this 

criterion is not being used in practice by the central review committee 

to make decisions about requests to film Smithsonian collections or 

staff. The central review committee told us that it has not defined the 

percentage of run-time in a program that would constitute incidental 

use, but it is instead using a combination of run-time and content to 

determine what constitutes incidental use. To illustrate the sensitivity 

of the analysis, using a run-time threshold of just 13 percent, a 

deviation of 2 percentage points, would add at least nine filming 

contracts to the list of programs that would have been affected by the 

contract. 

• Programs distributed via the Internet were excluded from the analysis, 

but this distribution method may compete with the new venture’s 

activities under the contract. Therefore, at least one program 

distributed via the Internet should have been included in the analysis. 

Through our evaluation of the Smithsonian’s analysis, we found at least 6 

additional programs that we believe the Smithsonian should have included

on its list of 23, raising the total to at least 29 programs. According to the 

Smithsonian, all of the 29 programs were nonbranded programs.20 To 

estimate the potential impact of the contract, the 29 programs can be

analyzed in two different ways—(1) in aggregate against the total number 

of one-offs allowed over a 6-year period, which could range from 30 to 36 

programs and (2) on an annual basis against the annual allotment of five or

six one-offs. By comparing the Smithsonian’s original result of 17 

programs to a 6-year allotment of 30 to 36 one-offs, the Smithsonian 

asserted that the contract would have no major impact on outside 

filmmakers. However, comparing the revised figure of at least 29 programs 

to the 30 programs at the lower end of the one-off allotment indicates that 

it is much more likely that outside filmmakers may be impacted by the 

contract. The annual distribution of the 29 programs exceeded the annual

limit of six one-offs in 1 year, and it exceeded the lower limit of five oneoffs per year in 3 of the 6 years (see fig. 3). 

 20A Smithsonian official stated that branded programs generally use the Smithsonian’s 

name in the title of the program, such as “Smithsonian’s National Zoo” or “Smithsonian 

Presents...,” or in its main credits. 

Page 31 GAO-07-275 Smithsonian's Contract with Showtime
Figure 3: Annual Distribution of 29 Programs from 2000 through 2005 with More 

than Incidental Use Based on Smithsonian Filming Contracts 

0

1

2

3

4

5

6

7

Number of programs added resulting from GAO analysis

Number of programs identified by the Smithsonian’s analysis

2005 b 2004a 2000 2001 2002 2003

Source: GAO analysis of Smithsonian data.

Number of programs per year

Total number of one-offs allowed 

when channel distribution <25 

million households (no more than three of which may be branded)

Total number of one-offs allowed 

when channel distribution 

reaches >25 million households

(no more than two of which may 

be branded)

Year

Note: Like the Smithsonian’s analysis, our evaluation was limited by the incomplete data provided in 

the spreadsheet and cases in which original contracts could not be located to validate information. In 

addition, while the contract stipulates that the one-off programs will be counted in the year that they

are first exhibited or distributed, the Smithsonian’s analysis used the year the filming contract was 

awarded instead, causing an inaccurate estimate of the annual distribution. 

a

The Smithsonian’s analysis included one program for which the contract was dated December 2003. 

b

The Smithsonian’s analysis included one program for which the contract has not been finalized. 

Regardless of the problems with the Smithsonian’s historical analysis, the 

underlying assumption of the analysis that the past demand for filming will 

be a good forecast of the future demand, may also be flawed. If the new 

channel is successful and there is an increased demand for programs 

featuring Smithsonian content, particularly as important historical 

milestones occur, the future demand may exceed that of the past. For 

example, one of the filmmakers with whom we spoke highlighted that 

2008 will mark the 50th anniversary of the National Aeronautics and Space 

Administration (NASA), and that there is likely to be a number of requests

to film at the National Air and Space Museum for programs 

commemorating the space program. 

Page 32 GAO-07-275 Smithsonian's Contract with Showtime
Aside from direct potential impacts on filmmakers, larger concerns have

been raised about damage to the Smithsonian’s image and goodwill. In the 

minds of stakeholders, these concerns have been exacerbated by the lack

of information provided by the Smithsonian about the impact of the 

contract. Concerns have been raised by filmmakers, curators, and other 

interested parties regarding the appropriateness of the Smithsonian 

limiting the use of the collections held in trust for the American public for 

the direct benefit of a single commercial enterprise, as well as other 

potential impacts of the contract. Interested parties have also raised 

concerns and pointed to potential impacts of the contract that may not be

directly related to filmmaking, including hampering collaborative 

partnerships with other entities, future donations, and future availability of

Smithsonian material via the Internet. Specifically, 

Other Potential Impacts 

Have Been Raised by 

Interested Parties 

• A PBS member station official with whom we spoke indicated that the 

station regularly works with museums, such as the Smithsonian, and

other entities to create well-known programming. Consequently it was 

troubling to the official when, in July 2006, a Smithsonian official 

declined the station’s request for the Smithsonian to be listed as a 

strategic partner on a definitive historical documentary series that it 

was producing, citing that the contract prohibited it from entering into 

such a partnership with the station. Recently, however, the station 

official indicated that the Smithsonian has reopened discussions with 

the station to collaborate on the effort. 

• Individual donors have inquired about the terms of the Showtime 

contract and how these terms might affect the availability of their 

donations for use by filmmakers and the general public. While access 

to the Smithsonian collections has always been controlled and subject 

to individual donor agreements, limits pertaining to more than 

incidental use of Smithsonian content, including collections and staff, 

for the purposes of filming, is a new limitation resulting from the 

contract. Organizations such as the American Historical Association 

have expressed concerns that the contract may be a violation of the 

trust of generations of Americans who have donated materials to which 

they believed the public would have free, open, equal, and 

nondiscriminatory access in perpetuity. 

• Some interested parties have raised questions about the loss of 

Smithsonian.tv, which was an aggregation of various Smithsonian 

programs, and the impact the contract may have on future digitization 

of the Smithsonian collections for access by the public via the Internet. 

The Smithsonian has said that the programs formerly aggregated on 

Page 33 GAO-07-275 Smithsonian's Contract with Showtime
Smithsonian.tv are being moved to other pages of the Smithsonian Web 

site and that the contract will not affect its digitization efforts. 

The question of whether or not the Smithsonian’s contract with Showtime 

is in the best interest of the Smithsonian and the American public will only 

be answered after the passage of time, as events unfold. Moreover, the

contract is final and is moving forward; as long as Showtime and the new 

venture abide by its terms and meet the performance benchmarks, the 

Smithsonian cannot terminate the contract. If the new channel does well, 

the Smithsonian could reap significant financial benefits through revenue

sharing and the appreciation of its equity interest. If the channel does 

poorly, the Smithsonian would not lose any money directly because it did 

not invest any initial capital into the partnership; however, its image and 

goodwill could be damaged, and opportunities for making alternate use of 

Smithsonian content during the contract period may be lost. 

Conclusions 

The Smithsonian recognizes that its public relations have suffered 

throughout the implementation of the contract, as evidenced by the 

numerous negative newspaper articles over the past year. While the 

Smithsonian provides Board of Regents meeting minutes to Congress, they 

are voluminous and lack tables of contents, and thus may not, by 

themselves, be the most ideal communication mechanism for alerting 

Congress to significant policy decisions made by the Smithsonian. 

Moreover, the Smithsonian did not conduct any additional congressional 

or public outreach to solicit input or provide information about the 

television venture concept prior to the contract becoming effective. As 

such, the Smithsonian lost opportunities to address concerns proactively, 

and it has instead had to address issues as they arise within the framework 

of the contract. 

We recognize the difficulty associated with trying to establish a clear 

definition of incidental use of Smithsonian content and understand that 

the parties to the contract made a conscious decision not to define it in the 

contract. In practice, the Smithsonian’s decisions on the hundreds of 

filming requests it receives each year, over time, will set the precedent for 

how the term is defined. However, the Smithsonian does not have a 

mechanism or process in place to (1) document those key decisions in 

detail, (2) synthesize those decisions over time into a record of precedents

of what constitutes more than incidental use that could be used as 

guidelines for filmmakers submitting filming requests, and (3) 

communicate those guidelines to the filmmakers that need it. Without 

such a process, it may be difficult to provide useful information to 

Page 34 GAO-07-275 Smithsonian's Contract with Showtime
filmmakers about what constitutes incidental use and ensure 

accountability with consistent decision making over the 30-year term of 

the contract. Consequently, filmmakers and other interested parties may 

remain uncertain about what factors the Smithsonian will use in its 

decision-making process regarding filming requests. 

To improve the implementation of the contract and increase the 

information available to interested parties, we recommend that the 

Secretary of the Smithsonian take the following two actions: 

• fully document decisions for filming applications that are denied 

because they involve more than incidental use or are approved as oneoffs to establish a record of precedents, which will define over time 

what constitutes incidental use and help to ensure consistent decision 

making by the review committee; 

• update the “Frequently Asked Questions about Filming at the 

Smithsonian Institution” on the Smithsonian’s Web site to better 

describe what the contract means for filmmakers, especially as it 

relates to incidental use of Smithsonian content.

GAO provided a draft of this report to the Smithsonian and Showtime for 

review and comment. The Smithsonian commented that it generally agreed 

with our findings and recommendations and will take actions to 

implement our recommendations. Showtime also generally agreed with 

the report and endorsed the Smithsonian’s comments. The Smithsonian’s 

and Showtime’s written comments are in appendixes III and IV, 

respectively. The Smithsonian and Showtime also provided joint technical 

comments, which we incorporated as appropriate. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

While the Smithsonian generally agreed with our findings and conclusions 

and intend to take actions to implement both recommendations, the 

Secretary of the Smithsonian commented on our observations regarding 

the Smithsonian’s historical analysis of filming contracts. Specifically, the

Smithsonian believes that the historical data support its conclusion that 

the contract’s potential impact will be minimal and that the actual impact

to date has been minimal as well. In addition, during the May 25, 2006, 

House hearing, the Secretary used the Smithsonian’s analysis to assert that 

under the contract, the Smithsonian had “almost double the capacity” 

necessary to accommodate future filming requests involving more than 

incidental use of Smithsonian content. We concluded that the 

Page 35 GAO-07-275 Smithsonian's Contract with Showtime
Smithsonian’s historical analysis was not sufficiently reliable to support 

such an assertion. Notwithstanding any historical analysis, we agree that if

the number of filming requests for more than incidental use of

Smithsonian content averages around five per year, the Smithsonian will 

be able accommodate those requests. During the first 9 months of the 

contact there were six such requests—two were denied and four were 

approved as one-offs. We acknowledge that the direct impact on 

filmmakers to date has been minimal. However, because the 30-year 

contract has been in effect for less than a year, it is still too early to judge 

the potential impact that the contract may have on interested parties in the 

future. 

We are sending copies of this report to interested congressional 

committees, as well as the Secretary of the Smithsonian, and Showtime. 

We will also make copies available to others upon request. In addition, this 

report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix V. 

Robin M. Nazzaro 

Director, Natural Resources and Environment 

Page 36 GAO-07-275 Smithsonian's Contract with Showtime
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

We were asked to (1) evaluate the extent to which the Smithsonian 

Institution (Smithsonian) followed its internal guidelines with respect to 

competition, oversight, and protecting against conflicts of interest when 

negotiating the contract with Showtime Networks Inc., (Showtime); (2) 

identify what the Smithsonian gave up and received in return under the 

contract; (3) evaluate the Smithsonian’s implementation of the contract;

and (4) identify what, if any, impacts the contract has had on outside 

parties. 

To evaluate the extent to which the Smithsonian followed its internal 

guidelines for competition, oversight, and conflicts of interest, we 

obtained and reviewed bylaws and meeting minutes for the Smithsonian’s 

Board of Regents and Smithsonian Business Venture’s (SBV) Board of 

Directors, documentation related to a potential conflict of interest, and 

Smithsonian guidelines regarding contracting and conflicts of interest. We 

also interviewed the Smithsonian and Showtime officials involved in 

negotiating the contract. To evaluate the extent to which the Smithsonian 

followed its guidelines regarding competition, we analyzed information 

from the boards’ meeting minutes and conducted interviews to understand 

the process by which the Smithsonian developed and solicited the ondemand television concept to potential partners and compared that with 

SBV’s contracting guidelines. Regarding board oversight, we reviewed 

meeting minutes from both boards to determine the frequency and extent

of board involvement in the process. Finally, regarding conflicts of 

interest, the GAO Ethics Officer reviewed the Smithsonian’s Standards of 

Conduct in effect during the time of the negotiations, the SBV’s chief 

executive officer’s disclosure of a potential conflict, and the Smithsonian 

Ethics Officer’s opinion regarding the potential conflict. 

To determine what the Smithsonian gave up and received in return, we 

reviewed the contract and other Smithsonian documents such as existing 

directives governing access to the Smithsonian collections. We also 

interviewed Smithsonian and Showtime officials who were involved in the 

contract negotiations to determine each party’s interpretation of certain 

contract provisions. We also attempted to evaluate the reasonableness of

the contract’s term in relation to its economic provisions by comparing the 

Showtime contract with those of a similar nature, but were not able to 

identify suitable analogies. We were, however, able to obtain information 

on typical media contract lengths and provisions through interviews with 

media industry experts. Finally, we conducted an economic analysis to 

determine the net present value of the minimum annual payments. 

Page 37 GAO-07-275 Smithsonian's Contract with Showtime
Appendix I: Objectives, Scope, and 

Methodology 

To evaluate how the Smithsonian has implemented the contract, we 

reviewed relevant Smithsonian documents and interviewed Smithsonian 

staff that have been involved with implementing changes resulting from 

the contract. Specifically, we obtained and analyzed the Office of Public 

Affairs review committee’s spreadsheet that is used to track filming 

requests to determine the total number of filming applications the 

Smithsonian received between January 1, 2006, and September 30, 2006, 

the number of applications that were accepted, declined, withdrawn or 

closed, or pending, and the reasons for the committee’s decisions. We also 

interviewed public information officers from the National Museum of 

Natural History, the National Museum of American History, and the 

National Air and Space Museum, which are the museums that receive the 

majority of filming requests, to get their perspectives on how the filming 

request process has changed as a result of the contract. In addition, we 

reviewed other Smithsonian documents pertaining to actions it has taken 

in response to the contract, such as establishing a committee to develop 

program ideas, coordinate the Smithsonian’s review of programming 

content, and provide recommendations regarding content review and 

other administrative issues related to the contract. 

To identify what, if any, impact the contract has had on the Smithsonian’s 

operations and outside parties, we reviewed the methodology and results 

of the Smithsonian’s analysis of filming contracts from 2000 through 2005

to determine the reliability of the analysis. We discovered several 

problems with the Smithsonian’s analysis that led us to determine that the 

analysis was unreliable, and we discuss those limitations in this report. We 

also interviewed Smithsonian staff that have been involved with 

implementing changes resulting from the contract and reviewed

statements from individuals and organizations that have spoken out about 

the contract. Finally, we interviewed a selective sample of interested 

parties that could potentially be affected by the contract. We selected the 

individuals with whom we spoke from a wide range of disciplines, 

including filmmakers, curators, and historians. 

We conducted our work from June to November 2006 in accordance with 

generally accepted government auditing standards. 

Page 38 GAO-07-275 Smithsonian's Contract with Showtime
A

A

ppendix II: Smithsonian’s Filming

pplication Review Process 

Page 39 GAO-07-275

Appendix II: Smithsonian’s Filming 

Application Review Process 

Yes

Yes

No No

Yes

No

No

Source: GAO analysis of Smithsonian data.

Filming request comes into museum Public Information Officers (PIO) or is routed to them from museum staff

Request is handled by PIO and/or 

by Smithsonian Office of Public 

Affairs

No application or contract required

Request denied 

by museum PIO

Requestor 

modifies

request

Request denied

Filmmaker may 

submit project 

independently to 

the new venture 

(separate process)

Filmmaker can 

reduce the amount 

of proposed 

Smithsonian 

content so that it is

considered 

incidential use

Smithsonian can 

develop with 

requestor as a 

one-off outside of 

the new venture

Request is forwarded to 

the Smithsonian’s Office 

of Contracting to draft 

contract consistent with 

request, including

appropriate fees as set 

forth in filming policy

Requestor directed to fill-out “Application for Filming at Smithsonian Institution,” which details the nature of the 

request and provides revelant information. Requester then submits application to PIO.

PIO determines, based on application, whether request is appropriate and consistent with the Smithsonian’s

filming policy. Considerations include whether request will/is:

1. Consistent with the Smithsonian’s mission;

2. Reach the appropriate audience;

3. Involves appropriate use of Smithsonian facilities, collections, and staff resources;

4. Whether the relevant staff or curators have the time to cooperate with the request;

5. Whether the relevant staff or curators are interested in cooperating with the request;

6. Whether undue costs or expenses will be incurred cooperating with the request; 

7. Whether the intended use may be defamatory of or impact the Smithsonian’s reputation negatively;

8. Compete with or detract from an existing or planned Smithsonian use or projects.

PIO submits proposal to review committee overseen by the Office of Public 

Affairs for final determination on three additional criteria (in consultation with 

the Office of General Counsel, as necessary).

1. Is the request part of an academic, scholarly, or curriculum-based program?

2. Is the film being distributed via a noncommercial distributor?

3. Is the proposed use of Smithsonian content incidental in the context of the 

finished program?

Is

request for 

news or public 

affairs purpose?

Is

request 

appropriate?

If “ Yes” to 

any of three 

questions

abovea

Is the 

Smithsonian 

interested in 

developing project 

as a one-off?

Smithsonian's Contract with Showtime
Appendix II: Smithsonian’s Filming

Application Review Process 

Note: The shaded area represents new review procedures put in place as a result of the contract. 

a

In the case of scholarly programs, questions 1 and 2 above must be answered “yes” for the program 

to be approved. 

Page 40 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the Appendix III: Comments from the Smithsonian Institution 

Smithsonian Institution 

Page 41 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 42 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 43 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 44 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 45 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 46 GAO-07-275 Smithsonian's Contract with Showtime
Appendix III: Comments from the 

Smithsonian Institution 

Page 47 GAO-07-275 Smithsonian's Contract with Showtime
Appendix IV: Comments from Showtime Appendix IV Networks Inc. : Comments from Showtime 

Networks Inc. 

Page 48 GAO-07-275 Smithsonian's Contract with Showtime
Appendix IV: Comments from Showtime 

Networks Inc. 

Page 49 GAO-07-275 Smithsonian's Contract with Showtime
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 50 GAO-07-275

Appendix V: GAO Contact and Staff 

Acknowledgments 

Robin M. Nazzaro, (202) 512-3841, nazzaror@gao.gov

In addition to the individual named above, Jeffery D. Malcolm, Assistant 

Director; Jean Cook; Michele Fejfar; Richard P. Johnson; Jamie J. 

Meuwissen; and Anne Stevens made key contributions to this report. Also 

contributing to the report were John Finedore, Carol Kolarik, Alison 

O’Neill, Jena Y. Sinkfield, and William Woods. 

Smithsonian's Contract with Showtime

GAO Contact 

Staff 

Acknowledgments 

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