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28–299 2006

HEARING ON SMITHSONIAN 

INSTITUTION BUSINESS VENTURES 

HEARING 

BEFORE THE

COMMITTEE ON HOUSE 

ADMINISTRATION 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, MAY 25, 2006 

Printed for the use of the Committee on House Administration 

( 

(II) 

COMMITTEE ON HOUSE ADMINISTRATION 

VERNON EHLERS, Michigan, Chairman 

ROBERT W. NEY, Ohio 

JOHN L. MICA, Florida 

CANDICE MILLER, Michigan 

JOHN T. DOOLITTLE, California 

THOMAS M. REYNOLDS, New York 

JUANITA MILLENDER-MCDONALD, 

California 

Ranking Minority Member 

ROBERT A. BRADY, Pennsylvania 

ZOE LOFGREN, California 

WILL PLASTER, Staff Director 

GEORGE SHEVLIN, Minority Staff Director 

(1) 

SMITHSONIAN INSTITUTION BUSINESS 

VENTURES 

THURSDAY, MAY 25, 2006 

HOUSE OF REPRESENTATIVES, COMMITTEE ON HOUSE ADMINISTRATION, Washington, DC. 

The committee met, pursuant to call, at 12:25 p.m., in room 

1310, Longworth House Office Building, Hon. Vernon J. Ehlers 

(chairman of the committee) presiding. 

Present: Representatives Ehlers, Ney, Doolittle, Miller, 

Millender-McDonald, Brady and Lofgren. 

Staff Present: Peter Sloan, Professional Staff; Bryan Dorsey, Professional Staff; George Hadijski, Director, Office of Member Services; George Shevlin, Minority Staff Director; Matt Pinkus, Minority Professional Staff; Charles Howell, Minority Chief Counsel; and 

Janelle Hu, Minority Professional Staff. 

The CHAIRMAN. Good afternoon. The Committee on House Administration will come to order. I want to thank everyone for being 

here, but particularly those who are planning to offer testimony. 

We unfortunately, as frequently happens, have had a conflict with 

votes. We had a vote call just as we were about to begin this session, and that explains the delay in getting started. We have other 

votes that are expected to be called approximately at 2:30 to 3:00, 

somewhere in that time frame. It would be wonderful if everyone 

could be concise and lucid so that we could finish before then. I 

wouldn’t put any bets on it, but at least it gives us a goal to shoot 

for. 

Today this committee convenes a very important oversight hearing on the operations and investments of the Smithsonian Institution, as well as the role that Smithsonian Business Ventures serves 

in furthering the Institution’s mission as an establishment for the 

increase and diffusion of knowledge. 

The goal of our hearing is to allow the Smithsonian to provide 

an overview of their current status and bring transparency to the 

operations of the business venture. This will include discussion of 

the recent creation of a new joint venture between the Smithsonian 

Institution and CBS Showtime Networks called Smithsonian Networks, and the launch of its first product, Smithsonian On Demand. 

The Smithsonian Institution is a treasured part of the American 

cultural landscape. Last year alone, 24 million visitors experienced 

the objects, artworks, and specimens housed within its walls, which 

contains more than 136 million items. That exceeds the amount of 

stuff I have in my basement, although my wife might dispute that. 

2 

It is the duty of this committee to ensure that this jewel of American culture be preserved and that its policies and procedures serve 

the public trust, something, incidentally, which it has done very 

well for many, many years. 

For those students, visitors, and others who are unable to visit 

the Institution in person, to view its vast archive programming created by independent producers has served as an essential tool in 

furthering education about the many artifacts that are part of the 

Smithsonian. There has been considerable concern expressed by 

those in the educational and creative communities regarding the 

potential risks involved with curtailing use of the Smithsonian collections by filmmakers, rival networks, journalists, and scholars, as 

proposed in the Smithsonian On Demand venture, and the committee looks forward to hearing from our panelists on these issues. 

Today’s hearing will focus on several areas of concern to the committee. First, my staff has made strenuous efforts over the past 

several weeks to obtain a copy of the contract that Smithsonian 

Business Ventures entered into with CBS Showtime. 

I would like to thank Secretary Small for providing a copy of the 

contract in the past several days; however, large portions of the 

contract were redacted in the version that was submitted, making 

it difficult to gain a complete picture of its substance. My understanding is that the Smithsonian cited a confidentiality clause as 

the reason for redactions that were made to the contract before it 

was submitted. For Republican institutions such as the Smithsonian, the contents of this contract are essential in preserving the 

appropriate level of transparency that the public expects and deserves. 

After you provided the redacted copy of the contract and at your 

invitation, my staff has met with your staff to discuss the content 

of the redacted portions. This discussion raised additional concerns, 

and my staff requested an unredacted copy of the contract so that 

this committee may better understand its contents. 

Thank you, Secretary Small, for now making the full text of this 

contract available in keeping with your role as a steward of this 

institution on behalf of the American public. We will honor your request to keep it confidential while we review the agreement. 

Our second objective today is to better understand your management philosophy in the operations of Smithsonian Business Ventures and to bring clarity and transparency to the process used by 

the Smithsonian in entering into this contract with CBS Showtime. 

I am very interested to learn more about the genesis of this partnership, and why a deal of this magnitude was not thoroughly vetted with the Smithsonian’s authorizing and appropriating committees prior to the venture being ratified by the Smithsonian’s Board 

of Regents. 

Finally, and most importantly, this committee must insist on behalf of the millions of Americans who not only visit the Smithsonian each year but who also enjoy programming based on its contents, that this institution must put the needs of the public above 

its own need to explore new sources of revenue when those income 

sources limit the public’s access to the Nation’s attic. We must take 

whatever steps are necessary to ensure that no filmmaker, scholar, 

or any other individual whose goal is to use and foster educational 

3 

awareness of the Smithsonian is inhibited in making use of the resources contained within the institution. 

To address the growing concerns surrounding the Smithsonian 

Business Ventures, and particularly the new joint venture between 

the Smithsonian Institution and CBS Showtime Networks, the 

committee will call upon several distinguished experts from the 

Smithsonian to provide insight into these issues. 

To provide additional perspective, the committee is also pleased 

to welcome several witnesses from the educational and creative 

community to provide their testimony. Our first witness today is 

Lawrence M. Small, secretary of the Smithsonian Institution. Secretary Small, we welcome you and thank you for being with us 

today. We look forward to your overview of Smithsonian operations 

as they stand today, and expect you will conceptually address your 

guiding philosophy behind Smithsonian Business Ventures and its 

operations. 

Our second panel of witnesses today includes Carl Malamud, 

senior fellow and chief technology officer from the Center for American Progress; Margaret Drain, former executive producer, vice 

president of national programming for WGBH in Boston; and 

Emily Sheketoff, associate executive director for the American Library Association. Welcome to our distinguished second of panel of 

witnesses as well. 

Finally, on our third panel today we have Alice Maroni, chief financial officer of the Smithsonian Institution, John Huerta, general 

counsel of the Smithsonian Institution, and Gary M. Beer, chief executive officer of the Smithsonian Business Ventures. 

While we will not be requesting or hearing testimony from them 

today, I asked them to appear before the committee to answer 

member questions. I welcome you all to our third panel, and I 

thank each of you for being with us today. 

At this time, I would like to recognize the Ranking Member, Ms. 

Millender-McDonald from California, for any opening remarks she 

may have. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. Thank 

you. It is good to see you again, Mr. Secretary. 

I am pleased that you have called this oversight hearing, Mr. 

Chairman, because it provides the Smithsonian with an opportunity to inform us about where the Smithsonian is today and 

where it is going in the future. 

The House Appropriations Committee cut the Smithsonian’s budget by $20 million last week, and I would be very interested in 

hearing what impact that cut will have on the operations of this 

critical institution and to hear from the Secretary as to what 

caused these cuts. 

The Smithsonian is a public trust which houses the Nation’s cultural and historic treasures. It operates as a trust entity for the 

people of the United States, and, as such, has a special place in the 

heart of all Americans. The Congress has allowed it to occupy a 

place of honor on the National Mall, and it is a beacon for scientists, scholars, families, and donors. Therefore, the public trust 

should never be breached. 

I think this hearing will provide a long overdue opportunity for 

the American people to meet the person who heads their national 

4 

trust and to begin to understand the complex nature of the institution. With the availability of public funds being drained away from 

other national priorities and reduced revenues, the Smithsonian is 

inevitably and negatively affected. I am very appreciative of the 

Smithsonian, and I look forward to its continued viability and expansion. 

There are many things to be preserved and displayed which have 

yet to be fully realized, and the Smithsonian is the place where 

that can occur to the benefit of the Nation. 

While the budget cut has gotten the Smithsonian’s attention, I 

want to say that I have not taken a position on the Smithsonian 

On Demand contract itself, nor on the laudable ambitions behind 

it, which is to increase public awareness about the Smithsonian’s 

collections and to increase the Smithsonian’s ability to utilize its 

trust funds. 

However, I am deeply concerned as to the lack of transparency 

to the process and to this contract. Congress only received a copy 

of this contract, a couple of days ago; and we must examine the 

contract fully and receive the views of the public and/or outside experts. I will again make sure that the confidentiality of this contract is not breached by this Member. 

This hearing, the first in the 109th Congress on this subject or 

any other Smithsonian issue, will begin this process today. I would 

hope that the issue of the budget cuts would resolve itself as the 

appropriations process moves forward in the Senate and in conference. But that will depend in part on how responsive the Smithsonian is to us today, Mr. Chairman, and in the future, to the concerns which have been raised. 

I am particularly interested in hearing the institution’s justifications of the increased salaries paid out of the trust fund moneys 

to personnel in the Smithsonian Business Ventures, as well as to 

the secretary of the Smithsonian and other high officials of the institution. Some of these may well be justified, but for comparative 

purposes, looking at salaries at Federal agencies funded entirely 

from Federal funds, this could have a negative appearance. 

Mr. Chairman, frequent oversight provide a way to address the 

inevitable differences which arise among visitors, public users of 

the Smithsonian collections, the Institution, and the Congress. It 

could help avert the impulse to take counterproductive actions and 

provides an avenue to redress grievances. It really falls within the 

legislative and policy jurisdictions of our Committee on House Administration, and I would like our committee to be the court of first 

resort whenever possible, Mr. Chairman. 

Therefore, I look forward to hearing more about these new ventures which the Smithsonian has undertaken, its new financial 

needs, and how we can help to ensure that it continues its important function as the Nation’s attic. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you. 

I am now pleased to recognize the gentleman from Ohio, Mr. 

Ney, for his statement. 

Mr. NEY. Thank you, Mr. Chairman. And thank you for holding 

an important hearing. And welcome to the secretary. In the interVerDate Aug 31 2005 01:03 Sep 07, 2006 Jkt 028299 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 E:\HR\OC\A299.XXX A299
5 

est of time, without objection, I will just put my statement in the 

record. 

The CHAIRMAN. Without objection, so ordered. 

[The information follows:] 

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The CHAIRMAN. Next we turn to the gentleman from Pennsylvania, Mr. Brady. He has no opening statement. Thank you. 

At this time, then, we will commence with testimony from our 

first witness, Secretary Lawrence Small. Mr. Small. 

STATEMENT OF LAWRENCE M. SMALL, SECRETARY, THE 

SMITHSONIAN INSTITUTION 

Mr. SMALL. Mr. Chairman, thank you very much for this opportunity to testify. With 19 museums and galleries, 9 research centers, the National Zoo, and 136 million objects, as you pointed out, 

in our collections, the Smithsonian is the world’s largest provider 

of museum experiences. It connects Americans to their cultural 

heritage, and it also acts as an international leader in scientific research and exploration. Last year, the Smithsonian attracted more 

than 24 million visitors and reached 150 million more people 

through its magazines and Web sites. 

The Smithsonian is unique in status and structure. It is not a 

Federal agency. It is not in the Executive Branch. It is an independent trust entity, established as such by Congress 160 years 

ago in 1846. And that was done to ensure that scholarly research 

and exploration would be unaffected by changing political climates. 

In fact, Congress was satisfied enough with the public-private nature of the Smithsonian structure to make the National Gallery of 

Art, the Kennedy Center for the Performing Arts, and the Woodrow 

Wilson International Center for Scholars legally part of the Smithsonian when they were established. And they continue as such 

today, although, as you know, they receive separate appropriations 

from Congress and have independent governance. The support of 

the administration, the support of Congress and the private sector, 

is crucial for all four institutions, and we are more than grateful 

for it. 

The Smithsonian relies on Federal funds for roughly 75 percent 

of its budget. In addition, the Smithsonian has nonFederal funds, 

which we refer to as trust funds, which include contributions from 

private sector sources and earnings from Smithsonian Business 

Ventures, which we call SBV. 

The Smithsonian has had museum shops, it has had restaurants, 

movie theaters, and a study tour travel business for decades. Its 

highly regarded Smithsonian magazine, which I know all of you are 

familiar with, is now 35 years old. 

Smithsonian Business Ventures was established in 1998, when 

the institution’s board of regents authorized the creation of a distinct operating division that would bring together the 

Smithsonian’s diverse business activities and have them managed 

professionally by a team of experienced executives reporting to a 

board of directors and the secretary. 

In fiscal year 2005, Smithsonian Business Ventures contributed 

$30 million to the institution, and from 2000 to 2005 a cumulative 

total of $155 million. And these are funds that are used for activities, that are not paid for by taxpayer dollars. And so while the 

Smithsonian Business Ventures contributes less than 4 percent of 

the total annual budget, it is really a critical contribution, because 

the unrestricted funds that it provides aren’t earmarked for special 

9 

projects as are most philanthropic gifts, and it fills really vital 

funding needs that would otherwise not be met. 

SBV’s contributions to the Smithsonian accounts for nearly half 

of the institution’s total unrestricted funds. And these are dollars 

that help pay for programs such as the largest traveling museum 

exhibition service in the world, the relationships that the Smithsonian has with 143 affiliate museums around the United States in 

39 States, hundreds of lectures and trips and seminars every year, 

and the Annual Folk Life Festival on the Mall, which attracts more 

than 1 million people, and many, many education programs which 

reach millions of students and teachers. 

Now, the Smithsonian has long sought to do on television what 

it was able to do in print so successfully with this magazine, the 

Smithsonian magazine. This was established 35 years ago. It 

reaches millions and millions of people who would not otherwise 

have had their lives affected and touched by the fascinating content 

of the Smithsonian. And to that end, and with the full support of 

the board of regents, the Smithsonian concluded an agreement in 

early 2006 with CBS Showtime to create a new cable TV offering 

called Smithsonian on Demand. This is targeted at a market vastly 

larger than the Smithsonian’s total number of annual visitors. 

Smithsonian simply doesn’t have the resources, doesn’t have the 

expertise to do something like this alone. Smithsonian on Demand 

will allow the Institution, for the first time and in its own voice, 

to connect with millions of people nationwide, most of whom will 

visit the Smithsonian rarely, if at all. The new arrangement involves very minor change to the way the Smithsonian interacts 

with its many constituencies’ access to the collections, to the archives, to the libraries, for research remains completely unchanged. 

Researchers, teachers, journalists continue to have full access to 

the Smithsonian for news and public affairs and academic and 

scholarly purposes. The Smithsonian is totally committed to keeping Congress up to date and informed as the progress of this exciting and innovative service takes place. We look forward to discussing with you this new means of communication that represents 

a really major step forward in permitting the Smithsonian to touch 

the lives of millions of Americans through the use of 21st century 

technology. Thank you. 

[The statement of Mr. Small follows:] 

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The CHAIRMAN. Thank you very much for your testimony. And 

the telephone reminded me that I neglected to mention the rules 

of this committee: No cell phones allowed to be on. So if you have 

a cell phone, please turn it off, whether you are a member, member 

of the audience, or member of the media. Thank you. 

I appreciate your testimony. Just to kick off the questions, and 

I am sure there will be many questions, but what is the mission 

of the SBV? I assume you have that in writing in some fashion or 

as a part of your documents. And what strategies are employed to 

meet the goals of the mission? 

Mr. SMALL. The mission is to represent what I think you could 

call the best quality operations for the type of thing that each one 

of its businesses does against other people who do the same sort 

of thing. So, for example, the mission of the magazine is to be one 

of the great general interest magazines in the United States, and 

it consistently is viewed as doing that, and has a terrific reputation 

and, as I said, is read by about 7 or 8 million people a month. 

The mission of our restaurants and our museum shops is to be 

the best restaurants and museum shops in the museum world. 

Each one of these businesses is simply designed to be the best it 

can possibly be, to provide, first of all, an extension of the mission 

of the institution, which has always been since 1846 the increase 

in diffusion of knowledge. So the magazine is meant to reach out 

to millions of people who would otherwise not be able to come and 

visit the museums. 

The shops and restaurants are an extension of the visitor experience of the Smithsonian. So in each case, it is to be the best in 

class for the type of market that it is to serve, and obviously to 

raise funds for the Institution to supplement the Federal funding 

that we get. 

The CHAIRMAN. Now, is this the only means of raising outside 

funds that you use? 

Mr. SMALL. No, sir. We also have an endowment which amounts 

to a little over $800 million, and it generates about $35 million to 

$36 million a year for the institution. We also raise money from the 

private sector. Over the last 6 years we have raised $1 billion in 

private sector philanthropy. So there are definitely other sources 

that contribute nonFederal funds to the Smithsonian. 

The CHAIRMAN. So in other words, the development in fund-raising is within your bailiwick. 

Mr. SMALL. Certainly. 

The CHAIRMAN. But enterprises which are trying to raise money 

through selling goods, providing services and so forth, is that all 

under SBV, or does the museum operate some of those as well? 

Mr. SMALL. The vast preponderance of what you might call commercial-type activity, publication of the magazine, the restaurants, 

shops, theaters, all of that is under Smithsonian Business Ventures. The raising of funds through philanthropy is not. 

The CHAIRMAN. And why did you see the need to start the Smithsonian Business Ventures? This is going back a long ways, but 

what do they do that you can’t do yourself, just with internal staff 

if you had decided to? 

Mr. SMALL. First of all, all of the members of the Smithsonian 

Business Ventures staff are, in fact, internal staff. Smithsonian 

15 

Business Ventures is just a name to indicate an operating division 

of the Smithsonian Institution. It is not separate from the Smithsonian Institution. 

The reason it was formed is that back in 1998, the board of regents felt that there had to be a more organized professional approach to dealing with so many museum shops, such a successful 

magazine, so many restaurants, all of these diverse activities. They 

asked former Senate Majority Leader Howard Baker, who was a 

member of the board of regents at the time, to chair a committee 

to look at the issue, help find some outside consultants as to what 

to do. And the committee went and looked at other institutions that 

are large and complex—universities, hospitals, things of that nature—and they found that where the most successful model appeared was where these institutions had pulled together their activities that were in the business world and had them run by professional business managers. And so the board of regents in 1998 

decided to form Smithsonian Business Ventures. 

The CHAIRMAN. And this is a separately chartered organization, 

or simply operates within the framework of the Smithsonian overall? 

Mr. SMALL. The latter. It simply operates within the framework 

of the Smithsonian. It is not a separate legal entity. 

The CHAIRMAN. And does the executive director then report to 

you, or to the board of regents? 

Mr. SMALL. Reports to me. 

The CHAIRMAN. And through you to the board of regents? 

Mr. SMALL. Absolutely. 

The CHAIRMAN. So every aspect of their operations is subject to 

control by the board of regents? 

Mr. SMALL. That is correct. 

The CHAIRMAN. And what care is taken to make certain that the 

mission of the Smithsonian Business Ventures matches the mission 

of the Smithsonian as a whole? Does the motivation of profit or 

raising money in some way cause them to divert from your central 

mission of providing information, knowledge, imparting knowledge, 

and so forth? 

Mr. SMALL. Mission is paramount in the Smithsonian, has been 

for 160 years. It is what drives us. Everything done by Smithsonian Business Ventures is completely under the governance of the 

board of regents, and we are no less interested in mission there 

than we are in any of our museums. So anything we do, whether 

it be the publication of the magazines, the type of merchandise that 

we sell, any type of partnerships that we enter into, all have mission first and foremost. 

The CHAIRMAN. I see that my time has expired, and I would like 

to abide by the time rules, just as any member has to. So I am 

pleased to recognize the Ranking Member. 

Ms. MILLENDER-MCDONALD. Thank you so much. And, again, 

thank you for your testimony, Mr. Small. 

In looking at this, first of all, my first inclination in reviewing 

all of this material that I received was a 30-year contract given to 

you, and how often—and maybe, Mr. Chairman, you might be able 

to answer this when does Congress review this contract? How often 

do we come back to review just where you are, where you are purVerDate Aug 31 2005 01:03 Sep 07, 2006 Jkt 028299 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 E:\HR\OC\A299.XXX A299
16 

porting to go, what are you doing, some of those business ventures 

that you have entered into? 

Mr. SMALL. You mean with the committee itself? 

Ms. MILLENDER-MCDONALD. Well, there is a 30-year contract 

that I am reading here. And I was just concerned as to how often 

is that contract reviewed by either this committee or other relevant 

committees? Why was 30 years chosen as the length of this contract? 

Mr. SMALL. I understand, Congresswoman. First of all, I think it 

is a good point to make, because 30 years is an unusual amount 

of time. 

Ms. MILLENDER-MCDONALD. It seems to me, also. 

Mr. SMALL. Yes. Relative to the kind of things that we have done 

in the past in the Smithsonian. On the other hand, as we have gotten more and more into the world of learning about television—because the whole idea of this is to do for the Smithsonian in the 21st 

century what the magazine did in the 20th century, communicate 

with so many people. We have discovered that building a TV channel, a cable TV channel, building a film library are all long-term 

propositions; that they take at least 7 to 10 years to get established; and that long-term contracts are not unusual in the television industry. 

So as we have learned more and more about this, we have come 

to see that it is not something that you can do overnight. It takes 

a long time to build up the film library, it takes a long time to 

build up the number of users of the network. So while it is different from what we have done in the past, we understood that it 

is not unusual. 

Ms. MILLENDER-MCDONALD. And there is a possibility that it is 

not unusual, as you said, given the television industry. But there 

is one thing that tends to put you apart from all of this, and that 

is that you do get Federal funds, and you get 75 percent of Federal 

funds. And those funds are really the people’s money. 

Given all of that, then it would appear to me that we would have 

some sense of accountability, if you will, if nothing else, as to 

where you are along this continuum of 30 years to see whether or 

not there is something that we need to do to enhance the budget 

of the Smithsonian. And so that in and of itself is a deep concern 

of mine, that there is a 30-year contract, irrespective of what you 

are saying that you have to do all of these things and it takes time. 

And I can understand that. But when there is this proviso that you 

have said, while it is not a Federal agency, you do get Federal 

funds, and those funds really represent the people’s money. And 

doing that, then we have to have some accountability ourselves, 

and so therefore we should have that accountability as well in your 

new-found venture of the Smithsonian Demand on Review. 

Mr. SMALL. Smithsonian on Demand. 

Ms. MILLENDER-MCDONALD. What is the percentage of ownership 

the Smithsonian actually has in this Smithsonian network as a minority partner? 

Mr. SMALL. Ten percent. 

Ms. MILLENDER-MCDONALD. Would such an equity arrangement 

be considered unusual? 

17 

Mr. SMALL. I think that it is—since the Smithsonian is not investing any money in this, we think it is a terrific arrangement. 

Ms. MILLENDER-MCDONALD. So you think it is a terrific arrangement, and you do not see this as an unusual percentage? 

Mr. SMALL. No. We think it is a wonderful percentage. Unusually 

good; let us put it that way. 

Ms. MILLENDER-MCDONALD. Well, I suppose that is something 

that is yet to be determined. But let me go further on this. In your 

statement, you have said that given the GAO assessment of the 

buildings and the age of the buildings and all of those factors, that 

GAO has assessed that there is a critical need for you to have a 

total of $2.3 billion that is needed to maintain all the facilities. And 

yet in your statement you are suggesting that you need to come 

back to the Federal Government, perhaps the appropriators, to look 

for in excess of $100 million beyond that amount. 

Why would the appropriators want to do this when they have 

seen, as some perceive, an arrogance, and certainly the inability of 

your wanting to cooperate with them on questions and issues that 

they have raised about this business venture that you have ventured into? That is one question. 

The other question is you have outlined all of your different ventures and all of that. What sets you apart from them in terms of 

where you are today from what they have, where they have been? 

Mr. SMALL. First of all, I would say that I believe that Smithsonian on Demand is completely consistent with the other outreach 

activities of the Smithsonian in the past, and it is really a diffusion 

of knowledge-focused activity. It is focused on getting the 

Smithsonian’s treasures and stories, objects, out to the American 

people in the most effective way possible. 

One of the things we are aware of, and I am totally sensitive to 

what you are saying, Congresswoman, is that Congress was surprised by the blowup about Smithsonian Business Ventures. We 

were surprised. We were completely shocked by it. Our board was 

shocked by it. Because the way this—about Smithsonian on Demand. Because the way Smithsonian on Demand is actually structured, it actually represents almost no change, minimal change to 

the way the Smithsonian operates, where people come to the 

Smithsonian, with professors, with filmmakers, with all sorts of different constituents. 

Because it involved so little change, we did not foresee at all that 

there would be any hue and cry and that people would interpret 

Smithsonian on Demand the way they seem to have, which they 

believe it has some restricted access. 

So we apologize for the tremendous hullabaloo that has been created for Members of Congress because we didn’t expect it. And 

then when the time came to react to it, since this contract has a 

confidentiality clause that is designed to protect the business information in it that could hurt the venture competitively if it were 

made public, just because competitors would see it, we had to go 

back to the partner in it and say, since we are bound by this confidentiality clause and Congress wants to see the document, can we 

provide the document to Congress? And it has taken us this long 

to be able to get that permission. 

18 

Ms. MILLENDER-MCDONALD. But, Dr. Small, wouldn’t you think 

that because this was a venture unlike any other venture—you 

know, we had magazines, business offices and all of these things 

open up which you outlined—this is something unusual? It seems 

that you were putting the Smithsonian on sale, as Members of Congress have seen it. But you did not have the sensitivity to come to 

Congress before this. And then when Congress heard it, it was in 

the media. And that is what is perplexing, confusing, and insensitive to Members of Congress. 

Mr. SMALL. I completely understand what you are saying. From 

our point of view, the way we thought it through—and obviously 

in the blinding light of hindsight, we would try to do it differently. 

The way we thought it through is we, the Smithsonian, has been 

doing television programming and working with filmmakers for 

years and years and years. Their ability to access the Smithsonian, 

the ability to work with the Smithsonian is hardly changed by this 

at all. So we did not think that there was going to be any big uproar, because we saw it as minimal change. 

The reason we didn’t come to Congress is we didn’t see that there 

was anything that involved any significant change in any big way. 

And so now that we have seen that it has been turned into what 

you might call an issue, where some people believe that access is 

restricted, although—— 

Ms. MILLENDER-MCDONALD. We really do believe that, yes. 

Mr. SMALL. The fact is, it is not. And the same people can access 

the Smithsonian the same way they always have. The Smithsonian 

can do just about everything it did before we did this arrangement. 

But it has been twisted in some people’s minds into something that 

is dramatically different than the way we have operated for 160 

years, and it is not. 

And so understanding that, I am sorry that it has created problems for members who have been papered with all sorts of correspondence. But the fact is we did not estimate it would blow up, 

our board did not estimate it would blow up because we didn’t see 

it as a big change. That it has blown up, obviously we want to communicate with everybody as best we can to alleviate their concerns, 

to explain what is going on. The issue of confidentiality, we simply 

had to get our partner to go along with it, and they have. 

Ms. MILLENDER-MCDONALD. Well, I thank you, Mr. Chairman. I 

just want to say this. Smithsonian on Demand, becomes problematic for Members of Congress. Smithsonian on Demand, I think 

that is one of the problems. 

The CHAIRMAN. The gentlewoman’s time has expired. I am 

pleased to recognize the gentleman from Ohio, Mr. Ney. 

Mr. NEY. Thank you, Mr. Chairman. 

And Secretary, as you know, the Congress, appropriate jurisdiction committees, get an executive summary when it comes to House 

Administration, Transportation, and Appropriations. As I understand probably within that executive summary and from what you 

said about not knowing the magnitude of the reaction on this, and 

not thinking it would have a huge reaction. But those executive 

summaries that come to these committees sometimes will not have 

a lot of detailed information in them is what happens. 

19 

Now, I am not saying that by any stretch of the imagination it 

was intentional or anything. I know from the past in looking at 

these executive summaries, they are executive summaries. Of 

course, the Congress is represented on the board of regents. And 

I think in this case on this contract, there was an executive subcommittee, wasn’t there? 

Mr. SMALL. The board of regents reviewed this contract in great 

depth. 

Mr. NEY. And it was an executive subcommittee. So at the end 

of the day, probably the issue we can look at is what can be done 

to increase communication between the Congress, I think, and the 

private end with the SBV. 

Mr. SMALL. I couldn’t agree more. There is no question here that 

we have to do a better job in working with Congress on communication. 

There was no desire at any point in time in the Smithsonian to 

keep this secret from Congress, because all the minutes of the 

meetings of the Smithsonian Regents, where this was talked about 

in detail, were, in fact, sent to our committees of jurisdiction. 

But we didn’t call up the committees of jurisdiction and say, 

Look at the minutes of this; pay particular attention to it. They 

just were sent up routinely. 

And now that we have seen what has happened on this, we want 

to work very, very aggressively with all of the committees that 

work with us to make sure people are up to date. 

Mr. NEY. Because I think the argument that won’t hunt here— 

as we say, That dog won’t hunt. I think that argument won’t hunt 

here in the Congress that, well, the SBV is a separate entity, because although the Smithsonian is and should be unique—I would 

say that—but the SBV may make a decision that comes back somehow to get into the realm of public accessibility which then is the 

taxpayer dollar. 

So, yeah, I think maybe the way to look at this is, what can be 

done with communication, when issues in fact will have some type 

of effect on—even if they are decided by a different arm, would 

have an effect. 

Mr. SMALL. I agree. 

Mr. NEY. Thank you. 

The CHAIRMAN. I am pleased to recognize the gentleman from 

Pennsylvania, Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. I also have a problem 

with a 30-year contract. I have a problem with a 30-year anything. 

I mean, it is an awfully long time. But you said that the reason 

is because it is going to take 7 to 10 years for them to get ready 

to offer anything. 

Mr. SMALL. No. No. We expect that by the end of this calendar 

year there will be programming. I said it takes 7 to 10 years to 

really build up the brand within the world of television, so that it 

has lots of people who are subscribers to it and it establishes its 

presence in the marketplace. 

Mr. BRADY. So you are giving them a 30-year contract; we are 

allowing them on our time to build up their business? 

Mr. SMALL. We and they, because we are part of it. We are partners. 

20 

Mr. BRADY. And also I understand if a film maker, a private film 

maker would have to offer on demand, they would have to offer— 

they have first right of refusal? 

Mr. SMALL. No, that is not true; that is one of the things that 

has been a misunderstanding. 

We have the ability to do virtually almost everything that we did 

in the past. We actually took a look at, over the last 5 years, 350 

contracts that we entered into to allow film makers to work with 

us; and out of the total, the ones that would even come up for a 

look by this particular partnership ends up being less than 5 percent of the whole amount. So virtually everything that we did in 

the past, we would have done automatically. 

And then we have the ability to work with independent film 

makers outside of Smithsonian on Demand as well. So this is a 

misinterpretation that has gotten into the public arena. 

Mr. BRADY. But if I am a film maker and I want to make a film 

and you don’t agree, or the demand people, Showtime, don’t agree, 

you could stop that from happening? 

Mr. SMALL. If you are a commercial film maker and you have 

come to the Smithsonian at any time in the past, the first place 

you go is to the museum that you would want to work with. That 

museum has always made a decision whether it wants to work on 

that project with that film maker. And that has to do with, is that 

particular topic a priority for the museum? It has to do with whether the curators are free to work on it. 

So the first thing that the museums have always done is decide 

whether they want to do it or not. So the answer to the question 

is that if some film maker comes to a Smithsonian museum and 

says they want to make a movie, it is up to the museum first to 

say, do they want to make the movie, and it always has been. 

Mr. BRADY. But now you add to the equation, Showtime, and 

now they make a decision. 

Mr. SMALL. No. Then what happens is, let’s assume the museum 

says, do they want to work on the project with the film maker. The 

museum then has the option of saying, this is something that could 

be of interest to Smithsonian on Demand, or it is something that 

we might want to do independent of it. And so it could go in either 

direction; and that will then depend on the circumstances. 

But it doesn’t automatically have to go to Showtime, with 

Showtime saying—excuse me, with Smithsonian on Demand, with 

them making the decision. It is the museum’s decision which way 

it should go. 

Mr. BRADY. But isn’t Showtime a part of that decision? 

Showtime is not a part of any of the decisions? 

Mr. SMALL. No, the arrangement that we have made is that the 

Smithsonian will decide what it will do with whom. And it has the 

option to do a certain number of things independently during the 

year, during any given year, without being involved with Smithsonian on Demand. And then it expects to do the bulk of this, because Smithsonian on Demand is going to invest tens of millions 

of dollars every year in programming with independent film makers in this venture, so the Smithsonian will be doing much more 

than it has ever done in the past. So much more is going to get 

done. 

21 

Mr. BRADY. My concern is real simple. An independent film 

maker wants to produce or have a film put on TV. And you are telling me that Showtime has no say in that at all? They could just 

keep on coming in and doing what they have been doing when 

Showtime wasn’t in the 30-year? 

I am worrying about stifling these people for 30 years, and 

maybe Showtime doesn’t want the competition. I don’t understand 

that. 

Mr. SMALL. Let me be very specific. We looked at 300—all the 

cases that we have worked on with film makers over the last 5 

years, there are 350 cases; what we saw in the 350 cases is that 

in all but 17, the use of Smithsonian’s objects, curators, facilities 

was virtually insignificant. So they automatically would just do 

what we did before. 

When we got to the 17 cases, we found—we saw that in those 

cases, the Smithsonian occupied a significant amount of time in 

that particular show. Let’s say there was an hour show; it could be 

20 or 30 minutes of the time. In those particular cases what the 

museum would then say is, that is significant enough so that we 

may ask you, film maker, if you could like to talk to Smithsonian 

on Demand about working with them on the project; or the museum could say, this is something we think we would like to do 

with you independently. And we have the option, under this agreement, to be able to do a number of those independently. 

The vast preponderance of people who have worked with us in 

the past will be able to do exactly the same thing they have always 

done. 

Mr. BRADY. But if I don’t subscribe to Showtime. I can’t watch 

it. 

Mr. SMALL. If you don’t subscribe to Smithsonian on Demand, 

then you would not be able to see its programs. But you don’t have 

to pay anything to Smithsonian on Demand. Smithsonian on Demand will be offered through the cable package that you can sign 

up. 

Mr. BRADY. The cable package? 

Mr. SMALL. Not Showtime. 

Mr. BRADY. That I don’t sign up to. 

Mr. SMALL. All you have to do is, it will come automatically with 

the cable package. It is not something where people are going to 

pay for it specifically. And you don’t have to sign up for Showtime 

to get it. 

Mr. BRADY. Okay. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlewoman from Michigan. 

Mrs. MILLER. Thank you, Mr. Chairman. 

I apologize. I was late getting to today’s hearing. Secretary 

Small, I tried to read through your comments here, but I didn’t 

hear your testimony. You just mentioned that you would not 

have—let me follow up on what you just said—to pay separately 

for this service—that it would be a part of your cable package. 

Is that in the 30-year contract? 

Mr. SMALL. I believe. Let me just double-check. 

22 

Mrs. MILLER. You will never have to pay separately for it for 30 

years? 

Mr. BEER. The agreement has a number of different provisions. 

The CHAIRMAN. I am sorry. You will have to—— 

Mr. SMALL. This is Gary Beer, the Chief Executive of Smithsonian Business Ventures. 

The CHAIRMAN. You will have to come to the table and identify 

yourself. 

Mr. BEER. Excuse me. I have never testified at a hearing before. 

Could I have the question repeated? 

Mr. SMALL. If the contract specifies—— 

Ms. MILLENDER-MCDONALD. Your name, sir? 

Mr. BEER. My name is Gary Beer. I am the Chief Executive Officer of Smithsonian Business Ventures. 

Mrs. MILLER. Mr. Beer, my question is this. Secretary Small just 

testified that there would be no difference in cost to get Smithsonian on Demand. It would be a part of your normal cable package, 

there would be no additional cost, like HBO or Showtime or any 

of the pay channels. 

Is that for 30 years, people are going to be guaranteed that there 

will be no additional cost? Is that part of the contract? 

Mr. BEER. No, it isn’t. There is nothing in the contract that can 

guarantee what a cable operator or satellite distributor or a wireless operator or anyone else in the future may do. 

The current offering is conceived as an offering that is commercial-free and available to all subscribers of digital cable. And that 

will, in the end, depend upon what the customer—and in this case, 

it is a programming service, and that programming is made available initially to cable operators. So what will happen in the future 

will depend on what happens in the marketplace and what happens with individual distributors. 

Mrs. MILLER. Things change over the years. In 30 years a lot of 

things will change. His testimony is contrary to what you had originally said, Secretary. 

Let me ask you, do you—either the Secretary or Mr. Beer—do 

you have any background in television or film making, you, yourself, for instance? 

Mr. SMALL. Yes. No, I don’t. Well, I have some in that for many 

years I was in the financial services industry, and was a banker 

to people in the media business. I was also on the board of directors of Paramount Communications, which own Paramount Studios 

and Simon & Shuster books. 

Gary Beer, the Chief Executive of Smithsonian Business Ventures, was the founding partner, with Robert Redford of Sundance 

Industries, which was in the business of film making and various 

publications and things of that nature. So he has extensive experience in it. 

Mrs. MILLER. And you were involved in negotiating the 30-year 

contract, as was Mr. Beer then? Who actually negotiated the contract? 

Mr. SMALL. Mr. Beer. 

Mrs. MILLER. One of your comments you said a little bit earlier, 

Secretary, was that the Smithsonian had been doing similar things 

for years, that you were somewhat surprised by the brouhaha that 

23 

has erupted over all of these kinds of things, and that it is not dramatically different from—what we are talking about today from 

what you have been doing for decades, I suppose. 

Could you give me some examples of other 30-year contracts? For 

instance, could you give me an example of a contract that has been 

around 30 years that is now expiring or close to expiring, all similar kinds of things what you have done here? 

Mr. SMALL. No, I can’t. As I indicated, this is definitely unusual 

for us—before when I made my comments—there is no question 

about it. Because we have never attempted to build a presence on 

digital cable TV before, because it hasn’t existed. 

What I meant is that we have been—relative to the issue of access and use of the Smithsonian’s collections, we have been doing 

film projects with people for years and years and years, and in no 

case is there any issue of the venture, this business partnership, 

having any right of first refusal. In no case does this partnership 

decide what gets done, and in no case do we require any film 

maker to go to this. So I was being responsive to that. 

The 30-year contract is definitely something that is more similar 

to what is done in the media industry, and we have never done 

anything like that before. But we did a lot of checking to see 

whether it was reasonable, and the feedback we got from professionals was ‘‘yes.’’ 

Mrs. MILLER. Just because I am not familiar with this—if it is 

similar to what is done in the media industry, could you give me 

an example of a similar contract in the media industry that runs 

for 30 years? Can you enlighten me on that? 

Mr. SMALL. No, I don’t know a particular contract. I just know 

it does take a long time to build up a cable TV channel. I mean, 

we have seen that in the course of our lives, to build a film library 

and a lot of subscribers to a service is not something you can do 

quickly. And remember, that the partner here is investing tens of 

millions of dollars. And so the likelihood that you could get people 

to invest tens of millions of dollars a year and keep spending 

money on programming without having them have the confidence 

that they were going to enter into something where a film library 

would build and many millions of subscribers would be built up is 

logical. 

I mean, I don’t think anybody would invest money in a shortterm contract, knowing that it is going to take a long time to succeed. 

Mrs. MILLER. Well, everybody doesn’t make money, I don’t think 

in the film industry. 

But with that, I see my time has expired. Mr. Chairman, thank 

you. 

The CHAIRMAN. The gentlewoman’s time has expired. 

Let’s pursue some of the things that were just discussed before. 

For one thing, you mentioned that the Smithsonian Board of Regents had reviewed the contract in great depth, but I understand 

that only the executive committee was shown the full text of the 

contract and that the full board was not; is that correct? 

Mr. SMALL. What we provided to both the executive committee 

and the full board were what I would call fairly detailed descriptions of the provisions of the contract. But given that it is, I think, 

24 

over 110 pages long, there are no contracts in the Smithsonian that 

long that the board would go over in detail. But anything that was 

an important provision was attached to our minutes, was presented 

in the board books to them. 

But, no, we did not have them read the entire contract. I am not 

aware of any other contract that the Board of Regents has ever 

read in any detail either. 

The CHAIRMAN. Okay. But the summary you distributed, I am 

sure, would be available for us to look at. 

Mr. SMALL. Certainly. 

The CHAIRMAN. Thank you. 

Another issue regarding the questions asked by Mr. Brady and 

Mrs. Miller. I understand you make a distinction between ‘‘access’’ 

and ‘‘use,’’ that ‘‘access’’ will continue as it has, but the ‘‘use’’ is 

something that would go under the contract and possibly would require reimbursement. 

Is that a fair description? 

Mr. SMALL. As I said, the access is unimpeded. It is the same access everybody else has ever had. Use simply involves the situations where commercial—the use is related to commercial film 

making, where people come to the Smithsonian to enter into a commercial film venture, where they want to use the Smithsonian for 

a business purpose, for the making of a film documentary to sell 

or to put onto broadcast television. So it only affects those situations. 

And as I indicated, the contract has more than enough flexibility 

for us to allow ourselves to work with commercial film makers just 

as we have in the past. 

The CHAIRMAN. But if you choose not to work with them as you 

have in the past, they would work through Showtime? 

Mr. SMALL. They don’t have to. At no time do we say to anybody: 

You must deal with Smithsonian on Demand. 

We can say, Smithsonian on Demand exists and it plans to invest 

tens of millions of dollars with independent film makers that have 

not been put into the market before. 

So I am sure there will be lots of independent film makers that 

will go to Smithsonian on Demand, but if they don’t wish to, they 

don’t have to. And if they wish to consider working with the museum on a project that the museum wants to do with them, as I 

say, we have the flexibility to do a certain number of programs 

every year outside of Smithsonian on Demand. And of course, if the 

use of the Smithsonian is just completely incidental and not significant, they can do the project just as they have in the past, which 

represents 95 percent of what goes on with the Smithsonian anyway. 

The CHAIRMAN. But if they do it within the context of Smithsonian on Demand, or Showtime, then they must reimburse? 

Mr. SMALL. No, they don’t reimburse; there is no reimbursement. 

It just means that Smithsonian on Demand would be putting in the 

money to pay for the production, and work with the film maker on 

how that production would take shape if they chose to work with 

Smithsonian on Demand. 

The CHAIRMAN. But presumably then the money would go to 

Smithsonian on Demand. 

25 

Mr. SMALL. The film maker is obviously going to get paid for 

doing the film. And so part of the arrangements the film maker 

would make if he or she chose to work with Smithsonian on Demand would be whatever their financial arrangement was. 

Once it is produced, the revenues that accrue from having added 

that particular film to the library of Smithsonian on Demand and 

the programs that would be available ultimately should produce 

revenue to go to Smithsonian on Demand. 

That is why they are producing the movie, so that they can actually develop enough programs to put on the channel so that people 

have access to them. And then the cable TV operators who would 

have this service in their packages would pay Smithsonian on Demand. 

The CHAIRMAN. Yes. And what amount of that money goes to 

your business ventures and, thence, to you? 

Mr. SMALL. As I indicated before, we have part ownership in the 

partnership; and then there is a minimum fee that Smithsonian on 

Demand, Showtime networks has to pay—Smithsonian networks, 

excuse me, has to pay to the Smithsonian every year. So there is 

a minimum fee that has to be paid. And then there is a percentage 

of the total revenue, and if that is higher than the minimum fee, 

then we would get that percentage. 

The CHAIRMAN. And I am just trying to get a picture of the contract. 

It is fully open and free for anyone who wants to come in. You 

talked about ‘‘access’’ versus ‘‘use.’’ I want to make sure that ‘‘use’’ 

is fully open to anyone. 

Now, who sets the fee that someone would have to pay as part 

of this project? 

Mr. SMALL. The fee that someone—I don’t believe I understand 

the question. 

The CHAIRMAN. Well, you have signed a contract with Showtime? 

Mr. SMALL. Right. 

The CHAIRMAN. And presumably they have some control over 

who is going to be allowed to work with them, participate with 

them. 

Mr. SMALL. No. The Smithsonian decides—the independent film 

maker is aware that this partnership exists. This partnership exists to invest money into making films that are related to the 

Smithsonian that are like the kinds of articles that you see in 

Smithsonian Magazine, the kind of things that appeal to people 

who are interested in history, art, culture and science. 

When a film maker comes to Smithsonian and goes to one of our 

museums and says, I would like to do a film working with you 

about a particular topic, it could be about an art collection. It could 

be about an airplane. It could be about an object of American history. 

The first thing the museum has to decide is whether it wants to 

work on that project. That has always been the case, before there 

was any Smithsonian on Demand; and so that is step one. 

Step two is for the film maker then to decide, is this something, 

given that the museum wants to work on it, that I would like to 

work on? Is this something that involves significant use of the 

Smithsonian artifacts, premises, curators? 

26 

So the museum has to make a judgment, is this significant or not 

significant? If it is not significant and it is just a passing photograph of an object, a sentence or two from a curator, then the film 

maker operates the way he or she always did. If it is significant, 

such as a large amount of time or a very important point made in 

the film, then the film maker has to decide, do I go work with 

Smithsonian Business Ventures, or is the museum willing to do 

this outside of Smithsonian Business—not Smithsonian Business 

Ventures, Smithsonian on Demand willing to do this outside of 

that? 

And the museums have the option of doing several productions 

a year outside of Smithsonian Business Ventures. 

The CHAIRMAN. And how much is several? 

Mr. SMALL. Six of those. And we—as I said, over the last 5 years, 

we only had 17 productions that we thought could be viewed as significant. And we could have done 30 under this agreement. 

The CHAIRMAN. And what happens if you receive more than six 

requests? Then it is automatically—— 

Mr. SMALL. Not receive the request, but what happens if we 

wanted to work on more of those; then we would run out of that 

option. But you then have the option of the film maker saying, all 

right, but I still want to work with you, but let us reduce the 

amount of interview time or film time or the importance of the 

Smithsonian part of it down to something that is nonincidental, not 

significant. 

But in no case are they forced to work with anybody. 

The CHAIRMAN. Well, my time has expired, so I now recognize 

the ranking member, Ms. Millender-McDonald. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. 

And, Mr. Secretary, it seems like you, too, are having some problems in explaining this. It is quite convoluted, and if you are having problems, you can imagine what we are having problems up 

here with as well. 

You spoke about the fact that in addition to your contract with 

the Showtime folks, you can do other projects with other film makers. So you can go outside of Showtime On Demand and do that, 

and given that you do that, then whatever profit sharing that 

comes about—I mean, there is a profit here. You are saying that 

you receive the profit over a certain fee or above a certain fee. 

What are—all of this, what are you talking about? 

Mr. SMALL. What I said was, we are partners with CBS 

Showtime and Smithsonian on Demand, the first offering of this 

partnership. We own a percentage of that partnership, as I indicated before. And then we get a percentage of the revenues paid 

to us, and with a minimum every year, so that we are guaranteed 

a minimum amount of money paid to the Smithsonian every year. 

If we—that is, if we are doing films through Smithsonian on Demand. 

If we are working with an independent film maker independently, how much we would get out of that venture would have to 

be negotiated with that independent film maker. 

Ms. MILLENDER-MCDONALD. All right. So this whole percentage 

that I initially asked you about, the Smithsonian networks, are we 

27 

in the ball park of your going outside of this box of Showtime, and 

this is your network that gives you the 10 percent? 

Tell me, how does all of this work? 

Mr. SMALL. Smithsonian Networks is simply the name of the 

partnership with CBS Showtime, and its first offering to the public 

is called Smithsonian on Demand, which is just the same thing as 

video on demand. 

Ms. MILLENDER-MCDONALD. So it is one and the same. So Smithsonian Networks is really one and the same as Smithsonian on Demand? 

Mr. SMALL. Smithsonian on Demand is the first set of programs 

developed by the company, Smithsonian Networks. So the partnership we have with CBS Showtime is called Smithsonian Networks. 

The first project that they are doing is to create a series of Smithsonian programs on digital cable that is called Smithsonian on Demand. 

Ms. MILLENDER-MCDONALD. One of my concerns is your profit 

sharing in your contract with Showtime. 

But the one thing that I want to get back to is that on this contract, there are so many provisions in this contract, believe me, Mr. 

Small, that it is not small at all trying to get into it. If Showtime, 

at any time, wants to cut and switch, I mean, if they want to terminate the contract with you, they have the ability to do that. 

Mr. SMALL. There are conditions in the contract under which 

they can terminate, and there are conditions in the contract under 

which we can terminate. 

Ms. MILLENDER-MCDONALD. All right. So that is what I want to 

get to because if this program, if your Smithsonian on Demand is 

not profitable and is not sustainable, then they certainly will not 

want to keep with you, and they are going to cut and switch. They 

are going to leave. They will pull out. 

But when and how can you pull out of this contract? Do you have 

the same clause? Do you have the same time frame that Showtime 

has in pulling out of this contract? And what will be the liability 

to Smithsonian if that is the case? 

Mr. SMALL. From a liability standpoint, since the Smithsonian is 

not investing any money in it, we certainly wouldn’t lose any 

money. We have—the partnership has to perform at certain levels 

during its life, and if it doesn’t perform, if it isn’t as successful as 

these performance levels call for, which is in the contract provided 

to you, then the Smithsonian can say it is not successful and can 

terminate its arrangement. 

Ms. MILLENDER-MCDONALD. And these outside groups that you 

enter into and work with, in addition to the Showtime, that would 

not enter into this contract at all in terms of liability or any profit 

sharing or anything like that? 

Mr. SMALL. Totally independent of it. Totally different from it. 

Ms. MILLENDER-MCDONALD. And so you can, it seems, with— 

now, again, I haven’t gone through this entire contract because I 

just got it the day before yesterday. But it seems that the provisions that I have seen, that Showtime can get out of the contract 

in 2 or 3 years. 

And you are saying that you can also? 

28 

Mr. SMALL. There are different criteria in the contract. It is fairly 

detailed as to which party can do what. But in our case, our ability 

to get out is dependent on the partnership being successful. If the 

partnership is successful, then we don’t have the right to terminate 

the contract. If it is not successful in meeting the specific targets 

that it has, then we do. 

Ms. MILLENDER-MCDONALD. And that is where I have difficulty 

here, because if you are not meeting your obligation side of it, 

meaning successful, and then, you know, you define what is success—we will have to define that, and I am sure it is in the contract. 

Mr. SMALL. It is if the partnership isn’t successful; and that is 

the reason, if it weren’t successful, then we obviously wouldn’t 

want to continue it. So we have the ability to get out of it if it 

doesn’t hit a prescribed amount of growth. That is the important 

thing. 

Ms. MILLENDER-MCDONALD. And you will not—there will be no 

liability on your part if you should want to get out of it if it is not 

successful? 

Mr. SMALL. No liability as long as we were to leave it meeting 

the terms that we agreed to in the contract. 

Ms. MILLENDER-MCDONALD. But if you do not meet those terms 

then there is a certain amount of liability. 

Mr. SMALL. If the partnership did not perform as it was supposed 

to and hit these particular target levels, and we decided to leave 

the partnership, that would be fine. 

If we left it and the partnership did hit those levels, then we 

would breach the contract. 

Ms. MILLENDER-MCDONALD. And it is those levels that I need to 

know, how are they defined. What are those target levels? It is in 

the contract, I hope. 

Mr. SMALL. Absolutely. 

Ms. MILLENDER-MCDONALD. You would not know them offhand 

right now? 

Mr. SMALL. They were one of the provisions that we have asked 

you to, it is a business-sensitive position, a competitive one. You 

have it, and we would be glad to brief you on it. 

Ms. MILLENDER-MCDONALD. I understand. And we can talk with 

you in my office or your office on those provisions. 

Mr. SMALL. Absolutely. 

Ms. MILLENDER-MCDONALD. Mr. Chairman, I know the time is 

up, but I will come back again then, all right? 

The CHAIRMAN. The gentlewoman’s time has expired. 

Ms. MILLENDER-MCDONALD. I understand, for the moment. 

The CHAIRMAN. Mrs. Miller has no further questions. 

Mr. Brady. 

Mr. BRADY. Again, thank you, Mr. Chairman. You said there is 

a minimum guarantee. Do we know that figure? 

Mr. SMALL. It starts out at $500,000 a year. 

Mr. BRADY. $500,000 a year. You have to make $500,000 a year? 

Mr. SMALL. It has to pay us 500,000. 

Mr. BRADY. You have to be paid only $500,000 a year? 

Mr. SMALL. That is the minimum. 

29 

Mr. BRADY. Minimum. I guess you have no idea, but is there any 

projection what it may be? 

Mr. SMALL. If you took the minimum over the life of the 30 years 

and all we got paid was the minimum, it would amount to $99 million. 

Mr. BRADY. But you are basing it on only the minimum. You 

don’t think you are going to make anything more than the minimum? 

I can’t believe Showtime’s going into a venture like this to make 

$500,000 a year. 

Mr. SMALL. That is the minimum that has to be paid to the 

Smithsonian, not make—— 

Mr. BRADY. I understand that. But you are using the minimum 

over 30 years. 

Mr. SMALL. You asked me about the minimum. I am saying that 

that is the minimum amount. 

Mr. BRADY. That is the only guarantee you have from this contract? 

Mr. SMALL. That is correct. The minimum is the guarantee. We 

obviously believe it will do better. 

Mr. BRADY. How about PBS? Could they come in and do an archive, use your archives to put on a show? 

Mr. SMALL. PBS has the same access that they have ever had to 

the Smithsonian, and PBS would go through the exact same procedure that I described before. 

They would visit with the museum. The museum first has the 

right to say, do we want to work with them on the project? If the 

museum says, yes, we do, then they have to determine whether the 

use they want to make of the Smithsonian is significant or not. If 

it isn’t significant, just go ahead and do the project. That has been 

the vast preponderance of the cases we have had in the past. 

Mr. BRADY. I can’t get past that. I can’t get past your telling me 

that PBS has the same access, although you have a 30-year contract with another cable company, with the cable company with Direct cable; and you are telling me that they are not sitting at the 

table saying, ‘‘No, don’t do this with PBS. We want to do it and 

make money on it.’’ 

Are they having any say at all, Showtime, in this 30-year contract, that they can’t—could they veto PBS? They can’t do that? 

Mr. SMALL. No. They don’t get involved in that. It is the Smithsonian that decides what projects it wants to do. And the fact is that 

the—— 

Mr. BRADY. Does the Smithsonian then have the right to say who 

they want to give that project to? They would rather give it to 

Showtime or they would rather let PBS do it for nothing? 

Mr. SMALL. The Smithsonian has always decided, does it want to 

work on a given project or not. The film maker can say, I don’t 

want to go to Showtime, and that is fine; they don’t have to go to 

Showtime. 

And the museum could say, ‘‘You don’t have to go to Showtime; 

we want to do it with you.’’ 

The most important thing, first, is, are they going to do anything 

that is going to involve a significant use of Smithsonian resources. 

30 

And 95 percent of what we do doesn’t. So all of that is going to stay 

the same. 

Mr. BRADY. I don’t understand that. You have got a public broadcasting system that is going to put a show on the air for nothing. 

And it is going to be a good show; people are going to watch it. 

And then you have got Showtime coming, who is going to make 

a profit and you are going to make a profit from a good show. And 

I can’t believe that you are going to let PBS have the same access 

that you will with Showtime doing it. And if you are going to make 

money, and you want to increase your $500,000, which seems like 

a very little bit amount of money to me to go into a 30-year contract, and you are going to tell me that you are going to have 

them—they are going to have a level playing field, the people that 

don’t have digital cable be able to watch this show will have a level 

playing field, as opposed to Showtime thinking they have got a 

good show coming on you—something is clicking, whatever, maybe 

aeronautics, who knows, space or something might happen. 

That is just a problem that I don’t—— 

Mr. SMALL. What I am saying is that having looked at everything we have done with PBS and others in the past, the vast — 

Mr. BRADY. But that is changing now. 

Mr. SMALL. It is changing. But the fact is that there aren’t people, including PBS, who are coming to the Smithsonian and saying 

we want to invest millions of dollars doing programs with you. It 

just hasn’t happened in any significant way and there is no reason 

to believe that it would happen. 

What I am saying is that the vast majority of what we have done 

in the past continues the same, and that we have the flexibility to 

do projects just like that, and an amount of flexibility that is far 

greater than anything we ever did in the past like that. 

So I understand that this has been raised as a polemical topic 

that people are having difficulty coming to peace with, but the facts 

show that almost everything that we have done in the past we can 

continue to do and that there is a great deal of flexibility to work 

with independent film makers on projects outside of this venture, 

although we think that the independent film makers are going to 

knock down the door to the venture because they are going to be 

spending so much money with independent film makers. 

Mr. BRADY. But isn’t PBS now considered a competitor? 

Mr. SMALL. PBS is in the mass market of television. 

Mr. BRADY. I know. But are they considered a competitor? 

Mr. SMALL. Anybody who puts anything on television is a competitor. 

Mr. BRADY. Do you want to give them an equal playing field to 

go to a competitor that is not going to give you any revenue, as opposed to going to Showtime that is going to give you revenue that 

the people have to pay for. That is my point. 

Mr. SMALL. My point is that we have—there are, in many cases, 

instances where we might want to work with somebody outside of 

the venture, and we have the flexibility to do that. 

Mr. BRADY. Thank you, Mr. Chairman. 

The CHAIRMAN. I would like to follow up on a few of the points 

that were just mentioned. 

31 

You said several times, a decision will be made, what is significant and what isn’t. At one point I thought you were saying that 

Smithsonian on Demand would make that decision. Another time 

you said that you would make that decision. 

Mr. SMALL. If I misspoke, then I apologize for misspeaking. 

The decision as to what is significant or not significant is always 

made by the Smithsonian Institution. 

The CHAIRMAN. All right. 

Then the other item of clarity that I need—or clarification, rather—is, you mentioned that there would be no problem if someone 

wants to work with you, that is fine; if they decide they want to 

work through the other entity, that is fine. 

But aren’t you limited to six times per year saying, we want you 

to work with us? 

Mr. SMALL. That is correct. But that is vastly in excess of anything that has ever happened in the past. The number of cases 

where people come and say, we want to make a film—that is, 

where the Smithsonian is a big presence in the film—is less than 

5 percent of the history that we have had over the last 5 years with 

350 cases. 

The CHAIRMAN. How many projects per year would that be? 

Mr. SMALL. It was 17 total projects for the 5 years, so let’s call 

it 31⁄2. So we have right now almost double the capacity. 

The CHAIRMAN. All right. I think I have no further questions. 

Well, yes, I do. Just two quick ones. 

And that is, I am just surprised that limiting access to collections 

did not pop into your mind or your staffs’ mind as something that 

should be reviewed. 

Mr. SMALL. But we are not limiting access. There is no limitation 

on access. 

The CHAIRMAN. I am sorry, limiting use. 

It just seems to me that you would recognize this is something 

that you should have at least notified the committees of jurisdiction, this committee and the Appropriations Committee, and notified us, rather than simply providing a summary of the board minutes. 

And I think there is, it is an axiom of politics, touch base, always 

touch base. So that is just a bit of advice. 

Would it not be prudent to have the Inspector General of the 

Smithsonian reviewing contracts for you before those are entered 

into? 

Mr. SMALL. There is certainly nothing wrong with it. I really 

don’t know of—whether the Inspector General would have the experience and background and legal capacity to go through contracts 

like this. The Inspector General can look at anything the Inspector 

General wants to at any time at the Smithsonian. 

The CHAIRMAN. I recognize that. I am just suggesting that this 

might be a good practice to have them review ahead of time and 

benefit from their advice. 

I have no further questions. But I see Mr. Doolittle has arrived. 

Do you have any questions of Mr. Small? 

Mr. DOOLITTLE. No, not at this point. 

Ms. MILLENDER-MCDONALD. Mr. Chairman, just a couple more 

questions and I will be finished. 

32 

The CHAIRMAN. Yes. I recognize the gentlewoman from California. 

Ms. MILLENDER-MCDONALD. Thank you very much. 

Mr. Secretary, you have been most patient. Thank you so much. 

Just a couple more questions here. 

One is, you said that there is no limitation to access of any kind. 

And yet I have been told that material on the Smithsonian Web 

site has been pulled down because of concerns that it might conflict 

with Smithsonian on Demand. 

Is there a truth—is this a true assessment of that, or what? 

Mr. SMALL. We had on our Web site a little window on the Web 

site that was called Smithsonian TV. 

Ms. MILLENDER-MCDONALD. What is it, TE? 

Mr. SMALL. TV, as in television. Smithsonian.TV. And it is a series of film clips about the Smithsonian. The format of it was the 

format—the way it looked on the Web site, the list of things to click 

on, looked like Video on Demand. If you have access to video on 

demand at home, it had a look like that. 

We felt that that would be confusing to the public as we 

launched—this is all the Smithsonian’s own stuff. As we launched 

this new service, we didn’t want to confuse the public. 

So we have taken that down because we can now, we can put it 

all back up on our different Web sites, but we did not want to confuse the public with just the format. The content is the same. We 

can show all the material. We just didn’t want to provide a confusing situation where the public wouldn’t recognize that this was 

different from Smithsonian on Demand. 

Ms. MILLENDER-MCDONALD. Okay. So there is no limitation on 

access? 

Mr. SMALL. No, that is not a problem. 

Ms. MILLENDER-MCDONALD. The other thing, in reading the Regents’ meeting minutes that was provided to us, there is reference 

to risks involved in the new venture. One of them is called ‘‘restrictions on Smithsonian Internet activities.’’ Can you respond to that? 

Mr. SMALL. Actually, I—— 

Ms. MILLENDER-MCDONALD. Well, it goes on, and it goes on to 

say that because the service will be offered to cable and broadband 

Internet subscribers, there will also be restrictions on the aggregation of general-interest audiovisual programs on the Smithsonian 

Web site. So it gets back to this same notion that I am talking 

about. 

Mr. SMALL. I think what this simply says is that if the world of 

digital cable TV continues to homogenize with the world of the 

Internet, then essentially you have the same applicability as—on 

the Internet as you would have on cable TV, because so much of 

TV now is migrating onto the Internet. So it just says that the 

world of the Internet and TV are coming together. 

Ms. MILLENDER-MCDONALD. And this risk that they are talking 

about, involved in this new venture, maybe you would want to talk 

to me about that in a separate meeting. 

Mr. SMALL. Certainly. 

Ms. MILLENDER-MCDONALD. The last one that I want to speak 

about is your small and disadvantaged businesses, and if you 

have—are you still about the business of ensuring that we have full 

33 

representation of minorities and women in 69 percent of your contracts in high positions, focused on your top 200 positions? 

Mr. SMALL. We are completely committed to it but we are not 

anywhere near where we ought to be. We all know that. 

Ms. MILLENDER-MCDONALD. I understand that. That is why I 

asked my question. 

Mr. SMALL. We know that, and we know where in the Institution 

we have to improve. And we are working; that has my complete 

commitment. 

Ms. MILLENDER-MCDONALD. Can you, perhaps, a couple of 

months down the road, give me a report as to where you are on 

it? 

Mr. SMALL. Very delighted to do it. 

Ms. MILLENDER-MCDONALD. Thank you for your time. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Brady, do you have anything further? 

Mr. Doolittle, any questions? 

Mr. DOOLITTLE. Well, Mr. Chairman, having just come in, this 

may have been asked and answered, but was the question asked 

as to why the contract wasn’t competitively bid, or how is it that 

Showtime got an exclusive? 

Mr. SMALL. That question wasn’t asked and so I am happy to respond to it, Congressman. Thank you. 

The Smithsonian Business—none of the funds involved here in 

the Smithsonian Business Ventures are Federal funds, so Smithsonian Business Ventures doesn’t follow the specific Federal guidelines. 

On the other hand, how this was done was very similar to the 

Federal contracting procedure, in that Smithsonian Business Ventures first came up with a model of what they thought they would 

like to do in digital cable television. 

They went out and they talked to about 10 different entities that 

are involved in a big way in the business. Out of that emerged, 

first, one that said they were quite interested and were willing to 

invest in it. We almost had a deal with them. The others had said, 

no, they weren’t interested in doing it. 

When that deal fell through, then CBS Showtime came up and 

said they were interested in doing it and then they worked on the 

negotiating process. 

So it is similar to the Federal contracting process, but in business ventures, they just—they don’t follow that specifically and 

never have. 

Mr. DOOLITTLE. Is there any guarantee that the revenue raised 

by that contract will go to operations and maintenance? 

Mr. SMALL. It will go—generally speaking, the money that comes 

from private-sector activities in the Smithsonian goes into programming, like the Traveling Exhibition Service, the work that we 

do with courses and lectures, the work that we do all across the 

country with different museums. We don’t make enough money in 

those areas to even make a dent in maintenance. 

Now, we have raised a lot of private-sector money for physical fa- cilities—the new Air and Space Museum, $300 million of private 

sector money. There is over $100 million of private-sector money in 

34 

the American Indian Museum. There is going to be close to $140 

million in the new Patent Office building, the Donald W. Reynolds 

Center for American Art and Portraiture. 

Mr. SMALL. But what we found is private sector donors particularly won’t give money for building maintenance where buildings 

have been maintained by the government for years. As to the 

Smithsonian Business Ventures monies, with a $2.3 billion backlog, 

there is just not enough to make a dent in the maintenance. 

Mr. DOOLITTLE. Is the new Air and Space Museum in the Udvar 

Hazy Center out there at Dulles? 

Mr. SMALL. Yes. 

Mr. DOOLITTLE. Well, I first heard this discussed in the Appropriations Committee at some length. And, you know, I personally 

don’t have a problem with you trying to, through the use of creative partnerships with private business, that is not the problem. 

I think it was a surprise that this had gone on, and I think it was 

a pretty unanimous feeling on both sides of the aisle that we 

shouldn’t have been surprised. 

Mr. SMALL. We agree. 

Mr. DOOLITTLE. Thank you. 

The CHAIRMAN. Thank you. And I thank you, Mr. Secretary, for 

your time and your testimony. We appreciate it. 

And I would like to invite our second panel of witnesses to step 

forward, Mr. Malamud, Ms. Drain, and Ms. Sheketoff, to provide 

their testimony. And we will put up name plates for you in just a 

moment. 

Thank you very much for being here, and we look forward to 

hearing your testimony. As you know, the rules generally provide 

you 5 minutes to give your testimony. If your written testimony is 

longer than that, we will enter it into the record, and you could 

just summarize it. 

STATEMENTS OF CARL MALAMUD, SENIOR FELLOW AND 

CHIEF TECHNOLOGY OFFICER, CENTER FOR AMERICAN 

PROGRESS; MARGARET DRAIN, FORMER EXECUTIVE PRODUCER, VICE PRESIDENT OF NATIONAL PROGRAMMING, 

WGBH; AND EMILY SHEKETOFF, ASSOCIATE EXECUTIVE DIRECTOR, AMERICAN LIBRARY ASSOCIATION 

The CHAIRMAN. I am pleased to recognize you, Mr. Malamud, to 

provide your testimony. 

STATEMENT OF CARL MALAMUD 

Mr. MALAMUD. Thank you, Mr. Chairman, Ranking Member 

Millender-McDonald, and distinguished members of the committee. 

Mr. Chairman, as you so eloquently stated, the Smithsonian is 

really a treasured part of our national landscape, it is a jewel of 

the American culture. And I am here as a firm supporter of the 

Smithsonian, but I am also here as a perplexed and troubled supporter of the Smithsonian trying to understand how the recent actions to promote the increase and diffusion of knowledge among 

men, and I should add, among women although not part of the 

charter. 

35 

I think I would like to begin by briefly touching on the Showtime 

contract, because I think it illustrates some of the broader issues 

at the Smithsonian Institution. 

The Showtime contract may have been many years in the making, but it was a surprise to me and it was evidently a surprise to 

filmmakers and many other members of the public, and this contract has been shrouded in a veil of secrecy that I just don’t understand. There are some pieces that we know and pieces that we 

don’t know. There is an unspecified revenue stream, we learned a 

little bit about that. There is a sole source procurement; a nondisclosure agreement, and it appears, at least for a while, pertained 

to Members of Congress. And the list of clauses go on and on. But 

three aspects of this really struck me. One is a 30-year term. 

If you look back 30 years in 1976 and ask what would a 30-year 

contract that was signed then look like, 30 years ago there were 

200 computers on the Internet. Ted Turner had just begun beaming up to the satellite for WTBS. Brian Lamb had not yet started 

C–SPAN, he was 3 years away from that. And the latest hot technology in Japan was a fax machine, and it was just beginning to 

occur in the United States. I think if we had signed a 30-year contract in 1976, it would have turned out to be a bad contract, and 

I am afraid that a 30-year contract today might have the same effect. 

The second clause that is troubling is the right of first refusal. 

And I understand the Smithsonian is able to grant six exceptions 

in which films are made in other places. But one has to ask whether Ken Burns, for example, should be forced to apply to the 

Showtime Smithsonian joint venture instead of going to PBS to 

make his films. And one has to look at the six exceptions that they 

are granted. Mr. Brady brought up space as a possible topic. As 

you know, 2008 is the 50th anniversary of the U.S. space program. 

One has to ask, would not it be a good thing if 10 different networks all featured the Smithsonian and the U.S. space program? 

And could the Smithsonian do that if that kind of an excitement 

was raised? 

The third thing is the noncompete clause, which appears to be 

applying to the Web sites of the Smithsonian Institution. As was 

discussed earlier Smithsonian.TV was taken off the Web, and my 

understanding from phone calls from quite a few staff members at 

the Smithsonian is that the Web masters are going to be placed 

under fairly severe restrictions on how much video and audio they 

can place on their Web sites. Now, I don’t know if this is true or 

not, but if it is, this will certainly limit access to Smithsonian archives by the public. And instead of limiting access, I believe that 

the Smithsonian should be taking steps to vastly increase the 

amount of those resources available for the public to use over the 

Internet. 

The Smithsonian deal appears to be—the Showtime deal appears 

to be part of a pattern of several business deals, which at least 

leave me perplexed and asking questions. The Harper Collins book 

deal, for example, has led to the delisting of Smithsonian books as 

one of the leading historical publishers. And that is troubling when 

a reputable historical association feels that the situation is so bad 

that they delist an august publication like Smithsonian books. 

36 

I think it all comes down to transparency. And it could be that 

the Showtime deal is the right deal, but I think if the public had 

been involved more and there had been a process of public hearings 

and deliberation and disclosure, it might be a little easier to live 

with. 

There are four steps that the committee might wish to consider 

at this point, and these are simply suggestions. One possibility is 

a staff investigation into these contracts, into the Showtime deal 

and the Harper Collins, looking at them to see whether they are, 

in fact, appropriate for an instrumentality of the United States, 

and looking to see whether or not a termination for convenience of 

the government might be in order. 

The second step is to look at some of the transparency provisions 

of our laws that apply to various agencies. Now, the Smithsonian 

is a unique entity, but it is an agency for many purposes, for purposes of building, for purposes of a variety of actions. It might be 

appropriate to consider extending the definition of agency to include the FOIA, Sunshine, Privacy, and possibly even the CFO 

acts. 

Two additional steps, and then I will conclude. The third step is 

public hearings either by the Congress or potentially a blue ribbon 

commission that looks at this question of business models, looks at 

the questions of the balance of revenue generation and public access, and tries to do a deliberate public process that looks at all the 

different options available. These hearings are not an inconvenience. Hearings are really how we learn what the options are that 

are available. And I am convinced that the Smithsonian, had they 

held public hearings, might have had other options in front of 

them. 

And then the last point, and this is, I know, a sensitive point, 

but I do believe the Smithsonian is in need of money and it needs 

that money in order to fund its operations and its staff. And I understand that with the recent Appropriations Committee actions, 

there were some suggestions of steps that the Smithsonian might 

take to regain the full trust of the Congress. And if, in fact, those 

steps are taken and the distinguished Members of Congress feel 

that the issues of transparency have been addressed, I think restoring those $20 million would be very important. That is equivalent to about 300 staff positions. And in many cases, the Smithsonian, the curators and the archivists are, in fact, vastly understaffed. 

One might also consider investing some money into putting more 

of the archives on line for the public to use without restriction. 

Thank you, Mr. Chairman. 

The CHAIRMAN. And thank you. 

[The statement of Mr. Malamud follows:] 

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The CHAIRMAN. Next we are pleased to call on Margaret Drain, 

former executive producer, vice president of national programming 

at WGBH. 

STATEMENT OF MARGARET DRAIN 

Ms. DRAIN. Thank you, Mr. Chairman, and members of the committee. Good afternoon. I am the vice president for national programming at WGBH, the public television station in Boston, and 

I appreciate the opportunity to speak with you. 

At WGBH, we produce much of the programming that is seen on 

PBS, including the science history NOVA, the history documentary 

series American Experience, Drama on Masterpiece Theater and 

Mystery, Investigative Reporting on Frontline, and the ever popular Antiques Road Show. We also produce some of the best-known 

children series, including Zoom, Arthur, and Between the Lions. 

Our mission to deliver educational programming that is free and 

available to all Americans depends on our ability to gain access to 

a wide range of materials. That means documents, archival material, and artifacts from museums and institutions throughout the 

country. For two series in particular, NOVA, the science series, and 

American Experience For History, open access is their life blood. 

For them, the Smithsonian collections are critical, and over the 

years, we have benefited enormously from such use, from the full 

spectrum of Smithsonian museums, 19 in all, and even the zoo. 

The Smithsonian’s venture with Showtime raises the specter that 

our access may now be curtailed. If so, we may not be able to 

produce the programs that rely on key materials that are only 

available in the Smithsonian collection. I say may not, because we 

do not still understand the full terms of the contract. 

It is unclear to us how public television is defined in this new 

arrangement. Are we a commercial broadcaster? Are we a noncommercial broadcaster? Are we scholarly? Are we academic? What 

are we? And we do not have a sense of what ‘‘incidental use’’ is. 

If you are doing a program that has ten stills, five of which come 

from the Smithsonian, is that significant use? 

And I have to say in aside, the 30-year deal, the length of the 

term is, in my mind, unprecedented in this day of an ever changing 

television environment. What we do know is that for those of us 

producing for PBS, we take seriously our role as public educators. 

Access is important not to satisfy the personal ambitions of a producer, but to address the public interest. 

To help you understand what is at stake, I would like to offer 

some examples of existing programs that we would currently not 

be able to produce. Some of these may fall into this 5 percent that 

the Secretary talked about earlier. 

In the area of science, there is Mystery of the First Americans, 

a NOVA program which relied on substantial contributions from 

the Smithsonian and also on one of its prominent anthropologists. 

The Wright Brothers Flying Machine, another NOVA show, simply 

could not have been made without the involvement of the senior 

curator of aeronautics at the National Air and Space Museum, a 

relationship that may be off limits to us under the Showtime deal. 

There are several other shows. An award-winning hour documentary that was produced for American Experience called 

44 

Tupperware, a distinctly American story about innovation and free 

enterprise, absolutely would not be possible to make for PBS given 

what we now understand to be the terms of the Showtime deal. 

And I believe the same is true for Lost in the Grand Canyon, the 

story of John Wesley Powell’s exploration of the Colorado River. 

But these are projects in the past. Let me tell you what concerns 

me is what we have going in the future. We are now embarking 

on a five-part series on the history of native Americans called We 

Shall Remain. This is an ambitious series that we hope will be a 

national broadcast event. We made contact with the National Museum of American Indians just days before the Showtime deal was 

announced. The curators and staff were enthusiastic about working 

with us, but uncertainties swirling around the Showtime deal put 

a brake on those discussions about how we could work together. If 

this is unresolved, it would be a missed opportunity for all because 

of the prominence in stature of the Museum of Native American 

Scholarship. 

And what happens when NOVA goes ahead with plans for a special series on the history of aviation? Would they be denied access 

to the Smithsonian’s Tom Crouch, our Nation’s foremost expert on 

aviation? Will the full story only be allowed to appear on Smithsonian on Demand, leaving NOVA’s version to be compromised like 

a science textbook missing facts? Will the public not be able to see 

the story without paying for a cable channel? 

Let us remember the number of viewers who will tune in to 

Smithsonian on Demand is a fraction of those who can see these 

programs free on public television, thousands as opposed to millions. 

What you should also understand is that PBS programs are not 

just television shows. Television is now the first port of entry. We 

provide a long tail of material, educational outreach, Web streaming, teachers’ guides, AV use in the school, video on demand, even 

iPods. 

Once created, our content lives indefinitely in digital form, continuing to deliver public service value years after the initial broadcast. Every program we produce has a teacher’s guide. Hundreds 

of thousands of teachers throughout the country use it every single 

year. The exclusivity suggested by the Showtime deal flies in the 

face of our educational mission, of ensuring that original educationally enriched material is available to teachers, students, and the 

public on multiple platforms. If Showtime’s goal over 30 years is 

to own the material on those platforms, that is even a bigger 

threat. 

As someone who has spent a great deal of time in my professional life working in the nonprofit world, I am sympathetic to the 

financial difficulties the Smithsonian Institution faces. The stewardship of nonprofit institutions like WGBH, whose mission is to 

educate the public or, in the case of the Smithsonian, ‘‘for the increase and diffusion of knowledge,’’ grows more and more difficult 

in a time when Federal dollars are tight and money from commercial interests is within our grasp. 

I am not a purist. I understand that nonprofits must generate 

some revenue or we will perish. However, if in the process we dilute the mission, we do so at our peril. The public knows and trusts 

45 

the Smithsonian. It regards it as a repository of our collective pass. 

Once lost, that trust built over 160 years will never be regained. 

Thank you very much. 

The CHAIRMAN. And thank you. 

[The statement of Ms. Drain follows:] 

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The CHAIRMAN. Next we turn to Ms. Emily Sheketoff, associate 

executive director of American Library Association. 

STATEMENT OF EMILY SHEKETOFF 

Ms. SHEKETOFF. Good afternoon, Mr. Chairman. I would like to 

thank the committee for inviting me to testify today on behalf of 

the American Library Association. I am here to express our deep 

concern over the recently announced agreement between the 

Smithsonian and Showtime. ALA’s concerns are based on the information about the agreement from news articles because we, as 

most members of the public, don’t know what is specifically in this 

agreement. 

The American Library Association is committed to ensuring access to information for all, and that is why we are so concerned 

about this agreement. We understand the financial constraints 

faced by the Smithsonian and other cultural trusts. Solutions must 

be found, but those solutions do not lie in a series of exclusive and 

in this case largely exclusionary business agreement with the private company. 

The Smithsonian, while it has business-like needs and concerns, 

is not a business. It is a taxpayer supported through appropriations 

of Federal funds and tax benefited status as a 501(C)(3) organization, and it is the guardian of our cultural heritage. Indeed, the bequest of James Smithson came with a stipulation which the U.S. 

Congress accepted: The Smithsonian Institution was to be an establishment for the increase and diffusion of knowledge. 

Moreover, many of the collections given to the Smithsonian have 

been placed in the Institution’s hands in trust, to be maintained 

and made accessible to the public. This is not, therefore, simply a 

matter from where the revenue derives; it is a matter of public accountability and public confidence. Maximum feasible transparency 

in the arrangements for these collections is an essential component 

for that trust. It appears that access to the collections and archives 

of the Smithsonian will not be limited, but use will, including the 

ability to utilize the professional skills and expertise of the Institution’s curators, scientists, and other staff. 

As librarians, we see this agreement with Showtime as analogous to a library signing an agreement with some publisher that 

would allow library patrons to come in and look at the books and 

other resources in the library, but not take those books off the 

shelves to check them out and not be able to talk to the librarians 

for assistance and information. 

ALA is also concerned that this contract with Showtime and 

other contracts in the works may severely impede the ability of the 

Smithsonian Institution to digitize the collections it houses coherently and systemically either for preservation or for public access 

and use. While such an undertaking could reasonably be taken 

with private companies, the underlying materials and the data files 

created must remain in the exclusive control of the Institution. We 

understand that the Smithsonian’s practice has been to retain control, but we would appreciate assurance that the contract with 

Showtime or any future contracts do not violate this fundamental 

principle. 

51 

Last year, the Smithsonian’s Business Ventures unit announced 

an exclusive publishing partnership with Harper Collins publishers 

to create a line of high-quality Smithsonian-branded reference and 

adult nonfiction books. It was announced that Harper Collins 

would also be the exclusive distributor of the Smithsonian books 

backlist. That contract has not been made public, either, so we do 

not know how exclusionary is. We have no evidence that any prospective author has had to clear his use of materials in the Institution or discussions with Smithsonian curators or scientists, so we 

believe that the Harper Collins agreement is not as exclusionary as 

the Showtime arrangement appears to be. However, the Harper 

Collins agreement does seem to have laid the groundwork for this 

current venture with Showtime. Sole source contracting is particularly inappropriate for the Nation’s cultural stewards. 

The preeminent standing of the Smithsonian in our society requires that such substantial changes in how Americans can gain 

access to its collections and use those collections must only occur 

after extensive public discussion and review. We urge Congress to 

require that the Smithsonian Ventures null this contract because 

it was awarded before there was the requisite public discussion. 

And we also ask that other agreements be examined in public before they are made to protect the public’s access to the Institution’s 

collections, archives, and, most importantly, the professional staff 

of the Smithsonian Institution. Thank you very much. 

[The statement of Ms. Sheketoff follows:] 

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The CHAIRMAN. And thank you all for your testimony. I recognize 

myself for 5 minutes for questions. 

The first one. The Smithsonian makes the argument, as you have 

heard, that the length of the contract is appropriate given the nature of time required for a TV channel to garner loyal ardent viewers and thus become self-sustaining. Given this fact, is this a reasonable approach for the length of this contract? In other words, 

what is your viewpoint of that argument? And I will turn to you, 

Ms. Drain, as being someone in the television business who can appropriately answer that. 

Ms. DRAIN. Thank you. I am no lawyer, but I would say it does 

take time to launch a channel, especially an on demand channel. 

So I think his explanation, the Secretary’s explanation is a reasonable one. I do think a 30-year term is unprecedented. I have never 

heard of anything—of a contract lasting 30 years, particularly in 

the day and age we are in right now where everything is changing 

so rapidly. You know, 5 years ago, we didn’t have Web sites. One 

year ago, we didn’t even know what podcasting was. You know, it 

is just changing so quickly. And I think right now one needs flexibility and—more than anything else, when you negotiate a contract. Our contract with WGBH for certain shows with PBS lasts 

2 years. That gives us maximum flexibility. 

The CHAIRMAN. And what is a typical length of time for a contract with the, let us say, the Washington Nationals and their TV 

programming? 

Ms. DRAIN. I don’t know the answer to that. I would suspect 

maybe 10 years or 5 years. 

The CHAIRMAN. I am not sure it is even a valid comparison, but 

I think it is important to look at other contracts like that. 

The Smithsonian also comments that, because of this new joint 

venture, only a fraction of the producers wishing to make use of the 

collection for commercial purposes will be denied access, and that 

this was a necessary trade-off to reach millions of individuals who 

would not otherwise be able to see the collections. 

I would appreciate comments on that from anyone on the panel. 

Ms. SHEKETOFF. Well, Mr. Chairman, that is a very admirable 

idea, to try and reach more and more Americans. And maybe this 

is one step. But we have the Internet, we have podcasting, we 

have—the Smithsonian had a Smithsonian TV on Demand. So 

there are many ways that they can broaden their reach. And we 

are hopeful that this contract is not going to restrict any of those. 

As my colleague mentioned, there is new technology being developed every day that will be of tremendous use to the Smithsonian 

broadcasting its collection, interesting more and more people in the 

artifacts that it has. 

And we don’t know how restrictive this contract is going to be to 

keep those artifacts, those pictures, that video, that sound off of the 

Internet and being able to go into people’s homes, letting people 

use it for their own genealogical examinations as they pursue other 

interests that they have. So we really need to make sure that because they are the public’s trust, because they keep America’s 

Attic, that all the artifacts in that attic are available to the public 

so that they can use them not only for commercial purposes, but 

for purposes that we don’t understand today that in 5 years we will 

56 

want to use, and that other commercial entities in 5 years or 10 

years might want to use. This 30-year restriction should be very 

troubling to you. 

The CHAIRMAN. If I may paraphrase your response. It is that the 

intent may be admirable, but the devil may be in the details. Since 

you haven’t seen the details, you are worried the devil might be 

there. 

Ms. SHEKETOFF. Very much so, sir. 

The CHAIRMAN. Thank you. Mr. Malamud, would you like to respond? 

Mr. MALAMUD. Yes. I think if you are trading off access to 20 

million people on a cable system and as a result you are limiting 

access to several hundred million Americans on the Internet and 

reducing the amount of information placed on the Net, that is not 

a good thing. One of the important points is that filmmaking is 

changing dramatically. In the old model of filmmaking, it took 

$100,000 or $500,000 or $1 million to produce something, and this 

old industrial style of filmmaking sometimes required large investments. On the Internet, there are people that place their videos on 

line in places like YouTube and Google Video, and 10 or 20 million 

people download those videos. I think it is important that we look 

at filmmaking as something that in the future, every American 

might be doing, and one of the first places they are going to want 

to look to make those films are the archives of the Smithsonian. 

Putting them on line, making the staff available, I think, is the 

most important thing they should be looking at. 

The CHAIRMAN. Are you in some way saying that a contract, if 

it is to be done, of this sort should not only be for TV but also 

should include the Internet and any possible uses of that? 

Mr. MALAMUD. Absolutely, Mr. Chairman. I believe that that is 

where a lot of distribution channels are moving these days. I have 

been broadcasting radio on the Internet since 1993, and I have 

seen that medium grow by leaps and bounds. And today it is really 

amazing how that market for films and documentaries are changing. More documentaries are being produced today than ever before. 

Ms. DRAIN. May I just add one thing? 

The CHAIRMAN. Ms. Drain. 

Ms. DRAIN. The deal seems to also fly in the face of what is happening right now, where open content are the two key words. Everybody is under pressure more and more to give our content away 

as freely as possible on as many platforms as possible. Exclusivity 

is a word of the past. And this is what the users want. They want 

access on every platform that is available to them, and they want 

access and the ability to use this material also. So restricting its 

use once again flying in the face of where most media companies 

are going these days. 

The CHAIRMAN. Thank you very much. My time has expired. I 

yield to Ms. Millender-McDonald. 

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. Mr. 

Chairman, before I get started with the witnesses here, the second 

panel, I would like to ask unanimous consent that I place in the 

record a testimony from a Patricia Aufderheide, professor and director of the Center For Social Media and Social Communications 

57 

for American University. And also Linda Kerber, president of the 

American Historical Association. May Brekbeck, professor at the 

liberal arts and sciences from the University of Iowa. They had 

wanted to come but was told that they could not testify. So, unanimous consent that we place this in the record. 

The CHAIRMAN. Without objection, so ordered. 

[The information follows:] 

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Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. 

Mr. Malamud and Ms. Drain, both of you have said in your testimony that—Mr. Malamud first, you say that the Smithsonian 

Webmasters are reportedly being advised that they will be placed 

under strict guidelines on how much audio and video they will be 

permitted to place on any site, a guideline that may very well lead 

to taking a huge amount of content off of the Smithsonian public 

Web site. That is what you say in your testimony. 

And Ms. Drain has said that: We are now embarking upon a fivepart series of the history of the Native Americans called We Shall 

Remain. We made contact with the Smithsonian just days before 

the Showtime deal was announced. And while curators and staff 

said that while they would love to work with us, they were not able 

to strike the formal relationship that we wanted because it is a 

possibility of the restrictions. 

Now, you both heard from the Secretary when I raised the question with him as to whether there would be limits on access, and 

he said no, that there was this once, and he went on to describe 

what and reasons why, but this material will still be available. 

Since then, I have gotten from my staff a visual of what used to 

be at the Smithsonian and what is now being seen on the Smithsonian Web site, clear indication that some of this material is being 

taken off. I will not ask the Secretary to come forth, but I will be 

raising this question again with the Secretary because of what we 

have just received from staff 5 minutes ago. 

I would also like to say to you that when you ask if we can investigate this 30-year contract, I am not sure whether we can do that. 

But what the appropriators have asked now, that GAO reports 

what they perceive and define as this contract, and will be reporting back to the appropriators in 10 days, at which time we will get 

that report here in the Committee on House Administration. 

I also will remind you that both the Senate and the conference 

will be seeing the same bill where the House appropriators did restrict or reduce the budget for the Smithsonian. They, too, are concerned. So you do have another opportunity to see just where this 

goes in terms of the exclusive contract that was partnered into, if 

you will, by the Smithsonian. We too were shocked with all of this 

and were not privy to this until just recently. 

I am also struck by the fact that it is possibly the other witness 

who says—yes, it is—Miss Sheketoff, that it was announced that 

Harper Collins would also be an exclusive distributor of the Smithsonian book list. 

As a former educator myself—and now my grandchildren use 

this Smithsonian Web site—I would be deeply, deeply hurt if some 

of this educational material, some of the other things that you have 

cited in your testimony be taken from the Web site. We are creatures of and supporters of this Web site. I mean, we go to that Web 

site. We get materials from that Web site. The Smithsonian has 

been part of our family. It comes into our homes and it comes into 

millions of homes. And I will say to you, as we have to the Secretary who has sat here—and that is good that he has to hear your 

testimony—that we will be coming back to him. I don’t need to 

raise questions with you. You have given us a great testimony on 

your thoughts and your concerns. And the only thing that I will tell 

65 

you is that I will very carefully now get the report from the GAO, 

talk to my counterparts on the Senate side, and then observe the 

Smithsonian Web sites to see whether or not we can continue to 

have this very valuable, or invaluable, material that is educational 

to the people of this country. And I thank the three of you for coming today. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman’s time has expired. I recognize 

the gentleman from Philadelphia. 

Mr. BRADY. Thank you, Mr. Chairman. 

Mr. Malamud, you said that you didn’t appreciate or you didn’t 

think it was the right way to have this bidded; it would have been 

much better for competitive bidding to have taken place rather 

than just an exclusive. I mean, I want you to agree with me because I think that you are, but isn’t it on a noncompetitive bid, it 

is an exclusive bid to Showtime; and then you are telling them that 

you have this bid for 30 years. And if something were to not go 

right, they would be locked in for a 30-year bid. I mean, have never 

really heard that before. 

Mr. MALAMUD. I work on the Internet, sir, and 30 years is an unheard time span for us. Even 3 years is farther than we can predict. 

I think if in the long run after extensive public hearings this was 

the best option available, the only option, maybe this would have 

been easier to stomach. But without those public hearings, without 

that deliberative process, without that input from other people on 

options—and that includes the staff of the Smithsonian, many of 

whom have very good ideas on how to exploit their resources in a 

way that balances the public trust with revenue generation. I think 

without that public process, this contract is hard to understand, 

sir. 

Mr. BRADY. I appreciate that. And, Ms. Drain, you said that—you 

don’t have to apologize for not being an attorney, because that 

doesn’t put you in any bad stead with me, for sure. But in your experience, Showtime puts a show on, Show on Demand, and they 

don’t do—well, they do a good job, but there is more—time goes on, 

more things to be added to it. It can be more depth, it could be 

more detailed. Would they then have an exclusive right to that 

show and not let anybody else like a PBS to expand on it? 

Ms. DRAIN. You mean once the show is made? 

Mr. BRADY. Yeah. 

Ms. DRAIN. I don’t know what the terms of the deal are. So in 

these days, what Showtime could conceivably do in the future is 

negotiate with PBS to license the show on PBS at some future 

date. 

Mr. BRADY. Would they have an exclusive right to that show and 

you would have no way to expand on it? If you saw a better way. 

Ms. DRAIN. They would have exclusive right to that show. And 

I raise the question of whether they have exclusive to the material 

in that show to exploit on all these different platforms. 

Mr. BRADY. And that would exclude you or PBS and people without On Demand or without Internet, you know, that that would exclude you from trying to expand on it? 

Ms. DRAIN. It could. Yes. 

66 

Mr. BRADY. And one more for Ms. Sheketoff. You said that you 

were negotiating with the Smithsonian prior to this contract 

being—— 

Ms. DRAIN. No. That is me. We were negotiating with the Museum of Native Americans to strike some kind of an arrangement, 

a cooperative arrangement. And then the deal was announced, and 

the staff, because of the uncertainties swirling around the deal decided just put a brake on those discussions until we could figure 

out what the terms of the Showtime deal were, and whether we 

could partner in some way. And I have to say that the curators 

there are really supportive of our project, and we have nothing but 

the greatest of admiration for them. So we are hoping that we can 

continue our conversations. We just don’t know. 

Mr. BRADY. So you were kind of denied access and use. 

Ms. DRAIN. Well, we weren’t denied access. We were put on hold. 

We are in limbo right now. So we haven’t really been denied access 

or use yet. 

Mr. BRADY. Well, if you are in limbo, you have no access. 

Ms. DRAIN. Well, we are quite ready for access. The point of the 

production is still in the—we are in pre-production right now, so 

this is the critical period that we want—this is when you start 

hammering out these agreements and arrangements that you have 

with all of the partners to produce this Native American series. We 

have a lot of our partners in place, and we are still working with 

the museum. 

Mr. BRADY. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. And I might observe, since limbo no 

longer exists, you may actually be in purgatory. We will deal with 

that later. 

Next, it is my pleasure to welcome to the committee and to yield 

time, 5 minutes to the gentlewoman from California, Ms. Lofgren. 

Ms. LOFGREN. Thank you, Mr. Chairman. And my apologies for 

being late. I think that Mr. Malamud and others will be happy to 

know that the Judiciary Committee did report the neutrality bill 

out, and that is where I was all morning. 

I have had a chance to read through the testimony even though 

I didn’t get to listen to it, and I just have a couple of observations. 

First, while the Smithsonian is in a unique legal structure, 

America thinks of it as our stuff. You know, it is America’s attic. 

And so I do think that—and I would guess that the powers that 

be at the Smithsonian might agree that it was probably a mistake 

not to be more inclusive with the people’s House in terms of sharing the elements of the contract and the like because there is a 

great deal of anxiety, obviously, as we hear from the testimony of 

what that deal is. 

I understand—I have not had a chance to read the contract yet, 

and so I am not going to say what the contract says because I 

haven’t read it. And I understand that it was just received, the 

unredacted version yesterday, and it is quite lengthy. 

I do understand the need to bring private resources in to the 

Smithsonian. I think that is really a product of our lack of funding 

of the Smithsonian. So I hope that as we move forward—and there 

will probably be other hearings, I would assume. I don’t know what 

the chairman and ranking member have in mind. But even if it is 

67 

just in the Appropriations Committee, this should be a reminder of 

why we need to appropriate sufficient funds to the Smithsonian so 

they can do their maintenance work, so they can maintain their 

collections, and so that it can continue to be free to the American 

people. 

One of the things I am so proud of is that when Americans, or 

anybody for that matter, come to this wonderful capitol, they can 

go into any museum for free, they can appreciate American culture 

and history for free, and just enjoy that richness. And what we 

want to make sure is that on a noncommercial basis, which we 

have had testimony that the contract preserves that, and I hope it 

is true, that that can also continue through emerging technologies, 

not only noncommercial TV, but the Internet and on and on. 

So I don’t have a lot of questions at this point except that I will, 

I hope to be able to read the contract myself, and certainly the 

GAO analysis of it. And I hope that when we see all the details, 

that we will, hopefully, will have an opportunity to celebrate more 

than we are today, because I think hopefully we have the same 

goal of the sharing of American culture on a nondiscriminatory and 

free basis. And I thank the gentleman for yielding. 

The CHAIRMAN. And I thank you for the comments. 

I want to thank the panel for being here. We thank you for your 

testimony. It has been very enlightening. And we will now recognize the next panel. Thank you for your testimony. 

And I am pleased to invite the final panel of witnesses: Ms. 

Maroni, Mr. Huerta, and Mr. Beer, to take their places at the 

table. 

While they are doing so, let me just give everyone some word on 

the schedule so that you will know what is happening here. We are 

scheduled to have our next round of votes close to 3:00, and there 

will be a series of four votes which will take at least 45 minutes. 

So my goal is to wrap this up before we have to leave to vote. And 

in addition to that, there are other meetings immediately after the 

votes. So everyone can plan on that. We will try to finish at 3:00 

at the very latest. 

STATEMENTS OF ALICE MARONI, CHIEF FINANCIAL OFFICER, 

SMITHSONIAN INSTITUTION; GARY BEER, CHIEF EXECUTIVE 

OFFICE, SMITHSONIAN BUSINESS VENTURES; AND JOHN 

HUERTA, GENERAL COUNSEL SMITHSONIAN INSTITUTION 

The CHAIRMAN. Now, this panel will be a bit unusual because 

usually we have witnesses give testimony. In this case, we have not 

asked you for any testimony. You are just present for questions. 

And I would like to introduce Alice C. Maroni, Chief Financial Officer of the Smithsonian Institution, Gary M. Beer, Chief Executive 

Officer of Smithsonian Business Ventures, and John Huerta, General Counsel of the Smithsonian Institution. And we will first ask 

questions of Ms. Maroni. And I yield myself 5 minutes for this. 

Have the financial figures upon which the SBV executive compensation is based been audited? And, if so, what was the number 

of revenue items for each line of business that the auditors tested 

to ensure revenues were accurately reported? 

68 

Ms. MARONI. Mr. Chairman, I think it would be more appropriate for me to refer that question to the Deputy Secretary or to 

the CEO of Smithsonian Business Ventures. 

The CHAIRMAN. Mr. Beer. 

Mr. BEER. Well, the audit of the Smithsonian Institution includes 

Smithsonian Business Ventures because we are not a separate entity. So whatever the revenues are that we deliver by each of our 

businesses are provided as part of the general audit. They are identified from each of the operating entities as well as all the extraordinary items that may occur in a given year, and they are part of 

the auditor’s annual finding. 

The CHAIRMAN. And you are audited annually then. 

Mr. BEER. The Institution is audited, and we are part of their 

audit. 

Ms. MARONI. I thought you were asking a different question. 

The CHAIRMAN. Another question for you, Ms. Maroni. The Secretary testified that the SBV has earned $155 million in net revenue for the Smithsonian since the year 2000. How much of the 

$155 million was already being generated by existing retail and 

other businesses operated by the Smithsonian before the SBV was 

created? And what portion of these revenues constitute new or increased revenue attributed to SBV’s management of these activities? 

Ms. MARONI. Mr. Chairman, we don’t have a simple way of doing 

that analysis. It is very evident to everyone that, as a consequence 

of the creation of SBV, that the Institution receives considerably 

more funding in unrestricted net gain back to the Institution. To 

be able to parse through what was previously received, it would not 

be an apples-to-apples comparison because of the number of additional businesses that have been added as well as the expanded 

services, new museums. So that analysis does not exist as you have 

described it. 

The CHAIRMAN. But if you are audited every year, I assume that 

would be available. 

Ms. MARONI. I can look at back and look at overall business activities, and would be happy to provide that to you. 

The CHAIRMAN. It would be very interesting to see how that 

changed during the transition from no SBV to SBV. We would appreciate it if you would do that. 

Questions for Mr. Beer. How many employees does SBV have at 

this point? And what is the ratio of SBV employees to executives? 

Has this number increased or decreased in relation to increasing 

executive compensation? 

Mr. BEER. Congressman, I do have that number. I would have 

to look for it, and I will in a moment, maybe on the next question. 

I can tell you we have about 488 employees, and I can tell you that 

we looked at that ratio of senior executives against the entire employee base and it has not materially changed in the last three 

years for which I saw the data this morning, but I will have to flip 

through to give you the actual breakdown. 

The CHAIRMAN. That is fine. And whatever information you can’t 

provide immediately today, for any of you, we will keep the record 

open for five days for you to respond. We also, by the way, expect 

69 

to submit questions in writing to any of the witnesses today giving 

you the opportunity to respond in detail to any of these issues. 

Another question, Mr. Beer, is, and I think I know what your answer is but I am going to ask you to justify it as well. Does the 

Smithsonian’s mission match the mission of the SBV? And can the 

motivation of profit cause those in the SBV to neglect the 

Smithsonian’s primary objective of increasing the diffusion of 

knowledge? What happens there? What is the interaction? I would 

appreciate your perception of that. 

Mr. BEER. Well, I am very glad to answer that question, Congressman. I consider the mission of Smithsonian Business Ventures not apart from the Institution. We are there to serve that 

mission. That is why we are here. I took this position to maximize 

revenues that could be available to support mission activities. 

These are all funds that are earned from various different business 

operations or business activities that then flow to the Institution. 

The idea that the Smithsonian Business Ventures may have an 

independent mission is one that I don’t think any of us would subscribe to. Our job is to maximize revenue or profitability, but only 

if it is an activity that one would commonly believe was mission 

appropriate or helped to extend the mission. If you were to look at 

some of the material that was provided as from the early days of 

the inception of Smithsonian Business Ventures, I think that you 

would clearly see that intent in the various mandates provided by 

the then-Board of Regents and the Secretary. 

The CHAIRMAN. The final question for you, Mr. Beer, is the incentive payments to SBV management for reaching performance goals, 

how do you establish these goals? When did you start establishing 

these goals? How do you ensure the goals are challenging and that 

they are achieved? Who establishes? Just give me some general 

background on that, please. 

Mr. BEER. The incentive program for setting goals and as part 

of an annual compensation practice was one of the central tenets 

that was established by the Regents in 1998. My initial arrangement provided for both a base salary and an annual incentive target. Those targets are performance-based. They are set annually 

based on a budgeted goal for profitability or net gain, financial net 

gain as we call it at the Institution. And each year, those goals are 

set as growth goals or improvement in those. 

And the way in which they are set first begins with the overall 

compensation to an executive. They are capped so that our overall 

compensation philosophy is to be at mid market or the median of 

the market for comparable jobs in both the nonprofit sector and the 

private sector. And within that, a target of the total compensation 

is for incentive pay or performance if you were to achieve the goal. 

If you don’t achieve the goal, you don’t receive it. 

Those targets are basically budgeted targets each year. The 

Smithsonian Business Ventures has an advisory board they have 

outside directors of industry experts and a compensation committee. They make recommendations to the Secretary; the Secretary then makes recommendations to the board of regents compensation committee, and is approved as part of their recommendations along with the budget. 

The CHAIRMAN. Thank you. 

70 

I also have some questions for you, Mr. Huerta, but my time has 

expired so I turn to the ranking member. 

Ms. MILLENDER-MCDONALD. Thank you so much. Mr. Chairman, 

you have heard now from the first panel, our Secretary, and the 

second panel, and you know that the 30-year contract has been and 

is troublesome to us. However, I think a lot of that could have been 

avoided if we had just heard and had this information up front as 

opposed to hearing it vis-a-vis the media. Not that we are that 

pleased with the 30-year contract, but that is something that you 

guys have done. So I am very pleased to have you before us today. 

The one thing I would like to ask each of you, how long have you 

been in your respective positions—your Chief Financial Officer, Ms. 

Maroni; Mr. Beer, how long have you been with—I am sure that 

is short lived—with the SBV? But you may have been there prior 

to that. And Mr. Huerta, the General Counsel. How long have you 

guys each been there? 

Ms. MARONI. Almost 6 years. 

Ms. MILLENDER-MCDONALD. Six years with you. All right. Mr. 

Beer. 

Mr. BEER. Just 61⁄2 years. 

Ms. MILLENDER-MCDONALD. 61⁄2 years. And Mr. Huerta? 

Mr. HUERTA. It will be 11 years. 

Ms. MILLENDER-MCDONALD. So the venture, the SBV venture 

that we have gone into here now, certainly you have seen other secretaries who have gone into different business ventures prior to 

this one. This one is pretty ambitious, it seems. And that is okay, 

because everything tends to be more ambitious now than they were 

years ago. How do you feel this, though, differs from the profitability of these other ventures that took place under other secretaries? Do you think this one would be a—how does one look at this 

in terms of measurements as to its profitability? 

Mr. HUERTA. Well, I served under Secretary Hayman as well as 

Secretary Small. And Secretary Hayman was very frustrated with 

the income that was generated from the exiting, we called them 

auxiliary activities, but they are essentially the museum stores, the 

restaurant concessions, the Imax theater, the magazine, Smithsonian books, the whole list of things. We were losing a lot of money, 

around $8 million a year, on just the Smithsonian books. When I 

joined the Smithsonian, the Regents were extremely concerned 

about it. They did a number of steps to try and stem the flow of 

money. They weren’t able to do that. And that is what led them 

actually to create this subcommittee, the regents led by former 

Senator Baker, that eventually led to—after a year of study they 

went to outside consultants that led to the formation of Smithsonian Business Ventures initially with an outside consultant, and 

then they hired Mr. Beer. So that is the background on this. 

This particular agreement is off the—— 

Ms. MILLENDER-MCDONALD. More ambitious than these others. 

Mr. HUERTA. It is more ambitious than anything else. It is closest to the magazine, although at the time they formed the magazine 35 years ago, I don’t think they dreamed it would ever be as 

successful as it has turned out. It has really been a first-class 

American product that we are very proud of. And it is our hope for 

71 

the Smithsonian digital cable programming, that it will be just as 

successful or even more successful in the future. 

Ms. MILLENDER-MCDONALD. You are really the Smithsonian side 

of things. 

Ms. MARONI. I haven’t served under another Secretary. 

Ms. MILLENDER-MCDONALD. Mr. Beer. This one should reach levels much higher than the others, of the ventures, business ventures? 

Mr. BEER. I think this is certainly an ambitious undertaking. I 

think that it is probably important just to frame a couple of things 

about its early initiation and why we embarked on it. The Smithsonian Magazine has been a very big success for the Institution, for 

all the programs that we do, and in the consumer marketplace for 

35 years. The idea that the Smithsonian needed to have the same 

type of presence in the marketplace as the magazine, in television 

and new media seemed to me when I got here and seemed to the 

regents, because new media and television is listed as one of the 

things that the regents hoped that we could do in the future as 

new business or a new tack. And we agreed, and we put together 

a business plan and attempted to go out and to do that. 

I think that if you look at where all of our earnings come from, 

the Smithsonian Magazine has sustained itself with over 2 million 

paid subscribers and has returned over $350 million to the Institution in its 35-year history. We don’t know what this is going to be, 

but we do know that it has scale. And that is why we built the performance benchmarks into it. We knew that we couldn’t risk the 

Institution’s own money or put itself at risk. And so there are lots 

of other things that go into that. But we think this one has scale. 

It is really very difficult to say in something that is this new. 

Ms. MILLENDER-MCDONALD. I suppose so. But it sounds so fabulous, it sounds so ambitious. It just seems to be something that has 

been embarked upon that has never been embarked upon before. 

So you just tend to think, with all of this, you are just going to 

reach different heights. We just don’t want to exclude the public 

from those Web sites that we have come to love and to know. And 

we just want to make sure that when you do well, that you also 

remember us who bring you into our living rooms and our dens 

every night or every so often to get the material that you have that 

is invaluable. 

The last thing that I want to say, Mr. Chairman, is that this perhaps is something you cannot give me now. But I would like to 

know just how much funds come in from your endowment, from individuals, from corporations, foundations, and how much is membership and how much money is drawn from that. I am sure those 

questions you cannot give me today, but if you can get those to me, 

Ms. Maroni. 

Ms. MARONI. I will submit something that gives you all of those 

numbers. 

Ms. MILLENDER-MCDONALD. I would appreciate that. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman’s time has expired. The gentleman from Pennsylvania, any questions? 

Mr. BRADY. Just real briefly. 

72 

We have a 30-year contract with Showtime. How does Showtime 

get to be the—how does Showtime get to get that contract? It 

wasn’t put out to bid. Was it offered to HBO, Starz? Was it offered 

to any other cable providers? Anybody. 

Mr. BEER. Let me give you the history on it. We, that is Smithsonian Business Ventures’ management with involvement of our 

boards and our regents, created a business model for how we might 

create a Smithsonian channel. That means that we would have programming created and a distribution means to do it. We then went 

out and looked at who were the potential media players. We went 

to ten of the top media companies in the world. And Starz Encore 

was one of them, and in fact, out of that ten, Liberty Media, Starz 

Encore expressed a serious interest, and we had a very definitive 

negotiation in the end that fell apart. 

About 6 months after that, Showtime networks, which had seen 

some of the initial work that we had done, came forward and said 

that they wanted to look at it closely, and we did, and as we got 

through it, it was clear that they wanted to enter a serious negotiation, which we brought back to the regions comparing it against 

the offer that we had had with Starz Encore and some of the other 

elements that had been produced in the course of our conversations 

and discussions with the other eight players, and we chose to then 

begin a definitive negotiation process with Showtime. 

Mr. BRADY. But other cable providers did have an opportunity to, 

I guess not bid, but to just try to offer. 

Mr. BEER. Absolutely, Congressman. We spoke to a variety of different types of media companies because what we were looking for 

were three things, one, someone who could make the financial commitment, and as the Secretary said, it is tens of millions of dollars 

up front and a continuing investment. Secondly, someone who had 

the technical capability because the institution doesn’t. And then 

the third, which really became the toughest was finding a company 

that was willing to actually respect and embrace the nature of the 

mission and programs and the activities of the institution because 

it was so important to us that these programs and this distribution 

or this channel, if you will, would allow us to tell our story. So we 

didn’t have a lot of bidders, but we certainly went out into the marketplace. 

Mr. BRADY. Okay. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman from California. 

Ms. LOFGREN. Thank you, Mr. Chairman. I guess one question 

I have is what other ventures are being considered for the content 

that the Smithsonian has and private for-profit partners? Can you 

tell us of anything that is being contemplated or in the works? 

Mr. BEER. Congresswoman, I believe that in the material we provided to the committee, we actually showed you sort of an overview 

of a 10-year, a 5-year look back, and a 5-year look forward. So basically, a planning document, if you will, that the regions reviewed 

called 2010. The two biggest initiatives that we have had on the 

books for years are a copublishing partner that would allow us to 

extend the presence of our authors and our content in a variety of 

trade books, and the television cable channel. 

There aren’t any other major initiatives currently on the books 

for that type of activity. And I can assure you to the extent that 

73 

we have any other ideas we will be here as soon as we get them. 

But right now, in getting these integrated in all of the work that 

needs to be done, the HarperCollins program is only a year old and 

we actually have a hundred titles in the marketplace being produced. 

And I would like to just make one correction. There is nothing 

exclusive about our backlist distribution, and there is nothing exclusive with respect to content written by our authors in the 

HarperCollins program. I can understand how perhaps the other 

witness may have assumed that, because of some of the conversation about this. But it is very different. 

Ms. LOFGREN. So I gather then that prospectively, if you were 

considering an exclusive partnership arrangement with a for-profit 

partner, you would want to have a more open process and dialogue 

with potentially the Congress and the public before proceeding. 

Mr. BEER. My role in the institution is the operations of the business. 

Ms. LOFGREN. It is not fair to ask you that. 

Mr. BEER. Listening to the dialog so far, it is clear that this is 

a very—any media business is a complex business. And I have 

made a bunch of notes to myself, just some additional documents, 

I think, the staff, would be useful for the staff to fully understand 

what was the nature of the enterprise so that it is a complex, long 

document, and if you want to really boil it down to what it is, it 

is hard to read a contract. So I think I would clearly welcome whatever involvement with the staff and the members that the Secretary and the Deputy Secretary wanted us to have. 

Ms. LOFGREN. I would just say, I mean, as I said earlier, I hope 

to read the contract over the break so that I will be more knowledgeable than I am currently as to the video deal. But I would hope 

that as we move forward, for example, you could do an exclusive 

contract with some content to an Internet portal. I think it would 

be a mistake to do anything exclusive, although I would welcome 

anything that is non exclusive, just to get our info out. And that 

is just an opinion I would share with you. So with that, Mr. Chairman, I yield back. 

The CHAIRMAN. The gentlelady yields back. And I apologize to 

the gentleman from California, Mr. Doolittle, for not recognizing 

him in order. I am pleased to recognize him now. 

Mr. DOOLITTLE. Thank you, Mr. Chairman. Just a brief question 

of Mr. Beer. What is the nature of the communication between the 

business unit of the Smithsonian and the Smithsonian Institution 

itself? How do you relate in terms of those two organizations? I 

know you are a subunit of it, I guess. 

Mr. BEER. Well, I am glad you mentioned the question, Mr. Doolittle. The Secretary spoke about it before you got here. We are actually not a separate unit. I was hired by Secretary Michael 

Heyman and a subcommittee of the Board of Regents that served 

as the selection panel in 1999. I report directly to the Secretary. 

All of us at Smithsonian Business Ventures are employees of the 

trust. The trust, in my mind, is, the trust and the SBV are the 

same. We are part of the central administration. We have a division. And if you were to look at the organizational chart of the inVerDate Aug 31 2005 01:03 Sep 07, 2006 Jkt 028299 PO 00000 Frm 00075 Fmt 6633 Sfmt 6602 E:\HR\OC\A299.XXX A299
74 

stitution, we are just a division as other divisions are under the 

management of the institution, the Secretary and his staff. 

Mr. DOOLITTLE. I was just, I am not trying to beat a dead horse 

here. But you know, every year the Smithsonian comes and meets 

with the members of the—I mean, they send some representatives 

to meet with the members of the—I assume they do it with the 

Senate as well, but the House Interior Appropriations Subcommittee. And it seems like with a 30-year contract of this nature 

that that might have been on their agenda to mention to us, and 

they did not do so. 

Mr. BEER. Again, I don’t want to speak for the Secretary and the 

Deputy Secretary, but I have sat in enough meetings over the last 

few weeks that I think I would share that we think that the idea 

that a 30-year agreement really relates to the nature of the structure of it. It is both an equity joint venture as well as a licensing 

term. It is an unusual thing for the Smithsonian to do. It is not 

an unusual thing for a nonprofit and it is not unusual for the 

WGBHs and other buyers and sellers of television programming to 

do. I think that there are—— 

Mr. DOOLITTLE. But may I just interrupt and say that since this 

hadn’t been done before by the Smithsonian, I mean surely this 

stood out in your mind as something that was new, different, important. I mean that is exactly the type of thing, especially that if 

you thought it might be at all controversial that you would want 

to mention. 

Mr. BEER. Congressman, I think that we missed the fact that it 

was going to be controversial, but we completely agree with you. 

Mr. DOOLITTLE. Okay. 

Ms. LOFGREN. Mr. Doolittle, would you yield? 

Mr. DOOLITTLE. I will be happy to yield. 

Ms. LOFGREN. Just for a quick question that I forgot to ask before I yielded back my time. Congressman Honda, our colleague 

from California, mentioned that he has, I guess, been working with 

a nonprofit group that is attempting to provide free WIFI service 

throughout the mall and in the vicinity of the Smithsonian Institute, and has run into roadblocks in that regard. I guess it has now 

been reevaluated. Do you know anything about that? Is there anything that would preclude—— 

Mr. BEER. This agreement would not. But I couldn’t speak to 

this. 

Mr. HUERTA. I believe the Deputy Secretary could address that. 

I am not knowledgeable about the details of it. 

Ms. BURKE. If I may, Mr. Chairman. Yes, in fact, I have. I am 

Sheila Burke, Deputy Secretary. 

The CHAIRMAN. Would you identify yourself for the record. 

Ms. BURKE. I am Sheila Burke, the Deputy Secretary and chief 

operating officer of the Institution. We have, in fact, for a period 

of time, been in negotiations and have now signed a contract and 

intend to, in fact, provide free WIFI access throughout the Smithsonian Institution and into our garden areas. This is something, you 

are absolutely correct, Congresswoman, that has been of a great 

deal of interest to a great many people and we are, in fact, now 

ready to, in fact, go forward and provide that service in our institution. 

75 

Ms. LOFGREN. That is great news. And I would just note that 

with that, you can do, I know the San Jose Museum of Art is now 

doing podcast tours so that it has really worked out very well. And 

this will facilitate that. And I thank you for answering the question 

and also for facilitating that. And I thank you, Mr. Doolittle, for 

yielding. 

The CHAIRMAN. Do you have any further questions? 

Mr. DOOLITTLE. No further questions. 

The CHAIRMAN. The gentleman has no further questions. I want 

to just pursue this one moment. You said when you say service will 

go into the garden areas, are you referring to the entire mall? 

Ms. BURKE. I am sorry sir. I didn’t hear the question. 

The CHAIRMAN. When you say it is going into the garden areas, 

are you referring to the entire mall or just—— 

Ms. BURKE. No, sir. In fact, I was corrected. Apparently the contract is in process, not yet signed. It will be within the Smithsonian 

confines, so the garden areas surrounding the Smithsonian Institution, not fully out to the mall, sir. 

The CHAIRMAN. Is there not a proposal to also provide service in 

the entire mall? 

Ms. BURKE. There have been discussions of that nature about 

posting essentially an antennae on our buildings, similar to apparently an exercise that took place up here, although not on the Capitol buildings but apparently on building in proximity. The decision 

was to try and do something that essentially allowed it to be internal to our buildings and to the area surrounding our buildings and 

to place the antennae on our buildings for those purposes, but not 

to do the wider community. Again, it was a discussion that took 

place over a long period of time. 

The CHAIRMAN. All right. I believe there are some Members of 

Congress who want to pursue that with you. But that is not our 

jurisdiction. 

Ms. BURKE. I am happy to, sir. 

The CHAIRMAN. That is not our purpose right here today. We 

have approached the witching hour. I would like to wrap up. But 

I see the ranking member has one burning question. 

Ms. MILLENDER-MCDONALD. Just one burning question. Mr. 

Beer, you said that you guys are part of the general structure of 

the Smithsonian. But do you not have a Board of Directors that is 

directly tied in with the SBV? And if so, are they advisory in nature? How do we make up this board? 

Mr. BEER. The board is in fact advisory. We have 11 members 

I believe by our bylaws there is a proscribed number of outside directors to come from various fields of industry akin to those that 

we are in. And then there are several internal directors. 

Ms. MILLENDER-MCDONALD. You report to them though, and not 

to the—— 

Mr. BEER. No. They are just advisors. And actually the bylaws 

provide that they advise the Secretary of the Smithsonian and the 

CEO. And they have a—they are very engaged. They work very 

hard. They give us their recommendations and all their opinions. 

They have, but they have no authority other than as advisors. 

Ms. MILLENDER-MCDONALD. Thank you. 

76 

The CHAIRMAN. We have approached the witching hour. I would 

just like to make a few concluding comments. Obviously, the contract has been a real center of attention and I think there is considerable nervousness about the 30-year term. As someone commented 

to me, the only common document in the United States that has 

a 30-year term is a mortgage on a home and when it is finished, 

you actually own the home. And so that may not be a good comparison to what you have proposed here. 

Also, you heard the word over and over, ‘‘transparency.’’ The 

Congress is a public institution. We represent the public. We expect 

all entities receiving funds from the Congress to recognize their 

public obligation to be transparent so there is clear accounting of 

the funds that are used and expended, not just taxpayer money, 

but all money used by an institution funded primarily by taxpayers. And I just want to make sure that is clearly engraved on 

your minds at this point. 

The final point. I would like to thank all the witnesses for being 

here. I think this has been very beneficial for all of us on both sides 

to hear the testimony, hear the questions and hear the responses. 

So I appreciate your assistance. I would also like to make clear 

that we will leave the record open and members having additional 

questions may, will submit them in writing, and we would ask for 

your response within 5 days at that point. 

Having said that, a few final formalities. I ask unanimous consent that members and witnesses have seven legislative days to 

submit material into the record and further statements and materials to be entered into the appropriate place in the record. Without 

objection, so ordered. And also, I ask unanimous consent that staff 

be authorized to make technical and conforming changes on all 

matters considered by the committee at today’s hearing. Without 

objection, so ordered. And with that I hereby declare the hearing 

adjourned. 

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[Whereupon, at 3:01 p.m., the committee was adjourned.]