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Friday, 9 August, 2002, 08:13 GMT 09:13 UK
Art firm paints profitable picture
Thomas Kinkade, Photograph courtesy Thomas Kinkade, Media Arts Group, Inc. Morgan Hill, CA 95037
Media Arts' fortunes rest on Mr Kinkade's shoulders

"Being good in business," Andy Warhol once said, "is the most fascinating kind of art."

To call [Thomas Kinkade's] style chocolate-boxy would be a serious slight to the world of confectionery illustration

Mary Wakefield, art critic
Thomas Kinkade may not be a great painter. Indeed, he is mocked by art critics and firmly excluded from the cultural establishment.

But with more than 10 million pictures sold and reportedly the highest earnings of any artist in US history, Mr Kinkade has little cause for regret.

Nor have the shareholders of Media Arts Group, the $100m-a-year, Wall Street-listed firm that fronts Mr Kinkade's work.

Paints mean profits

Media Arts is a peculiar sort of company.

It calls itself "the leading art-based lifestyle brand", but its mission is to squeeze the maximum shareholder value out of the limited stock of Mr Kinkade's work.

Media Arts share price

Media Arts sells prints and lithographs, but it also licenses Mr Kinkade's work to giftware and other knick-knack producers, and looks for ways to build an art brand into a lifestyle product.

This last segment, which encompasses everything from furniture to financial services, is where the future of Media Arts lies.

In the year to end-March, the firm had revenues of more than $110m, only three-fifths of which represented sales of pictures.

Gingerbread and candy...

And what pictures!

Mr Kinkade's taste is for the nostalgic - some would say mawkishly whimsical.

Photograph courtesy Thomas Kinkade, Media Arts Group, Inc. Morgan Hill, CA 95037
Elfin, candy-coloured, and wildly popular

Improbably candy-coloured landscapes tumble down to purple seas; cotton-wool smoke snakes from gingerbread-house chimneys.

At every window winks an elfin lamp; on every porch hangs the Stars & Stripes.

The critics, predictably, hate it.

As one recently wrote: "To call the style chocolate-boxy would be a serious slight to the world of confectionery illustration."

... taste good to me

But who cares?

Thomas Kinkade has an extraordinary grip on the broad bottom end of the US art market.

"People feel as if they can wander right into the painting," says Felix Quinn, who owns three Kinkade-branded galleries in the UK.

"They get a genuine sense of peace from these pictures."

From its first base on West Coast of the US, Media Arts now markets Kinkade art through 4,500 dealers nationwide, almost one-fifth of which are company-owned franchises.

The master's hand

To keep a hungry audience baying for more, Media Arts doles out the artwork carefully.

Original Kinkades never come onto the market - instead, collectors can buy into a carefully-graded hierarchy of reproductions.

Media Arts revenues

At the top of the tree - costing about $3,000 - come so-called "Renaissance Editions", prints that are personally touched up by one of Mr Kinkade's assistants before shipping.

And for those with $15,000 or more to spend, there are the "Master Editions", finished off by the maestro himself.

What's in a name

For Media Arts, the real gravy is in the licensing of the Kinkade name.

Illuminated musical waterglobe
The logical conclusion of fine art

Thanks to an intricate web of relationships with firms from Hallmark cards to Avon cosmetics, there is an ever-expanding range of products with the Kinkade imprimatur: CDs, mugs, nightlights, photo frames, notelets, illuminated musical waterglobes - that sort of thing.

On 24 July, the firm announced the launch of the Thomas Kinkade "Painter of Light" credit card, which rakes off a chunk of each transaction for selected charities and allows privileged access to painting sales.

And last year, Media Arts unveiled "The Village at Hiddenbrooke", a residential development in Northern California quaintly modelled on the houses in Mr Kinkade's paintings.

Secure behind locked gates, the Village features "meandering sidewalks, benches and water features, which are designed to enrich homeowners' lives with endless visual surprises and delights."

Galloping galleries

And while the Kinkade brand is being teased into new directions, the sheer volume of product shifted is also growing strongly.

Photograph courtesy Thomas Kinkade, Media Arts Group, Inc. Morgan Hill, CA 95037
Not aimed at the European market

New galleries are being opened at a furious pace, and Media Arts is pushing aggressively into overseas markets.

Canada, where the first gallery opened last year, now has a couple of dozen outlets; there are now five in the UK, with plans for new openings in Leeds and Nottingham, and an eventual target of 50 by 2008.

Initial fears that Mr Kinkade's homespun style might not travel well have not been realised.

According to Mr Quinn, European buyers have not taken to Mr Kinkade's more overtly patriotic works, but they are suckers for the rest.

The performance of his first gallery, in Kent's Bluewater shopping centre, was "phenomenal", and first-year sales were more than double the projected figure.

Coming off the boil

All this activity has served Media Arts shareholders well over the past few years.

Sales were growing at a 25-30% annual clip during the late 1990s, and its shares doubled in value in the nine months after 11 September.

But the company has its headaches nonetheless.

Shares may have been perky of late, but they are at less than one-fifth of their price of four years ago.

And last year, sales stagnated for the first time in the firm's 10-year history, prompting fears that the company may be close to exhausting its franchise.

Back to basics

Media Arts has moved swiftly.

A thorough boardroom cull reached its conclusion at the beginning of this year when Ron Ford, a giftware-industry veteran, as chief executive.

Andy Warhol
The original artist as businessman

It also pledged a greater focus on cost-control, with the aim of boosting what had been a rather droopy gross margin.

And, most adventurously, it discontinued the mini-Kinkade deals it had signed with three other artists, previously seen as a hedge against reliance on one talent.

The decision to refocus on Mr Kinkade, the firm said, lay behind a strong bounce in revenue in the first quarter of this year.

Mere mortal

But it also underscores the main potential worry at the firm - this dependence on Mr Kinkade.

As a mere mortal, Mr Kinkade could die, rebel (indeed, he made an unsuccessful attempt to buy out Media Arts last year), or even lose his popular touch.

The firm is aware of this, and lists overdependence as its top risk factor in obligatory stock market filings.

But the firm may not need to worry much on that score.

It has Mr Kinkade's back catalogue nicely sewn up. If he died, or defected, it should still have a steady income stream until another artist is found.

Customer focus

And as for Mr Kinkade falling from fashion, he was never there in the first place.

Mr Kinkade's market is the defiantly unfashionable heartland of Middle America, where folks know what they like and care not a fig for the vagaries of fashion.

Media Arts, Felix Quinn says, is superbly focused on the collector base, understanding and anticipating exactly what they want.

It may at times stray into bad taste, but it is most definitely good business.

See also:

07 Jul 02 | From Our Own Correspondent
11 Jul 02 | Arts
14 Aug 01 | Reviews
15 Jun 00 | UK
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