Vol 02 02
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Quarterly Journal on Management
From the publishers of THE HINDU BUSINESS LINE

Vol. 2 :: No. 2 :: August 1998


For Art's Sake

Jeyessomnath C. Nagarajan

Ken Raasch, Chairman and Chief Executive Officer, and co-founder of Media Arts Group Inc (MAGI), based in San Jose, California, spoke to Praxis when he visited Chennai. MAGI is a company that retails branded art at an affordable price. The company was founded in 1990 with an initial investment of USD 35,000 and its market capitalisation today is in excess of USD 175 million. It is a publicly traded company listed under the code ARTS on NASDAQ.

Besides being a person pressed for time, Raasch is also involved in philanthropic work with Mercy Ministers, an organisation which he had helped form in Calcutta with some of his Indian friends. Mercy Ministers runs schools and orphanages for the destitute.

Here's Raasch:

We (Raasch and Thomas Kinkade) founded the company in 1990... we actually started this business in 1987. Prior to that, I ran a business in Palo Alto, CA. It was a leveraged buy out of a company called Anesthesiologists Services Inc., and turned it around. Its parent company was First MedCorp, and it was a data processing company for doctors, and what we did was we worked with doctors and other hospital-based physicians and provided business services. Then I sold that company to a public company, and used some of the capital to start Media Arts Group. I Started with a capital of about $35,000, and MAGI today has a market capitalisation of $175 million.

MAGI is the largest artist-based brand in America. It is a very unique business where we saw big opportunities. In all areas of arts, there were major household names in America. For instance, if you take music, we have Whitney Houston and Mariah Carey, and in the area of books, we have, for instance, John Grisham. But in paintings, there was no clear number one artist in America who was recognised as a household name.

So, Thomas Kinkade, my partner in this business, who is also an artist, and I got together and developed Thomas Kinkade as the number one artist in America, by every measure. We have about 100 stores across America, that sell only the Thomas Kinkade brand of art. It is not only art work, but books, stationery items, crystal, ceramics, table cloths, everything you can think of, for the home. But we use the artist as a brand, which like Calvin Klein would be a brand, or Ralph Lauren. So, Thomas Kinkade is a brand for the home.

When we started the company, we had a smaller vision. Our vision was to be a traditional art publisher. I took $35,000 and invested it to start this company. But our vision expanded step by step. We never thought we would be a $175 million company. When we saw an opportunity we adjusted our plans, talking and adjusting, talking and adjusting, responding to changes in the market and the economy. We started by not really understanding what our business was, but we grew by finding what it could be. And, then we continued to change. For example, in 1992, we invested a couple of million dollars, almost all the money we had made in the first three years of business, and we started building our own stores in the biggest malls in America, including the largest Mall of America in Minneapolis, Minnesota. They became phenomenally successful.

Why? Because we learned to sell our products in a unique way, like, training our own retail stores to sell only the Thomas Kinkade brand of products. Today we have 20 stores that we own and 80 different licensed people. We will be expanding the number of stores dramatically.

So, we have a big vision now. But when we started, we did not have this kind of vision. So we faced a lot of obstacles. Most of the obstacles were because of what we were doing...it was so different and unique, that most people did not understand what it was all about! So what we had to do was to constantly communicate and put our money where our mouth was and spend a lot of our own money to prove it. And that worked out very well for us.

We did something with art, and art has been traditionally viewed as something only for the elite and the rich. Most people, when they walk into an art gallery, find themselves uninformed or uneducated, and they feel bad. Half the time, they couldn't tell what the picture was and what it was about! We took a complete approach to art education, and made it mainstream, `art for people at affordable prices', that they can look at and understand. Then, we developed many products based on that. We used television (Tom has his own television programme on QVC) and now we are talking about magazines to communicate.

Now, we get criticised by the art community, and they say we are trying to commercialise art! Our view is Good! We are commercialising art! We are bringing art to people's homes, where they can enjoy it. We are not about bringing ugliness...we are about bringing joy and peace through our work. If you think about it, when you listen to a piece of music, or listen to a CD, you listen to it until it is time to take it off and throw it away. And it is the same thing with video cassettes. But a piece of art is permanent. Art leaves a lasting impression and it helps form the way you think and helps form the way you are, and I feel good about that.

There is a huge opportunity for the business community in India to grow up. But what is needed is the necessary infrastructure. It is never easy to start a business, but in the place where I come from, which is the Silicon Valley in California, it is easier to start a business. There is a climate which is very positive for business to be successful. We have the infrastructure and the mindset of entrepreneurship, it is like a fire, when lit, that can go from house to house, business to business... people can see the results of their hard work. Business should be a tool to enrich the lives of all the people in a community, and not just a few. Of course, people who take the greatest risk, take the greatest gain...and that is the nature of business, and there is nothing wrong with that.

Besides infrastructure, what is needed is capital. I was surprised to understand, after talking to a lot of businessmen in India, that there is very little venture capital available here. Venture capital is omnipresent in the US. There is more capital than investments. There is a great competition to invest in certain companies, but it is wise money. What they look for in the US is people with a track record, people who have proven successful and who can do something innovative. Then they look for the concept. If the concept is a unique proposition, does it have a great potential? And is it sustainable? For instance, it is easier today to invest in the Internet than in a steel mill. So India needs access to venture capital. It needs to set up institutions at first to decide if it is worthwhile to invest in innovative ventures.

I believe what India needs is one or two things. I think the Indian business community should recognize the difference between entrepreneurship and industrialisation. Industrialisation is companies setting up units. But entrepreneurship is much more liberating, where ideas come to grow. What needs to be planted here is the spirit of entrepreneurship. There are many ways you can do it. It is going to take the business community to put pressure on the government in this regard. Thinking in terms of an entrepreneurial economy as opposed to an industrial economy would actually revolutionise any country.

The key is to understand what roles people play in your business. People are the only real asset any company has. Until you, as a manager, understand how to nurture people, how to compensate, how to make them grow, you really are not going to lay a great foundation for your business. What we chose to do is to share a significant amount of shares with our employees through stock options because I wanted to make sure that people cared about the business as much as I do. (Raasch's secretary, by the way, has made over USD 2 million through her stock options). I think having only financial considerations as your highest purpose in business is really short sighted. Business is about money. But you also have to think about how you are going to serve your community and culture. And if you do not do that, you become a taker. If you do that, you become a giver.

I gather that entrepreneurship in India has always faced obstacles in the Indian culture. Indians need to give themselves the permission to fail. Because until then, the Indian culture wont let entrepreneurship to flourish, as it won't be acceptable to try something new and have it not work. And so, they want to not think of the new and go for the one which is proven and just build on it. There needs to be a cultural mindshift, which has to be generated by the business community and other governmental institutions, to say, `it is alright to try out new things and fail. The risk is just part of the excitement'.


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