Art Dealers suing company
Thomas Kinkade paintings are about warmth and security: garden gazebos, elegant old cities at dusk, thatched cottages surrounded by flowers.
But a growing number of Kinkade licensees aren’t feeling either secure or warm. They’re feeling ripped off – and a lot poorer. Alleging fraud, they’ve filed at least seven lawsuits, including one led by Jim Cote, who operated the Kinkade gallery at Briarwood Mall until it closed late last month. Cote’s lawsuit, filed March 17 in Wayne County Circuit Court, seeks class action status representing other Kinkade dealers.
The battle is heating up. Thursday night, Kinkade’s company terminated Cote’s license. Cote owns three galleries in the Detroit area – and now plans to bring in work from other artists.
He also has been chairman of the Signature Dealers Council, a national group representing Kinkade dealers. Cote charges he’s being pushed out because of speaking out against Kinkade’s conglomerate.
Cashing in on Kinkade
In the last 15 years, Kinkade paintings have become increasingly popular. Working from a California studio and calling himself the “Painter of Light” – a trademarked phrase – Kinkade produces a steady stream of soft-focus, often bucolic scenes, many of which are reproduced on canvas or textured paper. Often they’re highlighted by an army of workers told precisely what to highlight, then sold at the privately-owned galleries for hundreds, sometimes thousands of dollars.
Kinkade has built an international reputation, and has interviewed on “60 Minutes,” “Good Morning America” and other TV shows. Media Arts Group, the San Jose-area company that distributes Kinkade’s work, licenses 279 Signature Gallery dealers who sell Kinkade only, plus about 3,600 other dealers. The firm reported $103.8 million in revenues for 2002, but posted a $1.1 million loss for the year.
In the last several years, Media Arts has issued low-price reproductions of the same art available in the galleries, plus a raft of Kinkade-related merchandise such as calendars, music boxes and greeting cards. Gallery dealers say they’re required to sell these items at full retail price – they can’t discount – and it’s wiping them out.
“Media Arts is a ruthless company,” says Cote.
The company counters that Cote and other dealers are simply unhappy about the company’s marketing decisions. What’s more, says Media Arts general counsel Robert Murray, “almost all the dealers who have sued owe considerable amounts of money – at least $100,000, and up to $1.5 million.”
The Media Arts network
David White, original owner of the Thomas Kinkade Gallery at Briarwood, opened that store in late 1999. Like other dealers around the country, he sold limited-edition copies of Kinkade paintings.
“I did this because I believed in the artist. I still love his work,” says White, a financial planner in Bloomfield Hills. He planned to give gallery profits to charity, but says he instead lost $2.5 million. White says to become a dealer, he was required to attend a five-day seminar at TK University – Media Arts’ training center – and submit a business plan.
Dealers were strongly encouraged to have Pebble Beach Financial, a California consulting firm, prepare the plan, he says.
White spent $500 on the seminar, then $5,000 on a business plan from Pebble Beach. However, he believes Media Arts instructed Pebble Beach to wildly inflate possible profit margins – up to 18 percent.
“The company said they use Christian values, so people let down their guard,” says White. “We trusted them. We believed them.”
Murray says White was not required to attend TK University, and he could have had any firm prepare the plan.
Norman Yatooma, a Birmingham lawyer representing White, Cote and other dealers, says Media Arts made it clear if potential licensees did not use Pebble Beach, “they’d wait a long time” for a dealership. Pebble Beach Financial could not be reached for comment.
White says Media Arts pressured him and many other dealers to open stores before they were ready, often in areas Kinkade had saturated. White opened four stores in 1998 and 1999, including the Briarwood one. He later sold the store to Cote, but wishes he’d never opened it.
He blames company strategy for poor sales. “They opened too many stores too close to each other,” he says. Today, there are four Kinkade galleries in the Detroit area. Several others in this market have closed over the past few years.
Legal action
In lawsuit documents, White and Cote say as early dealers, they signed agreements to sell at full-retail only, and the company agreed to strictly limit Kinkade distribution. Thereafter, they allege, Media Arts flooded the market with cheap reproductions and dozens of related items, undercutting gallery dealers. A Kinkade Web site offers discounted merchandise, and stores such as Hallmark and La-Z-Boy sell Kinkade-related products.
But some dealers say they’re quite happy, including Kal Jabara, who owns Wild Wings Gallery in Plymouth. His clerk, Paul DesChenes, says there’s a big difference between Wild Wings and the disgruntled dealers: “We don’t owe (Media Arts) money.”
Media Arts CEO Anthony Thomopoulos told the Los Angeles Times the dealer dispute centers on whether the company has distributed too much Kinkade material or not enough. Thomopoulos believes the market hasn’t been saturated.
“Certain people become disgruntled or upset with the new ways,” he said.
White acknowledges owing Media Arts $140,000 in inventory fees, but still feels he’s been scammed.
“I believe in paying my debts,” he says, “but they owe me a lot of money.”
Three years ago, White began selling his galleries. They were losing money, and he couldn’t afford them all. Cote already had three shops in the Detroit area, and wanted a fourth.
“I had been a dealer longer than David,” says Cote. “I was more hands-on than he. I thought I could turn (the shop) around.”
But he believes that market saturation, coupled with Ann Arbor area tastes, caused the store to flounder. “We lost our shirts,” says Cote.
Media Arts says it terminated Cote because he hadn’t paid them. “Jim Cote owes Media Arts Group Inc. a considerable amount of money, which he has refused to pay,” according to a statement issued by the company.
Cote believes Media Arts dropped him not only because he spoke out, but because Signature dealers’ annual convention is the end of this month. As chairman, Cote would have been its leader.
