The NPG, whose budget is almost entirely derived from public funds, supplements its income by licensing photos of its paintings to books and for the web. They are so protective of this small bit of income that they even prohibit photographs of their "no photography" signs (they argue that these signs are copyrighted).
They argue that they can service the public -- whose taxes sustain them -- by extracting additional rents from photos instead of seeing to it that they are widely distributed. This is an increasingly common argument by public institutions, for example, the BBC jealously guards its additional DVD income and shies away from any kind of public archive that might undermine it, saying that the five percent of its budget derived from commercial operations is so important that the material funded with the other 95 percent of its income -- which comes directly from the public -- should be locked up.
At the end of the day, you either buy this argument or you don't. I don't. If you take public money to buy art, you should make that art available to the public using the best, most efficient means possible. If you believe the public wants to subsidize the creation of commercial art-books, then get out of the art-gallery business, start a publisher and hit the government up for some free tax-money.
I don't really think that this has anything to do with income. I think it's the NPG's ingrained philosophical approach. A couple years ago, they had a show of pop-art portraits by the likes of Warhol, et al, and practically every single portrait represented some kind of copyright infringement. Seemingly without irony, the NPG prohibited photos of these infringing works "to protect their copyright." At the time, I asked whether they were celebrating the creativity of the pop arts, or eulogizing it. Today's Warhols have no friends at the NPG, who are only interested in celebrating fair dealing if it took place 30 years ago.
"It is hard to see a plausible argument that excluding public domain content from a free, non-profit encyclopaedia serves any public interest whatsoever," he wrote.Wikipedia painting row escalates (Thanks, Fee!)
He points out that two German photographic archives donated 350,000 copyrighted images for use on Wikipedia, and other institutions in the United States and the UK have seen benefits in making material available for use.
Another Wikipedia volunteer David Gerard has blogged about the row, claiming that the National Portrait Gallery makes only £10-15,000 a year from web licensing, less than it makes "selling food in the cafe".