The Art Business

Iain Robertson, Iain Robertson, Iain Robertson

• Publisher: Routledge
• Year: 2008
• ISBN:
  9781134222421
• Edition: 1
• Topic: Art
• Subtopic: Art & Business

By the time you read this book, the art world may have witnessed the sale of its first $500 million painting. Whilst for some people money is anathema to art this is clearly a wealthy international industry, and a market with its own conventions and pressures.

Drawing on the vast experience of Sotheby's Institute of Art, The Art Business exposes the realities of the commercial trade in fine art and antiques. Attention is devoted to the role of auction houses, commercial galleries and art museums as key institutions, with the text divided into four thematic sections covering:

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• technical and structural elements of the art market
• cultural policy and management in art business
• regulatory legal and ethical issues in the art world
• the views, through interviews, of leading art market experts.

This book provides a thorough examination of contemporary issues in the art business, and the mechanisms and influences which underpin its evolution. It is essential reading for students of art history or international business, or anyone with an interest in pursuing a career in this area.

1 Introduction to studies in art business

Iain Robertson and Derrick Chong

The art market is the place where, by some secret alchemy, the cultural good becomes a commodity.

Raymonde Moulin, The French Art Market (1987 [1967]: 3)

It is the assumption of this book that a work of art is a gift, not a commodity. Or, to state the modern case with more precision, that works of art exist simultaneously in two ‘economies’, a market economy and a gift economy. Only one of these is essential, however: a work of art can survive without the market, but where there is no gift there is no art.

Lewis Hyde, The Gift (1979: xi)

Introduction

Raymonde Moulin’s contemporary account of the Parisian art market of the 1960s holds true today. How is an aesthetic object, often without utilitarian purpose, assigned value? What mechanisms exist? In many respects, the art business world, as discussed in this text, represents Moulin’s ‘secret alchemy’. Moulin’s research method of interviewing the key players (dealers, private collectors, museum curators, and critics) remains an object lesson. The Business of Art was based on conferences held in the United States under the auspices of the National Endowment for the Arts (Caplin 1982); and Art Basel 2006 was the launch pad for Collecting Contemporary by ARTnews-listed collector Adam Lindemann (2006), based on his own collecting decisions and access to interviews with key players. At the same time, the art market remains problematic for those who are uncomfortable with price tags attached to works of art. There are condescending references to a ‘privately moneyed collecting system’ or a ‘commodification of art’. A more nuanced account is offered by Lewis Hyde (1979: xii) in The Gift: a work of art is a gift and that ‘when we are touched by a work of art something comes to us which has nothing to do with the price.’ This is a position explored by Robert Storr (2007), director of the 2007 Venice Biennale and dean of the Yale School of Art:

[R]educing art’s commercial value to zero means other values can emerge, other transactions can occur in the currencies of the imagination and intellect … market values frequently have little or nothing to do with enduring aesthetic or anti-historical values. They are barometers of taste which is nearly always conservative compared to the lasting pleasures and challenges art has to offer.

Storr was drawing reference to the traditional role of the museum in taking works of art out of circulation once and for all.

It is not possible to measure with any particular accuracy the X international art market or reach any conclusions regarding overall competition because dealer and auction firms frequently do not report annual totals for auction sales, revenues or profit, and the amount reported may not be verifiable.

(Sotheby’s 2007b)

The largely unregulated nature of the market for art was a prominent motif when the (UK) House of Commons’ Culture, Media and Sport Committee (DCMS Committee 2005) convened to examine, by seeking written submissions and oral evidence from key stakeholders, the market for art. In the UK there is no legislative framework for the trade in art as for financial products under the Financial Services and Markets Act of 2000; nor is there an equivalent of the self-regulatory framework administered by the Advertising Standards Authority for the advertising industry. Rather it is more likely that dealers and auctioneers are subject to laws and regulations, which vary from jurisdiction to jurisdiction, that are not solely directed to the art market (e.g., import and export regulations, antitrust laws, cultural property ownership laws, data protection and privacy laws, anti-money laundering laws, and value-added sales taxes). Several trade associations – ABA (Antiquarian Booksellers Association), BADA (British Antique Dealers’ Association), BAMF (British Art Market Federation), LAPADA (The Association of Art and Antique Dealers), SLAD (Society of London Art Dealers), and SoFAA (Society of Fine Art Auctioneers) – operate in the UK art market. Membership is optional, however, as some of the leading contemporary art dealers in London do not belong to SLAD, and Christie’s, for example, is not a member of SoFAA.

Of course, the art market operates: ‘The purchase and sale of works of art in the international art market is primarily effected through numerous dealers, the major auction houses, smaller auction houses and also directly between collectors’ (Sotheby’s 2007b: 1). Various ‘arts councils’ in different countries have, in recent years, shown interest in the workings of the art market: the Arts Council of England commissioned Taste Buds (Morris Hargreaves McIntyre 2004) and Market Matters (Buck 2004); Pro Helevetia commissioned Art Market Switzerland (Walliser-Schwarzbart 2003); and the Canada Council for the Arts launched ‘Assistance to Professional Canadian Contemporary Art Dealers’, in 2006, to encourage the development of international links. A research-based monograph, Talking Prices, by Olav Velthuis (2005), grounded in economic sociology, highlights the social structures of the art market, with particular reference to how art dealers in New York and Amsterdam determine primary market prices for contemporary works of art.

Recent developments in art business have made it an intriguing subject for study: the rise in fine art and antiques as alternative investment vehicles (as represented by the emergence of art price databases, art indexes, and art funds); powerhouse contemporary art dealers ‘poaching’ artists; fine art and antiques dealers borrowing from luxury brand retailing to attract so-called mass affluent clients; the growth of art fairs around the world; globalization with significant pockets of wealth in emerging economies interested in collecting art; the emergence of new art market centres in the Far East (Hong Kong, Beijing, Shanghai, and Singapore) and the Middle East (Dubai and Abu Dhabi); ethical issues regarding looted and stolen art and cultural artefacts not least of all in public collections; the introduction of European Union regulation on droit de suite (artist’s resale rights); and issues of corporate governance, such as public trust, gaining prominence with art museums. Furthermore, many developments which took root in the 1980s – corporate sponsorship of blockbuster art exhibitions, record-breaking auction prices, and the lifestyle celebration of superstar contemporary artists, dealers, and collectors – have become naturalized.

A review of Art in America’s (Summer 1988) issue on money and art at the end of the 1980s is very instructive. Several contributors asked about the cultural implications of the ‘astronomical’ auction prices for French Impressionist and Post-Impressionist paintings (van Gogh was a key artist here and buyers included Japanese corporations and Australia’s Alan Bond), modern works by the likes of Jackson Pollock, Jasper Johns, Man Ray, and Edward Weston, and even contemporary artists such as Barbara Kruger. ‘Neo-Geo’ (associated with artists such as Ashley Bickerton, Peter Halley, and Jeff Koons) was cited as ‘The New Thing’ in contemporary art. They were a response to the insatiable hunger of a new breed of aggressive often neophyte collectors seeking out ‘hot’ artists. Corporate support for the arts, promoted by Business Committee for the Arts, a leading advocacy organization in the USA, raised concerns about the rise of blockbuster museum exhibitions financed by corporate sponsors and corporate art collecting.

Dealers were interviewed on the relationship between art (aesthetic value) and money (commercial or economic value) in the context of rising auction prices. Excerpts from statements by Leo Castelli, the then leading gallerist, and Larry Gagosian are illustrative:

High prices achieved at auction affect everyone in the art world in many complicated ways. In particular, galleries that handle contemporary works in the secondary market are sometimes rather unhappy. They feel the auction houses have been taking precious materials away from them. Such problems have never affected this gallery. On the contrary, it was favorable to my cause to see works of my artists attaining high prices in auction sales because it suggested to collectors that the prices we charge here are not in any way excessive. Therefore, I have friendly feelings toward the auction houses, though I can understand if, recently, some think the bidding has gone too high. These immense prices are a bit disturbing. They show the law of supply and demand operating in an extreme way.

(Leo Castelli in Art in America 1988: 78; emphasis in the original)

Art is a commodity but of a funny kind. It is held by relatively few people, and there is not as much liquidity as some of the recent financial reporting on the art market might suggest. People don’t wake up in the morning and decide to buy or sell a van Gogh. Art is more beautiful than gold. It has a spiritual quality. People who buy art like art. I know of no collector who has absolutely no feeling for what he’s buying…. Auction results are a factor in pricing, but more important is the word-of-mouth among collectors. Initial interest is sparked by a new artist, word spreads, there is a critical response, then gallery exhibitions, and possibly museum shows. Reviews in the New York Times can be very important. Some people treat the Times like a dope sheet. But serious collectors take a wider range of factors into account. A consensus develops around an artist. Some collectors are especially important in forming this consensus. They have buzz names, like certain dealers in the primary market. As a secondary market dealer, I also function as a collector. I acquire works for myself. This gives me a credibility I wouldn’t have if I were just buying and selling and gave people the idea that I was just another buccaneer. Other dealers in the market work in the same way. In the eight years I’ve been in the art world, the dealer has emerged as an elite collector

(Larry Gagosian in Art in America 1988: 82)

Such sentiments – high prices at auction, conflict and cooperation between dealers and auctioneers, word-of-mouth and buzz marketing, and the dealer as an elite collector – would not be out of place today. The names change, though, reflecting the life cycle of dealers in the intervening two decades. Castelli died in 1999; his gallery, established in 1957, continues in a reduced state of operations. Gagosian has developed a leading position in the intervening two decades. Iwan Wirth of Hauser & Wirth, who opened his first gallery in Zurich, in 1992, is touted as a successor. Other dealers, who emerged in New York in the 1990s, like Andrea Rosen (est. 1990), David Zwirner (est. 1992), and Cheim & Read (est. 1997), have established international reputations. Likewise London has witnessed the rise of Jay Jopling’s White Cube (est. 1993) and Sadie Coles HQ (est. 1997), to the first rank. Property, often referenced as the process of gentrification, is never far from art market concerns: SoHo, as hub of the New York art world since the 1960s, started to give way to Chelsea in the 1990s, and current attention is given to non-Manhattan activity in Brooklyn (namely Williamsburg) and Queens, which has benefited from P.S. 1’s relationship with MoMA (New York’s Museum of Modern Art); and the Young British Artists (YBA) scene, associated with London of the 1990s, saw the emergence of the East End as a site for contemporary art.²

The observation of a leading critic, arguably a disinterested party, on the marketplace for art is even more apposite two decades later:

Everywhere one sees signs of an increasing importance of art as an investment property. It has clearly reached unexpected heights of economic hyperbole.… In an eloquent tautology, art’s monetary value has become its sublime value. Art and money have exchanged roles: money becomes ‘divine’ by being ‘translated’ into art. But that’s enough to give art the only clear and absolute meaning – meaning as universal and substantial as money – it’s going to get in this farcical world.

(Donald Kuspit in Art in America 1988: 109)

Now analysts at Citigroup (2005) are using ‘plutonomy’ to describe the growing gap between the super-rich (few in number, but disproportionate in the gigantic slice of income and consumption they take) and the rest of us. Recent art market examples – entertainment impresario David Geffen selling Pollock’s No. 5 (1948) for $140 million in a private treaty sale, and casino owner Steve Wynn seeking compensation from his insurance company for $54 million, as the value knocked off a Picasso, from elbowing it – raise the spectacle of the $500 million painting. It is less a question of if, or even when, such a transaction will take place, but various who questions – of seller, buyer, intermediary, and artist – and how (confirmed private treaty or public auction).

Art business organizations

Several main types of organization are involved in art business: dealers and auctioneers of fine art and antiques are key intermediaries; public art museums are leading civic institutions in liberal democracies alongside libraries and universities; providers of ancillary services include art fairs, art advisors, insurance companies, art lawyers, and interior decorators and designers; and business corporations use art by building art collections and sponsoring museum exhibitions. The profit incentive is used as a primary point of separation: art museums are usually not structured to maximize profits for shareholders, thus an emphasis on not-for-profit or public sector organizations; dealers and auctioneers, on the other hand, and almost all ancillary service providers are for-profit (i.e., commercial) organizations.

Dealers and auctioneers

The owner of a work of art wishing to sell has four principal options: sale or consignment to, or private sale by, an art dealer; sale or consignment to, or private sale by, an auction house; private sale to a collection or museum without the use of an intermediary; and for certain categories of property (in particular collectibles) consignment to, or private sale through, an internet-based service (e.g., eBay) (Sotheby’s 2007b). Selling fine art and antiques is the work of two key intermediaries: dealers and auctioneers. Dealers account for the majority of value of transactions in the international art market. As is the case with other intermediation businesses, personal contact and human relations remain important for success. Dealers need several competitive factors: relationships and personal interaction between the buyer or seller and the dealer; the level of specialized expertise of the dealer; and the ability of the dealer to finance purchases of art (Sotheby’s 2007b: 5). The principal role as an auctioneer, as an agent accepting property on consignment from its selling client, is to identify, evaluate and appraise works of art through specialists, and to stimulate purchaser interest through marketing techniques, and to match sellers and buyers through the auction process (Sotheby’s 2007b: 2). As an auctioneer earns commission revenue from the buyer (buyer’s premium) and the consignor (seller’s commission) ‘a key challenge is to obtain high quality and valuable property for sale either as agent or principal’ (Sotheby’s 2007b: 3)

Two facets are worth noting about the structure of the art market. First, art in the marketplace has two circulation patterns: primary sales and secondary sales. Primary sales represent the first time a work of art is sold; this is conducted, in the main, by ...