Friday, August 24, 2007

Is It Gonna Be a Bumpy Ride?

As the art market death watch heats up (see MAO's post on Eli Broad's predicitons), the two big auctions houses seem hellbent on discouraging collectors from pestering them to take on lower-priced works. From artinfo.com:

Three weeks after Christie’s announced that it would raise its buyers’ commissions by about one quarter, Sotheby’s has announced it will do the same, reports Bloomberg. As of Sept. 1, buyers will be charged 25 percent of the sale price on the first $20,000, 20 percent of the price above $20,000 up to and including $500,000, and 12 percent of any remaining amount above $500,000.Previously, the rates were 20 percent of the hammer price on the first $500,000 and 12 percent for $500,000 or more.
Indeed, as the Bloomberg report notes, this moves seems designed to alleviate themselves of the drudgery of handling lower-priced works:

Sotheby's, which auctioned almost as much art as Christie's in the first half, has said its strategy is to focus on higher- priced works. The auction house sold 37,977 lots in the first six months, compared with 56,978 at Christie's, Sotheby's said in an e-mail.

Christie's, which raised its fees on lower-priced lots early this month, wouldn't say how many lots it sold.
The timing of this strategy is kind of brilliant actually in that if the market does slow down, it's in the mid-range priced work market that the biggest effect is expected. The conventional wisdom is that highest-end works will see their prices readjusted downward, of course, but a respectable demand will still be there, and the emerging art prices will remain attractive enough to keep hard-core collectors feeding their addictions, but many more of those pieces that were entering that range that's a bit of a financial stretch for your average collector (especially those in the $50,000+ range) will end up back in artists' studios. Of course, if there's anything the past 5 years have taught us it's that the conventional wisdom needs tweeked a bit, due to the more global nature of the market, but, as Bette would say, "Fasten your seatbelts...."

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16 Comments:

Anonymous Anonymous said...

This is not what art is about anyway. This feels like Cheney type paranoia/fear mongering etc... The market will do what it will do. I think the people in the arts should look the other way. All this market talk just places us at the mercy of the elite 1%. I don't think that is where we want to be. And I don't think that is where we are. We should be focusing on what great works are out there on the horizon...and why.

8/24/2007 10:33:00 AM  
Blogger Edward_ said...

This is not what art is about anyway.

It's foolish if you're hoping to buy a home (for example) off proceeds from selling your work to stick your head in the sand about all this, IMO, anonymous. Artists can continue to be true to their vision and make great art AND be professionally aware of the realities that will affect their income.

8/24/2007 10:42:00 AM  
Blogger Henry said...

How do auctions and fees affect artist income? I thought those two worlds were forbidden to mix. Or are you just saying that this type of news is a possible portent of the future in general?

Anonymous 10:33 might be trying to say that artists have already given up any expectations of their income when they entered the profession. The market does what it does, for better or worse, and if it affects an artist one way or the other, then that's what it does. I think anon-1033 is saying you need to be immune to marketplace news to be an artist in the first place, and perhaps the time to start thinking of buying a home is after you transition from emerging to mid-range.

8/24/2007 11:39:00 AM  
Anonymous Anonymous said...

There should be a different resale market for "contemporary" art, because the Christies model doesn't seem to preform properly for younger artists. Unlike a Picasso, a painting from joe blow-young to mid-career-living artist doesn't have a set value yet (except for the really old like Jasper Johns) and auctioning the work of said living artist effects their name. Speculators in a high market sell this type of work when it is out of favor or the market looks bad. Although you could argue that since said living young artist gained the speculators money in the first place, maybe a readjustment of that artist is necessary (if many 'speculators' are drawn to the work instead of 'serious' collectors...)

8/24/2007 11:44:00 AM  
Blogger Edward_ said...

Or are you just saying that this type of news is a possible portent of the future in general?

Yes, I'm speaking broadly about the effects of a possible downturn on individual artists.

The market does what it does, for better or worse, and if it affects an artist one way or the other, then that's what it does.

What an artist does in the studio is one thing. What they do in their personal finances is another. What I object to is the sort of head-in-the-sand mentality that leads artists to assume they need not be aware of what's happening in the market (because that's other people's jobs) when their very ability to do what they want to in their studio may depend on being nimble enough to make the right career moves at the right time. If, for example, there's a likelihood of $50,000-priced works collecting dust until the market gears back up again (not that I'm implying it's dipping, we're talking about being aware of what might happen and the consequences after that), an artist might want to consider looking for additional warehouse space if his/her plans included making works that would sell for that price for the foreseeable future. Doing so before all the other artists start looking for that space might ensure a better rate on it. In other words, without suggesting an artist alter what they want to make, there are realities to be conscious of here.

8/24/2007 11:59:00 AM  
Anonymous Anonymous said...

Yes, but if you think of the markets as things used to manipulate the masses, that type of approach is exactly what becomes most dangerous to an artist. I'm not arguing for a head in the sand. I'm arguing that watching the markets can become as deafening as sand. I agree with your warehouse advise/metaphor, but I think to concentrate on the "leaking sound coming out of the balloon" and to "fasten our seatbelts" is distracting and falling into the type of concerns perhaps the market drivers would like us fall into...

In other words I'm reminded of a quote you used: "Before heading for Asia, Alexander the Great found himself in Corinth, where the great beggar-philosopher Diogenes of Sinope was living at the time. Diogenes, as was his habit, was sitting in a barrel. Despite all the hoopla of the conqueror's entourage, Diogenes paid no attention to Alexander, who, very surprised at this lack of interest, asked if he could do something for Diogenes. "Yes, you could stand out of my sunlight," answered Diogenes."

There is power in not looking where we are told to look.

8/24/2007 01:23:00 PM  
Blogger Edward_ said...

I see your point, Anonymous.

I guess I would ask folks to be aware of the market. Not to focus on it perhaps, for the reasons you cite, but not to ignore it, as if by doing so it then couldn't impact them.

I don't think, however, that any of this talk about the market is designed to distract artists, per se. It's more designed, if it's even a designable thing, to provide that blend of short-term insight and drama that prods folks into believing someone, somewhere is able to predict/control things like this, but the irony is who that someone is constantly moves these days. It's not the Fed anymore, it's not the folks who already lost credibility because they declared the bubble was leaking two years ago, it's not even Paul Krugman who's gone through this interesting evolution of speaking more authoritatively about the war and less so about the economy.

But, to come back round to the original topic, I consider this blog as a safe and appropriate place to discuss and question such matters. I don't focus on them when I return to the real world and plan my long-term future, nor would I expect an artist faced with a blank canvas (or whatever) to focus on them in that context either.

8/24/2007 01:49:00 PM  
Blogger prettylady said...

to concentrate on the "leaking sound coming out of the balloon" and to "fasten our seatbelts" is distracting

Are you kidding? When a person's livelihood hangs by as slender a thread as that of most artists, paying some slight attention to general economic trends can make the difference between near-total financial devastation, and semi-comfortable survival.

For example, when the real estate bubble in the Bay Area hit its peak, I know of at least one artist who refused to look reality in the face, and ended up in a miserably protracted eviction situation which took an enormous emotional and financial toll, and left her homeless at the end of it.

Meanwhile, I took a cursory look at the market, sublet my place for considerably more than my expenses, booked to Mexico and lived like a princess for a couple of years.

Sigh. Those were good years.

8/24/2007 01:54:00 PM  
Anonymous Anonymous said...

Ed, one thing Im curious to hear your and others opinions on - we can agree that the financial market can be sympathetict to the available sources of information.If a company is going to be bought and people know it - that premium gets worked into the stock price of said company. The market responds to the information and the price moves accordingly. Secondly, a stock market crash or correction does present at least a few 'buying opportunities'. I wonder how an art market crash or correction would play itself out today in a world where - people are actively awaiting said crash, actively discussing its possibility in blogs. Could we expect people to look for buying opportunities in an art market crash? I would think that amongst people who see art as an investment, who are out to make a profit would be inclined in a crash to search out the now-undervalued prospects.

8/24/2007 03:37:00 PM  
Anonymous Anonymous said...

One additional comment - in the mao discussion of the eli broad comments - it notes that...

"After the 1990 art-market crash, even paintings by 20th-century masters such as Pablo Picasso halved in value over five years, according to Art Market Research"

geee wow. buy a picasso during the market downturn and sell during the next giant art market scheduled to take place appx 2025. Walk away
with very large profit.

PS I dont see Eli Broad being available during 2025.

8/24/2007 03:47:00 PM  
Blogger Edward_ said...

Could we expect people to look for buying opportunities in an art market crash?

I suspect the true addicts are very much looking forward to such opportunities.

I hadn't heard that the next great market is scheduled for 2025...where'd you hear that?

8/24/2007 03:51:00 PM  
Anonymous Anonymous said...

I agree with the first comment by anonymous

"This feels like Cheney type paranoia/fear mongering etc..."

and anonymous #2

"There should be a different resale market for "contemporary" art, because the Christies model doesn't seem to preform properly for younger artists."

All this talk of a crash will surely bring about one. True an adjustment will occur on the high end re-sale market, but that shouldn't affect the value of emerging artists, except a possible healthy purging of speculative collectors.

I'll mention him because he was referenced on your blog before.
Jerry Saltz often mentioned how he believes after the crash of the eighties art market in the early nineties the most refreshing and exciting artists emerged.
(and as a disclaimer I think he is a bit too nostalgic for that period, and a bit stuck in that moment: and post disclaimer that aside he has been one of the tireless champions for those artist, who are now very well established, or should I say entrenched in the establishment..;)

But this is an entirely different market, worldwide, more diverse, more differing levels of gallery, Art Fairs, Art Fairs, Art Fairs...

and different types of buyers on all levels.

and most importantly the art crash followed a recessive economy, how this economy is doing I have no Idea, according to Bush it's strong, but he would stand on the deck of the Titanic and call it sea worthy.

8/24/2007 08:20:00 PM  
Blogger Edward_ said...

This feels like Cheney type paranoia/fear mongering etc.

I can't wait until Cheney's gone and folks will have to explain what they really mean as opposed to using him as shorthand to stand in for anything negative they want it to. Seriously, do you really think the goal of discussing online issues like this is to get you to surrender your civil liberties or cower you into letting someone invade another country? Say what you mean, please. Who's expecting anyone to surrender anything as a result of acknowledging and discussing that there's a possible effect of the turbulence in the mortgage market on the art market? The mere suggestion of that says to me no fearmongering is necessary. Folks are already unduly afraid. Of what is not clear to me, but something.

8/24/2007 09:23:00 PM  
Blogger Bill Gusky said...

Is there a mid-level auction house that would benefit from the slack caused by Southeby's and Christie's sliding up toward high-end exclusivity?

(or is that absurd somehow?)

thanks for any info anyone cares to share -- peace love 'n' margaritas - B

8/25/2007 02:12:00 PM  
Blogger Henry said...

The mid-tier auction houses are Phillips de Pury, Bonham's, Doyle and Swann. Phillips and Doyle will be the ones to watch. Bonham's is too traditional and Swann is too small to play in this game. Doyle is already solidly in the middle space, but Phillips needs to decide whether they will try to keep running with the big boys, or do as Bill suggests and encourage more mid-tier sales.

8/25/2007 04:51:00 PM  
Anonymous Sonny said...

Are any other mid-tier auction houses out there it would be great to have a few more options instead of been stuck with the current crop.

8/27/2007 02:27:00 PM  

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