Tuesday, November 18, 2008

How to Buy Art in a Recession: Part I

It's a buyer's market right now, there is no doubt. Even Damien Hirst is admitting it [from artinfo.com]:
Brit art superstar Damien Hirst has accepted the fate of the art market, admitting that it had been too expensive and saying that he will gladly sell his work for less.

In an interview with the Independent, Hirst admitted that his Beautiful Artemis Thor Neptune Odin Delusional Sapphic Inspirational Hypnosis Painting, which failed to sell at Phillips's contemporary auction last week with a $3–4 million estimate, "was overpriced," saying: "It was bought from me less than a year ago at half the price. In a way it's good. We are looking at more realistic prices."
And while seasoned collectors like Eli Broad knew how to wait and save on the artwork they wanted [from Bloomberg]...
Eli Broad and fashion designer Valentino were among the collectors who converged on Sotheby's in New York last night to pick through big-name contemporary art at discount prices.

"It's a half-price sale," said Broad, a 75-year-old billionaire who predicted for years that prices would fall. "Things are a little more reasonable."
...there's no reason only he should enjoy having the upper hand. In the article quoted above, Damien Hirst noted, "As an artist, you don't stop making art because people are not buying it." True enough, but as Broad and the Rubells (see here) are demonstrating, as a Collector, you don't stop buying art because other people are not buying it. Now is the time to add those important key pieces to your collection...believe me.

Of course, if you're not a fellow billionaire like Mr. Broad, you may still need to reconsider how you're going about that. So this thread is dedicated to things I've learned, by both buying and selling art over the years, about how to buy art in a recession.

It's Not All About the Discounts
You can expect a much meeker response from dealers to your inquiries about discounts these days, I'll be on that. But focusing on discounts alone may not be your best means of securing that piece you want. Discussing discounts in conjunction with a long-term interest in the gallery program is your best avenue here. If you're only interested in one artist or one piece at the gallery, you might try asking for a significant discount, but personally I've turned down such offers recently and I will continue to do so (I value my artists' work too much to essentially "give it away" to folks who aren't in it for the long run). A one-time huge discount may make sense to a dealer and artist if your collection is world-famous, but few world-famous collectors buy so shallowly.

The purchasing advantage to this combination approach here should be clear. By showing interest in the longevity of the artist's career and the gallery (what many gallerists are most focused on at the moment), your offer becomes one the dealer will consider from a long-term perspective. You can always fib about your interest, obviously, but dealers are generally pretty good reads of sincerity (spare me the "how ironic" cracks please).

Payment Plans
Many younger collectors may not know that most galleries are happy to work out some sort of payment plan. I suspect this willingness is hitting a decade high about now as well. When I first started buying art I asked for payment plans, and got them, all the time. Most dealers will not offer both a discount and a payment plan, so you may want to consider what makes most sense for you. Also, keep in mind that a dealer will not deliver the piece to you until it has been paid for in full. If you want to install it by a certain date, you will want to consider that as well.

One easy way to handle a payment plan (and one that may just encourage a dealer to also offer a discount) is to give the gallery a series of dated checks totaling the full amount that they can deposit over the course of the payment schedule. Having the checks in hand helps them not have to send out reminders (which is why they may be more willing to consider a discount combination).

Advanced Investments
Say an artist you want to buy a work by is having a solo show in a few months. But even in this economic environment, you know the likelihood of you getting first pick of the new work is low. One way to perhaps work your way up the pecking order is to offer the gallery an advance payment toward a piece. (In case you didn't know, collectors make financial arrangements with dealers they like all the time, investing in the gallery and its artists for access to work down the road.)

Many dealers may not volunteer that they are willing to accept such an offer (because it sends the wrong signals), but it's easy enough to ask them about business in general, suggest you're willing to help out in this difficult time, and then define the terms of the arrangement to suit your goals. You would definitely want to get something in writing and perhaps even have your attorney review it (think what happened with The Project a few years back), but usually such arrangements go off without a hitch and are truly mutually beneficial.

There are other options you can discuss with dealers (some of which I'll discuss later this week...pressed for time today), but the main message of this post is that if you wait until the market rebounds, you'll miss out on the opportunities available now. Take a page from Mr. Broad's book...now is the time to get that art you want.

Image above:
Jennifer Dalton, Are Times of Recession Good For Art?, 2008, Mixed media (two gumball machines filled with plastic capsules with custom foil-wrapped chocolate coins inside), 72” x 24” x 24” (on pedestal), Edition of 3.

Labels: art market


Blogger Betta said...

Hi Edward,

Another absolutely great post. So informative. Thank you!

This is probably a whole other thread, but do you think you might find the time to give your thoughts on how artists should go about selling/pricing their works at this time?

11/18/2008 07:00:00 PM  
Blogger joy said...

gosh -- do I take the blue pill? or...? I mean gum ball.

11/18/2008 07:34:00 PM  
Blogger Joanne Mattera said...

Damien Hirst taking a price cut? I'm crying.

And I'm so glad that billionaires are able to get the work they want for less. Whatever the price is, it's 50% for the artist and 50% for the dealer--and one mother of a price cut for the guy with the moneybags. What's wrong with that picture?

As usual, though, you have offered some sound ideas, Ed. Payment plans and advanced investments seem like two good uideas for galleries and their artists.

11/18/2008 07:46:00 PM  
Blogger ms. gordon said...

Could it be a good time for those artists who are up and coming. As said, collector's aren't going to stop buying art bc others aren't. Wouldn't it be nice if those galleries with talent who they feel are going to be up there in 5-10 years could successfully market to their collector's and therefore make some small to mid-range sales but also set the ball in motion for these artists. Do you think that there could be a turn to these artists rather than stocks?
It would take a very special relationship (gallery to collector), but I feel like some younger artists could really do well during this time.

11/18/2008 09:53:00 PM  
Anonymous Anonymous said...

This is odd. When I started collecting there was a standard and unspoken 10% discount for anything in a show. I never had to ask for it. The discount was simply noted on the invoice. I was a young collector and this act made me feel like I was valuable to the galleries. Galleries that have now grown into SuperGalleries.

That all changed about 6 years ago when, to my surprise, I was invoiced at full price. The first few times, I would phone the gallery and ask about the oversight. I was usually told that discounts were no longer "policy" but if it were a dealbreaker, the gallery would extend the courtesy to make sure the work landed in a good collection. After that, I just stopped calling; I considered it to be begging and somewhat demeaning.

At that same point, the artworld ramped up and I was no longer seen as "valuable" to the galleries I frequented. So, I began to purchase from them less and less. Eventually, I stopped buying.

Ed, you're not one of these galleries, so do not take this personally. But I find it interesting that you're posting this at such a pivotal point in the market's decline. I wonder if I'll start to get phone calls again, like I used to 6-10 years ago, from my former galleries telling me about "an exciting new artist" or a show they "think I'd be interested in seeing". Perhaps now they'll even be open to offering me those discounts I never asked for in the first place?

It's sad and somewhat disgusting how little respect the artworld has for the true humans that populate it.

I will get back into the artworld. I will collect voraciously, picking up all the scraps. But I'll be damned if I ever write a check to any of those galleries who "grew out" of me. I'd rather write a check to an auction house. At least I know I was never important to them to begin with.

11/18/2008 10:40:00 PM  
Blogger George said...

Ed suggests in the previous post that "the situation everyone finds themselves in at the moment is unprecedented in our lifetimes."

I suppose this is probably true for ones own lifetime, but we've had recessions before and made it through with just a few bruises.

Here's a link to a chart of Consumer Sentiment, Unemployment and Recessions covering the last fifty years. The vertical shaded bands are the recession periods, typically they show up as less than two years but in reality the pain effect brackets the bands a bit.

There is a lot of scare talk about a depression, no one really knows if this is the case or not. At the moment, we are just starting the "official" recession and how long it may last will depend on the government response. We are very lucky to have someone as intelligent as Barack Obama as the incoming president.

If one looks at the recession periods (the stripes) and thinks about when the today's artists with high auction prices, started their careers, there is some correlation. By the time artworks get to the auction markets, they have been both validated and marked up in price.

For the collector with a longer term view, there is room in this picture for a new group of artists to coalesce over the next few years and become significantly important in the future.

It is an opportunity to both participate early and to have access to the artist's better artworks. These are opportunities which are more difficult to find when the market becomes stronger, remember waiting lists?

In my opinion, a second tier artwork by someone like Hirst is less likely to provide significant returns over the next ten years. For the same investment one can purchase a group of works from less exposed artists. All the works may not appreciate in value significantly, but some may, and I would suggest the total return would be better. Besides, it's more fun,

It is worth remembering that none of todays high profile collectors were billionaires when they started collecting, they started by buying works they could afford during a recession.

11/18/2008 10:57:00 PM  
Anonymous JoAnn said...

Informative and entertaining post with something for both artists and collectors. Thanks!

11/19/2008 04:39:00 PM  
Anonymous 52pieces said...

Thank you for this great article.... I love hearing about new ways for people to bring art into their lives!

11/20/2008 12:18:00 PM  
Anonymous Michael Orwick said...

I'm one of those aformentioned up and coming artists’ whos prices have been what some may consider laughably low. The last couple years my fellow artists and galleries alike have urged bigger prices. Last week I had one of my biggest yearly shows this and went into a bit weary and keeping my expectations low.
But low and behold I sold 14 new paintings the first day and 19 total. I'm scared to question too much what could have been the reasons for having one of my best shows to date in such a gloomy economic downturn, but I think it is part that I want my paintings to have real value, and I want the prices dictated more by the buying public and their demand then what I think or worse yet hope I'm worth. The people seemed to respond to sensable pricing on good art, and what I hope they saw as a good value and investment opportunity.

I have noticed all 4 of my galleries increasing their promotional side, offering on going collector discounts, such as anyone who buys two of my paintings gets discounts on all future work they get of mine from the gallery.

I also see this as a grand time for my wife and me to be stepping up our collecting.

All the best,
Michael Orwick

11/20/2008 01:23:00 PM  
Anonymous View on Canadian Art said...

Excellent, informative post!

3/10/2009 09:24:00 AM  

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