Wednesday, May 06, 2009

Maybe It's Not Entirely Their Fault, But...

Artinfo.com posts some striking comparisons on their site today, juxtaposing last year's Spring Contemporary Art auction results with this year's estimates.
Sotheby's Contemporary Art Evening Sale
This year: May 12, 2009
Est. $52–72.2 million
49 lots
vs.
Last year: May 14, 2008
Achieved $320.64 million ($362 million including premium)
85 lots

Christie's Post War and Contemporary Evening Sale
This year: May 13, 2009
Est. $71.5–104.5 million
54 lots
vs.
Last year: May 13, 2008
Achieved $294 million ($331.42 million including premium)
57 lots

Phillips de Pury Contemporary Art Sale Part 1
This year: May 14, 2009
Est. $12.2–17 million
43 lots
vs.
Last year: May 15, 2008
Achieved $51.35 million ($59 million including premium)
65 lots
What these numbers suggest is that far fewer collectors are willing to risk that their contemporary art will flop at auction and so they're hanging onto the work that just a year ago they would have considered flipping. Wise move for collectors, no doubt, but it's hard to look at what that means for artists and not think how right David Zwirner is about striving to keep living artists' work out of the auction system. In the very informative interview with him at the Wall Street Journal's site, he suggests:
I’d like a 25-year moratorium on selling living artists’ work at auction. It would give artists time to develop their work without worrying about auction prices. Auction houses got greedy and wanted in on selling new work—right up to the infamous Hirst sale when they stepped in and played art gallery. I don’t like it, and my artists don’t like it. When a piece they’ve sold is flipped for $1.5 million at auction, they don’t get anything out of it—and they’re left standing in front of blank canvases worrying about money when that should be the last thing on their minds.
There are far too many collectors (meaning far too many reasons for why they choose to put work up for auction) to lay the blame for what can happen to living artists' markets when their work goes to auction prematurely entirely at the feet of those who make the market possible in the first place. Personally, I blame the auction houses for this problem. They're the ones focused, as Tobias Meyer infamously said, on making art "expensive," seemingly without any other concerns for that artist or her career.

Don't get me wrong. For work by artists no longer with us (meaning by artists no longer tasked with facing a blank canvas), I see nothing wrong with that. When it comes to contemporary art though, the auction houses should participate with the galleries in ensuring that artists aren't left standing in front of blank canvases worrying about money, if only so the artists aren't saddled with doubt and money worries caused by unrealistic auction prices and can continue to make more work that will eventually, years from now, come back up at auction.

So what does this mean in practical terms, though? Should contemporary art auctions be canceled? Should auction houses fund campaigns for droit de suite laws? Should auction houses do what Mr. Zwirner suggests and refuse to resell any work less than 25 years old?

I'm not sure any of those is the right answer, actually. At least not on their own.

What I feel auction houses should do first, though, is consider that through their own greed they're often killing off the golden-egg laying goose (just today, for example, the S&P cut Sotheby’s bonds to junk status). With that harsh new reality as a foundation for exploring a change in business model, then, perhaps they could try a series of approaches to handle work by living artists differently from that of dead artists, taking up education as part of their mission. Collectors who need to sell their contemporary art surely deserve options, but when the only message the auction houses are sending during a boom is that their raison d'etre is to make art "expensive," it can't help but skew expectations (and the higher you fly, the harder you fall). Initiatives to balance out the impact of wildy unrealistic hammer prices for living artists could be part of such an approach, such as, perhaps, issuing a joint statement with an artist's galleries explaining why one particular piece might be different from others (provenance, critical acclaim, quality, etc.) to help prevent a stampede to auction with lesser works.

I don't know. Obviously such efforts would seem (in the short term) to undermine their own business interests, but with today's junk status news as evidence, it's the long term they should be more focused on in my opinion.

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13 Comments:

Anonymous A.K. said...

Thanks for this thought provoking post. For better or for worse, this is not an issue frequently faced by Canadian contemporary artists, with a few rare exceptions, such as Peter Doig (although outside of Canada, he is not considered Canadian, and he has no Canadian dealer). Despite the fact that there really is a limited secondary market for contemporary art at auction in Canada, the skewed expectations you speak of are highly contagious, and have affected the attitudes of some Canadian collectors as well, in a way that is is counterproductive and places inordinate pressure on artists and gallerists here as well. I think the distinction between "buyers" and "collectors" is important..."buyer" greed is as much to blame as that of the auction houses. I don't know the answer either, but I like Zwirner's take. A 25 year auction moratorium would not prevent collectors from making private sales or selling back to the original gallery if they must de-accession for financial reasons. I cannot see auction houses voluntarily self regulating or providing the sort of educational services you suggest. They are part of a money making system with a very short memory, without much capacity to take the long view....and cynical or not, their concerns (and that of "buyers") have little to do with the inner lives of artists. The market will bounce back in a few years, and the hijinks will start up all over again. In the meantime, I think this lull will be good for creativity.

5/06/2009 01:58:00 PM  
Blogger George said...

I haven't read the auction results yet, and we still have tonight's event, but I did notice something in the Sotheby's results.

While the dollar sales total was half of the low estimate, this is distorted by what didn't sell. If I read the release correctly, the aggregate total for the lots that were sold came in about 24% below their low estimate -- meaning prices fell 25% plus whatever contraction took place in setting the high-low estimates.

The year over year dollar volume comparison tells us less about the current pricing structures becuse fewer lots are being offered. It matters if one is estimating how much Sotheby's might earn over the next year, hence the cut in their bond rating.

5/06/2009 03:13:00 PM  
Anonymous Anonymous said...

Artists should get 10% of any resale. I think California might have a 5% to artists law, but it needs to be more and nationwide to be effective.

5/06/2009 03:45:00 PM  
Anonymous Anonymous said...

I know it's popular in the Art world to look askance at the auction houses I don't really think they're to solely to blame for the present circumstances. And as an Artist who not long ago was looking to utilize the auction process to my own ends: Ala Hirst, I would not be in favor of a practice that tied Artists to dealers any more than they already are.
JVK

5/06/2009 04:59:00 PM  
Blogger Edward_ said...

JVK,

Hard to comment without knowing more about your own experience with dealers, but personally, if I had to bet, I'd wager that Mr. Hirst is currently getting more sincere attention regarding his career from his dealers than he is from his auction house friends.

5/06/2009 05:24:00 PM  
Anonymous Franklin said...

I’d like a 25-year moratorium on selling living artists’ work at auction.I'd like a permanent moratorium on exhibiting the work of living artists in publicly funded museums, for largely the same reasons. Why should taxpayers underwrite the career benefits that accrue to museum-exhibited artists, including the rise in the price of their work, which in turn benefits their galleries? I have asked before, and I'll ask again, why isn't this just another kind of corporatism? Alas, there's about as much chance of the museums regulating themselves as the auction houses.

I can't help but think that the galleries are complicit in the problem described by Zwirner. He doesn't have to match the prices achieved at auction unless he wants to cash in on their rise. Let's say that a gallery sells a class of work by a certain artist for $5000. An example thereof sells at auction for $20,000. The gallery continues to hold prices at $5000. If the process repeats, the gallery is going to miss out on some profit-taking, but eventually its refusal to raise prices is going to send a signal to the auction market and depress it. In the meantime, gallery prices going for far below auction prices will stoke demand, and the galleries can get picky about who to sell to, favoring long-term collectors over flippers. If demand were really strong, gallerists could ban resale for some number of years as part of the purchase agreement.

5/06/2009 06:13:00 PM  
Blogger George said...

Oh blah. Honestly what's being described here as a problem for the dealer not the artist. The pressure on the artist isn't a function of zeros, but the pressures to produce when there is a market for the work. Whether the artworks are selling for fifty or five hundred thousand is more or less irrelevant.

5/06/2009 07:19:00 PM  
Blogger John said...

I grow weary of the constant facade where art is placed on this higher realm divorced from the so called evils of the market place and the socio-economics which orbit the world of capitalism. High renaissance aside there has never been a better time to be an artist; the ever growing number of galleries; art fairs; government grants etc. act as clear evidence that contemporary visual culture is widely celebrated if not booming throughout the west. However anyone who has stepped outside the realm of critical theory or from the ivory-tower of the art school lecture hall will know that contemporary art is completely market driven. But this is something that should be embraced rather than remain the elephant in the room, in many ways the great thing about the art market is that it undermines the laws of everyday economics in that its value is often highly conceptual rather than based on any physical material worth or scarcity. Mr Zwirner is one of the big-boys and has been RAKING it in over the past few years so I would be very cynical of his sudden uneasiness about auction houses, it certainly has little to do with protecting his poor artists and their blank canvases. Although Mr Zwirner would have himself cast as some concerned parent figure, in reality his concern probably lies in the fact that he has sold work to buyers in the recent past under the premise that the price of the work would continue to grow exponentially and with the same pace that it has done over the past six years. In reality the buyer who bought their Tuymans, Ofili or whatever in the very recent past is not going to get the same money back for it and is certainly not going to spin a quick turnaround at any auction in the near future. The art market has plummeted up to 40% and mother Zwirner should not be trying to hold the auction houses to blame, lets be thankfull that we live in an age where contemporary art has a value, and artists are not banished to the leaking slums of the past, drinking absinth from a jam jar and painting by candle light –hoping one day when their dead they’ll be appreciated.

5/07/2009 11:18:00 AM  
Blogger George said...

"Let's say that a gallery sells a class of work by a certain artist for $5000. An example thereof sells at auction for $20,000. The gallery continues to hold prices at $5000. If the process repeats, the gallery is going to miss out on some profit-taking, but eventually its refusal to raise prices is going to send a signal to the auction market and depress it. In the meantime, gallery prices going for far below auction prices will stoke demand, and the galleries can get picky about who to sell to, favoring long-term collectors over flippers."

It's a nice theory it but incorrectly describes what actually happens.

Rising prices increase demand. During the early part of this decade, with a robust art market, rising prices the auction market increased demand in the galleries (primary market).

Since artworks offered for auction will differ considerably from the artworks which are available in the gallery, it is difficult for the gallerist to "send a signal" to the auction market.

However, suppose the artworks are more or less similar (in quality, style etc), if there is a lot of supply and the works are available, then I suggest that the auction market will reflect this and that the prices will be close.

Artworks which fail to sell at auction, indicate that the estimates were placed too high and therefor one can infer that prices are falling --- demand will decrease.

In the current market, prices are falling and demand has collapsed. One way the secondary markets can deal with this is by removing artworks from the auction queue. This past year the total dollar volumes have collapsed partly because half as many works are being put up for auction. Sellers, who are not under financial pressure are willing to wait for prices to return to previous levels and these works are essentially off the market. This reduces supply, in an attempt to match the falling demand.

The psychology of falling prices makes the buyers willing to wait because they see the prices lower today than they were yesterday. This has the effect of causing prices to continue to remain soft until they reach an equilibrium point.

It is in the best interests of a gallery to have prices appear stable and gradually rising. In weak a market periods, we see more smaller artworks, selling for less money, in order to continue sales without the appearance of lowering prices.

All of these things occur over extended timeframes, there will always be day to day exceptions, but in general the art market functions like other markets.

5/07/2009 02:29:00 PM  
Anonymous Franklin said...

"...if there is a lot of supply and the works are available, then I suggest that the auction market will reflect this and that the prices will be close."

This is precisely the opposite of what Zwirner is saying is happening in the auction houses, who allegedly "got greedy and wanted in on selling new work," and the flipping got out of control. At any rate, I wasn't attempting to describe "what actually happens," I was attempting to describe how the galleries could put a damper on flipping. The only problem I see with the idea is that it's too idealistic to expect a gallery not to give into the temptation to sell work at a higher price when it has the opportunity.

5/07/2009 03:15:00 PM  
Blogger George said...

F. well ok.

I believe my remark about the auction market is correct and that Zwirner is misrepresenting the problem.

"Flipping" is raw speculation and will continue to exist as long as the market is strong enough to support it. At the current moment, the speculators are selling into a weak market, there is a profit to be made on works bought a few years back, but it is unlikely there is any profit on short term trades (flipping) As a result this sector of the auction market has collapsed.

In addition to whatever real estate sales auction sales they make. both Sotheby's and Christie's act as real estate agents. I don't find it difficult to understand how they would be interested in acting as a primary agent to sell art. I'm not talking abut auction sales but gallery sales. This of course is direct competition to the high end galleries and they won't like it.

In the secondary market, galleries, private dealers and the auction houses all compete. While I can understand that a gallery would like total control over sales, this seems like an unlikely occurrence and an inefficient method of price discovery which is inherently more open to manipulation. Certainly the auction market is not without its flaws but at least there is price transparency and history available for the would be collectors. Private sales, are just that, hidden and opaque.

Whatever, I think most of these issues were part of the noise which occurs at a bubble top in a market. In all likelihood events like the direct from artist sale (Hirst 2008) will be few and far between. For this to be profitable there has to already be an established market. At the present the gallery system provided a method of creating and promoting the market for an artists works. It seems unlikely that the auction houses really have the breadth to compete in this arena beyond a few already well known artists.

5/07/2009 04:00:00 PM  
Blogger George said...

John said ... will know that contemporary art is completely market driven.
.
I agree with this view. Despite what we may want to believe, the art market behaves like all other investment markets. As much as we would like to deny the point, artworks become investments and therefor appreciate the same as other investments. While artworks may lead or lag other investment vehicles, averaged out over the long term they provide the same approximate returns.

In the early stages of evaluation, pricing will vary wildly as the market and culture come into agreement over the merits of both an artist and the particular artwork. Generally (but not always) this process occurs within an artists lifetime and is the period of greatest price appreciation.

Once the artworks enter into history the price appreciation becomes reasonably predictable and works which achieve values outside this range will most likely remain off the market for awhile until the market catches up.

5/07/2009 04:14:00 PM  
Blogger zipthwung said...

I;m always amused by Franklin;s argumentative tone, and George;s pose of rationality (I;m an economist, but also I'm a doctor).

I dont get (because I choose not to) the focus on price over sales volume. It's an elitist conceit that price=value - where it is often arbitrary (Damien Hirst) or wholy without reference point (a chunk of the cross, say).

In another sense, the totemic value of a a piece counteracts the avant guar;s insistence on diversification, systems, micropayments and other ways of negotiating the "commodity" market.

I mean, heck yeah, bro, commodities can be really enticing, on multiple levels, but shit, it's hard to commodify the ineffable.


On another note - don;t get too high and mighty - I think 90% of jobs are "make work" - auctioneers, gallerists, artists and curators included.

"Make-work jobs are generally considered to be harmful to the economy, as it takes people out of the job market, and pays them more than their job produces. However, under certain circumstances, it is understood that make-work jobs can be a good thing, for example during a depression, make-work jobs can be a less-economically-harmful alternative to welfare.[1]

5/07/2009 04:41:00 PM  

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