What's Art Got to Do With It? Open Thread

Paddy Johnson tweeted something not too long ago that made me nod and, then, realizing it indicted me too, begin to quickly rationalize. She wrote : "Art could do without the art world."

I immediately knew what she meant, even as I realized, as part of the art world, that it meant me too. Thinking on it longer, I realized that it meant Paddy as well, and other gallerists and writers, and curators, and museum directors, and collectors and everyone else we collectively refer to with the term "the art world" other than artists.

So I let it go. 

Then Murat and I had drinks with a gallerist friend of ours, just catching up about vacations and business, and, well, that theme (of Paddy's tweet) kept emerging in our conversation, and so I began to muse on it again. 

Again, though, I let it go. Our new season is starting, we're super excited about our Fall line-up and Moving Image in London, and well, since the indictment applies to essentially all of us in the art world, what was little ol' me supposed to do about it?

Then came the 30-8-12 Art News Digest. It's a frequent summary of art news and commentary emailed out by one of the smartest and most open collectors I know, Alain Servais. Based in Brussels, Alain (who is an independent financial consultant and was profiled in Modern Painters 50 most exciting Collectors under 50), has for some time now emailed an undisclosed list of readers his interpretations of advances in art and in the art market, always providing a great non-US point of view informed by a professional understanding of the workings of the global economy. He's also a true believer in contemporary art and a supporter of the most altruistic art spaces around the world. In other words, a total mensch in my book.

What Alain said in his 30-8-12 art news digest, though, rocked my senses. It was simply a brilliant synthesis of what's happening behind the scenes in the global art market sprinkled with some rather blunt truths that need a wider discussion. He agreed to let me present his text here, which I do unedited (the more casual format of the art news digest is in part what makes it so popular):

this news digest is all about money...

it puts together quite a few conversations and observations dating back to frieze ny, artbasel and the rest.

it is definitely “grow or go” with the further caveat that real estate developers increase the temptation by building the spaces themselves.

how did we get there?

it is a convergence of trends reinforcing each other.

First, new money find many reasons to pour crumbs (the global fine art trade is assessed to a yearly total of 50 bln usd, very small vs the size of investable assets) of their wealth into art and particularly contemporary art. this new money comes from the western world still but also largely outside of it where the economic growth and increasing wealth is.

this new money is still largely unsophisticated and not yet confident in its own taste. the easy solution is to use their reflexes acquired in luxury goods and go after the best brands which are at the same time the art bringing some social recognition. and branding of artists or galleries is becoming the name of the game.

as an example of this, i remember the explanation a ny friend dealer gave me before buying a 15000 usd watch: “my client will recognize this watch and it will show him that i am part of his world and help me in my relationship with him”

Second, the development of 5 mega-galleries and their branding. the names: gagosian, pace, zwirner, hauser&wirth and white cube.

But one of the counter-productive trend going with this branding is the growing fixed costs of such an infrastructure. i can make some educated guesses: gagosian would have fixed costs around 120 mln usd when pace’s would be around 35 mln usd (reduced from the previous year).

this imply a large amount of art sales and more particularly an enormous pressure to sell. and this is where the vicious rat race starts.

with so high fixed costs, standing still or having a low-selling show or art fair is not an option. the mega-galleries have to focus of what an insider named for me “high-velocity” artists which means artists selling at good prices but mostly selling a lot. i call those artists, Very Bankable Artists or VBA’s.

but there are few VBA’s and worst they are changing with the time, like fashion.

so some VBA’s have suddenly their “velocity” dropping like a stone,: for example, most of the Young British Artists like Damien Hirst of others.

and this drop of velocity happened at a time where heavy infrastructure investments had been realized like the new mega white cube gallery in the neibourghood of tate modern.

the immediate consequence was Jay Jopling calling every single VBA’s of its mega-competitors.

and those mega-competitors have no other choice than to match offers, particularly in terms of exhibition spaces’ sizes and multiple locations which allow to increase the number of shows for one artist to more than the usual “once-every-two-years” that one space can usually accomodate.

this is what marc glimcher call “extremely brutal competition for artists” in the next article.

but it does not stop at division one of course as the mega-galleries are going to hunt for current or future VBA’s at the next level: division two with andrea rosen, spruth magers, barbara gladstone, blum and poe, thadeus ropac, yvon lambert, paula cooper,perrotin,cheim&reid,continua,victoria miro, luhring augustine and others i forgot.

and this division has no other choices than “grow or go” by expanding their spaces or multiplying them like a 12 mln usd fixed-cost a year andrea rosen in order to attract future VBA’s like ryan trecartin and lizzie fitch or mika rottenberg. but i let you guess what is the choice of their previous galleries like nicole klagsburn, laurent godin or new gallery in paris....this competition for VBA’s is going all the way to the bottom of the art galleries’ pyramid endangering an “eco-system” where one VBA in a gallery was supporting many more emerging artists which needed time and shelter to develop and blossom.

as a berlin gallery told me during artBasel, the problem is that the arms race and its costs are the same for gagosian and for his 4 people operation and the cost of the sq meter increased at the fair by 70% in last 4-5 years for gagosian but for himself too. how long can he make it with moderately priced artists?

Grow or go!!!!

if this was not enough competition for VBA’s, you have the relative “outsiders” who want to jump the established ranking and have a shot at the higher divisions: sean kelly and friedrich petzel with their new large spaces are examples.

and if you doubt about the “brutality of that competition for” VBA’s, just remember the gagosian opening of their new gigantic space two weeks in advance of thadeus ropac with...the same VBA’s, anselm kiefer.

this is where it turns nasty and pervert. we are not talking about art anymore but about hard-cash earnings in the context of much higher and therefore riskier stakes.

and gloves are off. an “insider” described this as “giving up to the dark side of the force” and it seems to me an appropriate description when never in the “gentlemen club'” past of the art market such a gagosian-ropac would have happened.

morality is not the order of the day anymore.

Third,one cannot speak of artists’ careers anymore but almost of months or years in the sun as galleries have more and more difficulties in investing in the early days of their artists.

“non-performing artists” are dropped like old horses with no mercy.

also the level of stakes push emerging VBA’s’ prices instantly to higher levels concentrating their acquisition in the most speculative hands and increasing the pressure on them to produce the “same line of product”.

this brought us back to the indispensable days of artists’ workshops to cope with the demand to be met like for kapoor, kiefer and some younger like houseago, ruby, olafur eliasson and others.

and again where is the art left when uniformization and comfort of eye-candy art is the main offer of the art market?

there are very fragile signs that artists are realizing that “all it glitters is not gold” as some galleries’ sell-high-or-go has some badly negative effect when the tide of fashion refluxes.

some begin understanding better the value of a committed long term support of their galleries which should extend to much more than just selling fast.

Fourth, global contemporary art auction turnover went from 215 mln usd in 2004 to 1.349 mln in 2008!! (on the same restrictive Artprice basis. see the excellent “art of the deal” pg8 as a source)

the total insured value of frieze ny art fair was 350 mln usd but during the 2 weeks surrounding the event approximately 1.5 bln usd was transacted at the three auction houses. (source:the art newspaper special frieze ny).

auction houses are one of the favourite super wealthy’s shopping outlet: convenient, confidence-inspiring and similar to the trading universe they are often used to.

auction houses are key players in the current art market and part of the reason for the “arms race” as explained in the competition for the juicy part of the large succession like the Lauffs or Sonnabend described hereunder.

there are coming on the galleries’ turf with their auction and private sales but now also with selling exhibitions like a josh baer curated West coast art at christie’s ny.

this gave rise to the mega-galleries as only possible response.

the vicious circle is closed.

why is it vicious? because it contains the seeds of its own demise: more money for less quality and greed replacing all kind of morality or love of art.

it looks so similar to the financial bubbles i have lived through in the last 25 years and particularly the last one, the Big One.

it looks also similar to the “winner takes it all” in all professionnal sport where clubs are bleeding themselves sometimes to death to retain the stars people only want to see.

how long will the New Buyers accumulate over-priced art which even furthermore can be mediocre? and when they will realize they all have the same “collections”?

what if the Crisis lasts 4 more years and starts hitting the wealthy’s confidence and therefore even only decreasing VBA’s “velocity”?

conclusion:

first of all everything which is described above concerns a narrow group of people: “art of the deal” writes  pg 18 that “the worldwide fine art, decorative art and anitiquities marketplace comprises upwards of 71000 dealers of which a core of 4000 (5.5%) account for 75% of business ans as few as 1000 (1.5%) are responsible for half the market by transaction value...the auction circuit which accounts for roughly half of the global art trade...comprises approximately 5000 fine and decorative art auctioneers globally. in the fine art segment, sotheby’s and christie’s dominate the international auction trade and together accounted for 73% of art auction sales by value worldwide in 2008 for just 16% of transactions.”

so this concerns a very narrow group of people but which (un)fortunately controls by far the largest part of the money spent on art.

it means there are hundreds of thousands of people not involved in this vicious circle described above.

but this narrow core art market has the biggest influence on the art which is being created, bought and exhibited.

what should we do to keep supporting less “commercial” art until this “bubble” ends up deflating as it for sure will (i can tell you as i have seen it deflate many times in financial markets)?

one should support what i would call the “Resistance” institutions still defending an ideal which is not only measured in hard cash: the museums like the Wiels, the witte de With, the Mukha, the palais de tokyo, the new museum, the south london gallery, the basel kunsthalle and many others; the galleries still fighting to defend emerging artists and offer quality art for less than 10000 usd like the lower east side in ny, the XXth arrondissement in paris, the dansaert neighbourhood in brussels and many others;the challenging and ambitious survey exhibitions like the documenta 13, the whitney biennial in ny, the new museum triennal in ny, les rencontres de la photographie in arles and many others;the ambitious writing and commenting about art in publication like especially e-flux but also frieze, mousse, de witte raaf and many others; and lastly, the daring pionneering artists which will be challenging and questioning us in our deepest certainties and who need our support to develop and find their ground.

it seems simple and too romantic but how many of us will stop at the main “glamorous” event, the luxury goods market described in the first part and not take the time to show their support to the above initiatives by only visiting them and even better supporting financially?

“At its height, Chelsea was home to more than 350 galleries; today only 204 remain”

“This is the new Chelsea gallery scene—where competition has gone beyond survival of the fittest and evolved into a full-fledged superspecies.”

i do not think all artists require those super-size galleries but Very Bankable Artists (VBA’s) certainly do as nothing can be refused to them: ““The artists are the ones in command of this,” “The artists like the idea of not having too many neighbors. It’s not a shopping mall; it’s about them and their work,”

this is the real problem: a vicious circle where VBA’s are becoming more demanding due to galleries’ competition for their cash-flow producing abilities and where galleries have no choice anymore than expand due to the competition for their most VBA’s. ““The good galleries are having trouble keeping their artists unless they can offer them a global platform or a space that’s magnificent,”

the top end on 24th str and the low end on the Lower East Side: “Some observers have attributed this fall’s mega-gallery boom to a bifurcation of the market that favors its very highest and lowest ends.”

does it sound like the luxury goods industry and their flagship stores? ““These are big brands trading on their reputations to a certain degree.” and “Indeed, “brand” is at times a better descriptor than “gallery” these days.”

and if competition between the mega-galleries was not enough, the auction houses are walking more and more on their own turf and the mega-galleries on theirs...: “It used to be that only a global conglomerate like Sotheby’s or Christie’s had the resources for large-scale secondary-market business, such as the liquidation of a major private collection or estate.

But in 2008, Gagosian Gallery challenged this model by purchasing Ileana Sonnabend’s collection of Andy Warhols for $200 million. That same year, David Zwirner, along with Iwan Wirth, purchased 155 postwar works from the collection of Helga and Walther Lauffs. The price was never disclosed, but Sotheby’s reaped $96 million for selling just 33 works from the trove.

It has been suggested that Mr. Zwirner’s success in selling off the Lauffs collection helped him land the coveted Donald Judd estate in 2010.”

and of course the developpers are an underlying force trying to get their share too: “very few dealers own property in Chelsea. Mounting office and residential competition makes space even more scarce.”

this is a fact: i will not discover new works in chelsea anymore. ““Increasingly the lack of smaller galleries in Chelsea makes it a less interesting place to be. It’s a great destination for museum-quality exhibitions, but there’s less sense of discovery there now.”

There, as they say, it is. What few others are brave enough to say in public, but which is continuously confirmed over lunch or cocktails throughout New York. The art market is increasingly beginning to function like the luxury goods industry. 

Consider this an open thread on what "art" has to do with that.

The articles sent with the Art New Digest included:

• Supersize Chelsea!: In New York’s Main Art District, It’s Go Big or Go Home Or to the Lower East Side By Rachel Corbett 8/20 12:22am at the gallerist in the ny observer
• "It’s Become Extremely Brutal": Pace's Marc Glimcher on What's Driving the Gallery's Splashy London Expansion by Julia Halperin @ artinfo Published: July 2, 2012
• 303 Gallery to Open Second Location by Dan Duray 8/27 3:28pm in the ny observer
• Friedrich Petzel Gallery Signs Israeli Artist Yael Bartana by rachel corbett @ in the air – blouinartinfo
• Justin Matherly Joins Paula Cooper Gallery By Michael H. Miller 4:24pm in the ny observer
• Tiffany’s Sales Growth Slows as Wealthy Cut Back Aug 27, 2012 11:46 AM EDT in the daily beast at the LA times
• The Number: 80,000 @ the daily beast; That's how many square feet art dealers have snatched up in Manhattan's gallery hub of Chelsea. http://www.thedailybeast.com/videos/2012/08/28/the-number-80-000.html
• Gagosian Plans $130 Million Package for Brazil Art Fair By Katya Kazakina and Juan Pablo Spinetto on August 28, 2012 @ businessweek bloomberg
• More brokers let clients borrow against their Bruegels, 7:03am EDT By Jed Horowitz @ Thomson reuters