Tuesday, January 22, 2013

The Babies Just Come with the Scenery

In the middle of the road,
You see the darnest things.
Like fat cats driving around in jeeps through the city,
Wearing big diamond rings and silk suits.
Past corrugated tin shacks holed up with kids and
Man I don't mean a Hampstead nursery.
But when you own a big chunk of the bloody third world,
The babies just come with the scenery.

---"The Middle of the Road," The Pretenders
Ahh, what one sees from the middle.

While the top of the international contemporary art market moves from boom to boom, seemingly unstoppable, and the newcomers multiply so quickly there soon won't be a dumpling shop left in the Lower East Side, the middle of the art market is, by all accounts, feeling the squeeze. Why this is remains somewhat debatable, but when the debate reaches the tabloids, as it did in London this past weekend, well, it becomes a bit difficult to keep ignoring it. From the Daily Mirror (not exactly the first London paper one thinks of for breaking art news), we get the rich people are destroying the market argument:
Oligarchs and other super-rich investors are 'bulk buying' new art and destroying the middle market for artists, a panel of experts claimed yesterday.

And they said a new 'Premier League' of art galleries and buyers fuelled by new wealth money was emerging, leaving smaller galleries and artists fighting for crumbs.

Multi-billionaires such as Mexican magnate Carlos Slim and Chelsea FC owner Roman Abramovich have so much money that they need to exercise little judgement when buying art.

Instead they can purchase the work of any promising young artists for high prices and gamble on one or two of them becoming a success.

But the 'spray and pray' approach to buying art among the super-rich has out-priced traditional middle-market art buyers like doctors and lawyers.

The knock-on effect is being felt by smaller galleries and the artists they represent, where interest from traditional middle income investors has waned.
Now I'll be the first to tell you that many of the middle-tiered galleries I know are indeed having a tough go of it at the moment. And among the reasons they "think" that is the case is indeed the decreasing number of doctors and lawyers (compared with half a decade ago) who are still collecting. But there are other explanations for it as well.

One is the it's not really even about art argument. This one is perhaps best illustrated by the story the arts press apparently can't get enough of. I could quote here the details from a dozen or so sources, but for the sheer depth of it, I'll quote Eric Konigsberg's retelling of the story from his epic new article on Larry Gagosian. This explanation begins with a particular type of collector epitomized perhaps by ...
Ronald Perelman, the corporate raider, who sued Gagosian in September in part over “secret contract provisions” that the dealer had attached to a $4 million as yet uncreated Koons sculpture titled Popeye—stipulations that Perelman felt would make it difficult for him to resell the work. [...] Perelman may well be an important collector, possessed, as his friends claim, of “a great eye” and a list of cultural institutions that have benefited from his charitable and brand-burnishing write-offs, but he is above all a money person. His collection is an investment vehicle, an “art fund,” actually, within an umbrella company that also owns large stakes in the biotechnology, gaming, and financial-services industries. Perelman claims in the complaint that he agreed to purchase the Koons from Gagosian in May 2010, but before he even took possession decided he wanted to exchange it for a major painting, and to receive credit for more than the $4 million he’d paid for it—essentially flipping the work and hoping to turn a profit, assuming its value had risen while he waited for Koons to finish making it. When Gagosian told Perelman that he had little incentive to take the sculpture back because he had promised Koons 80 percent of any profit from a resale before the piece was actually finished, Perelman apparently felt he’d been had.
It's Perelman's assumption that the work, even before it had been finished, should have appreciated in value (i.e, thinking of art as one does commodities futures), that points back to how the middle of the market is being left behind in all this. We, humble art dealers in the middle of the market, are clearly not even in the same industry as those we like to think we'll catch up to some day. How cute it must seem to collectors in that stratosphere when a middle-tiered dealer who finally gains an audience insists on discussing the aesthetic values of a work, when it's clear they can't tell a FAB Spread from a Buying Hedge.

Then there's the shift in the artist-dealer model argument. Again, I'll point you to Eric's article for a nice summary of how this one works:
The [Leo] Castelli model was to get the best young artists and nurture their careers without pushing their prices too high too quickly. The Gagosian model is to ratchet up their prices, encourage them to produce as much as possible (there has been less risk, with a burgeoning global economy, in flooding the market; there is a need, as new constituencies present themselves among Russian oligarchs and Qatari sultans, to feed the collecting beast), and keep artists, collectors, and estates away from his competition—“to make a market,” in the words of someone who knew both men, who adds: “Leo wouldn’t have done well in the current era—the money is too tempting—and Larry wouldn’t have done well in the Castelli era.”
Many of the dealers in the middle I know, though, are still committed to the Castelli model. And indeed, this may explain why they're being squeezed. When Gagosian or others in his realm can consistently come along and poach the middle-tier galleries' best-selling artists, the long-term benefit potential of the Castelli model begins to fade. The Castelli model (find an undiscovered artist, invest heavily in promoting their work, and then share in the rewards when their market takes off) relies on an act of faith--that the artist will stick around--so that the initial investment will indeed reap rewards one day. 

But we've seen nearly rampant poaching in New York over the past few years, involving almost always the top-selling artist from a middle-tier gallery. The most immediate impact of that is it leaves that middle-tier gallery scrambling for the income that had supported the rest of their often more-risk-taking programs.

And I've heard it from those in other industries that, well, if this is how the game is being played now, you're a fool not to play it that way. Don't moan about it, jump in with the sharks. But with art, in particular, that too comes with problems. If all those who wish to become successful art dealers use Gagosian as the standard model, we would see a stop to any risk-taking at all. As artist Mark Kostabi once said about Larry Gagosian "He doesn’t want to be the first person to discover major talent. He wants to be the second." If all dealers follow that lead, then who will discover the next major talents?

Moreover, rampant poaching introduces a lack of stability in the middle-tiered galleries and an element of distrust. Gallerists who were once the fiercest of champions for all their artists, begin to take measures to protect themselves instead, once their top artists decide to move to a top-tier gallery. The nurturing environment that the middle of the market once represented suffers as a consequence. And that's self-perpetuating. If a rising artist in a middle-tier gallery senses a new distance from their dealers (who's responding to having had their top artist poached), that rising artist feels less motivation to remain loyal as well.

So what to do about this unfortunate turn of events for the middle-tier galleries, and more importantly the nurturing component of the overall gallery system? 

One model out there that I think merits consideration (and is already seen in a few places around New York) is where a bluer chip gallery either opens (often under a different name) a new emerging gallery or takes an emerging gallery under its wings, letting the younger dealer take some risks in the program without as much financial risk as being out there on their own. This "farm league" model perhaps isn't for everyone (dealers are notoriously independent people), but it has the advantage of preserving a safe, commercial place to let artists (and dealers) experiment more. 

I'll be thinking about other models and offer some thoughts on those in a follow-up post.


Anonymous Bernard Klevickas said...

YES. Thank you. Looking forward to the Follow-up post.

1/22/2013 11:12:00 AM  
Anonymous Anonymous said...

Makes me think of Theo van Gogh's modern art dealing with Goupil & Cie.

1/23/2013 04:38:00 AM  
Anonymous Anonymous said...

"All the middle market has gone," she concluded gloomily.

Edward ,The Mirror article dosnt add up. The Super Wealthy Set Buys from Blue Chip Galleries so they can play their money Games. So How does that impact Netti Horns Bottom line ???? Danielle Horn says she sells to doctors and lawyers not the Wealthy Fucks.

Bad Economic policy in the West has Destroyed the middle .

I Checked out Netti Horns Artist . I was impressed. Quality Product.

My Suggestion to middle galleries is kick in the next fucking door. That means access to the Uber wealthy .

That means a Sales team of Closers with the Golden Rolodex.

Im a idiot with no communication skills . I had a buisness once, I built it from scratch. all my promised contracts never materialized I was dead in the water Right from the start. SO I had to cold call Purchase Managers at big Manufacturing Companies, totaly terrifying. Getting your foot in the door is the most difficult part. Then you have to execute and deliver on time.

1/23/2013 12:20:00 PM  
Blogger j_d_hastings said...

This is why I support domestic Green Energy Initiatives.

1/23/2013 01:25:00 PM  
Blogger Edward_ said...

I can't see the connection JD...can you explain? (I ask ever so hesitantly)

1/23/2013 01:55:00 PM  
Anonymous Anonymous said...

I'm afraid there really is no answer but to syat teh corse and hope that if you do have an artist hit it big they maintain their allegiance to you...but then again they have their own future to think about as well....kind of a catch-22!

1/23/2013 10:37:00 PM  
Blogger Tiffany Navarro said...

I like the model you proposed and I'm glad your thinking of solutions. I look forward to your next post.

1/24/2013 10:30:00 AM  
Anonymous Anonymous said...

no surprise....i have always wondered how it is possible for any non-blue chip gallery to stay afloat. the numbers don't really add up unless they are being subsidized somehow. Just like non-blue chip artists all subsidize their own work. so in that regard, an alliance with a blue chip gallery would be a very good thing....it would be pocket change for them to support an emerging gallery, or 5. the only problem with this model is that there are so few of the bigs.

1/24/2013 07:12:00 PM  
Anonymous Anonymous said...

All of this assumes that in the midst of this "everyone's an artist" era, there aren't enough artists producing worthwhile work who would be satisfied with the old model of gradual development, which I personally believe is the better one for all concerned. We can't all be in it for stardom. I'd just like to be able to quit my day job, sell my work to people who get it, and pay my bills.

1/25/2013 12:54:00 PM  
Anonymous Anonymous said...

A key difference (often) between middle tier galleries and Gagosian - iron-clad contracts.

2/04/2013 07:29:00 PM  
Blogger Rick Beerhorst said...

I believe we are in an era when it is more important than ever to think long term when building anything. Our contemporary conditioning to "get there fast" is having disastrous results almost every where we look from the climate change to fragile short sighted business models. We need to remember how to grow oak trees. We need to couple passion with patience.

2/19/2013 05:35:00 AM  
Anonymous Pax North Williamson said...

Why haven't any artists who've 'moved up' insisted that they be allowed to continue to sell through the dealer or gallery which helped them in the first place ?

4/07/2013 02:50:00 PM  

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