The competition for choice consignments can be intense as mentioned earlier in this blog and the publicity the winning auction house use to generate interest can be very creative. The glossary auction catalog with its excellent color photographs, monographs on the items by in-house experts and florid descriptions are collector items long afterwards. The auction houses actually break even producing these catalogs since they are sold.
The chapter on Auction Psychology is very fascinating. The author lists the kinds of bidders to be found at these auctions-agents bidding on behalf of collectors, wealthy foreign buyers and public museum agents. Many bidders are on the phone with their clients. These auctions are quite the event, there is a pecking order in the seating arrangements, and the room is often packed with only a minority actually planning to bid. The auctioneer is the ringmaster to this, pacing the auction and adding further information to drive interest and bids. Don't expect the Midwestern Chant style I grew up listening to when I attended farm auctions with my mother (or at the Barrett-Jackson car auctions shown on the Speed cable channel). But the drama is no less intense. Some superstar auctioneers are part of the consignment deal, only a particular auctioneer will sell this work.
As a case study the author covered the auction sale of Francis Bacon (199-1992) Three Studies for a Self-portrait, painted in 1982. After the owner selected an auction house (Christie's), there were negotiations for reserve price, positioning in the sales catalogue and the auction line-up. Spacing and order is very important in keeping the bidders' interest. The reserve price, despite by taking into account scarcity, other works by the artist in important collections and museums and auction prices of similar work by the artist, is still a guess.
Just before the sale, there was a retrospective of work by Bacon to generate interest in the artist, and private auction reviews. Despite of all the maneuverings and publicity the painting barely made its reserve and never reached the proposed estimate of its final price. The most important factor in its disappointing prices was not quality or publicity but it didn't come from a branded collection! The consignee wanted to remain anonymous and anyway wouldn't have been known in collecting circles.
To prove this the author described several other Bacon paintings that were of equal or lesser quality, but because of were they came from sold for very high prices compared to Three Studies for a Self-portrait.
There is intense competition between auction houses and dealers for secondary art sales. Auction houses hold the edge in getting these consignments. Dealers, despite promoting new works, get much of their income from secondary sales, not original works. There is a description for "private treaty dealing" done by auction houses which bypasses the dealers and still keep sales private. Some auction houses are now selling new work consigned by the artist. There are also sealed bid auctions that compete with dealers. And selling work at auction is dramatic and glamorous. The dealers are at a strong disadvantage.
One advantage dealers have are high-level art fairs. These fairs have little in common with the art shows and fairs that I attended to sell my works. These high-level art fairs are more like industry trade shows held in major cities mostly in Europe and North America. Dealers attend these, bringing their star artworks for sale. Major art fairs are on the rise, in 2001 there were 55, in 2008 205 major art shows scheduled around the world.
Because fairs are convenient, they are a favorite with time-strapped collectors. Comparison shopping is easy and impulse buying common. Dealers can compete for high-quality consignments because at a fair there can be a quick resell. But the disadvantage is that fairs are time-consuming and expensive to attend. And fairs are considered a terrible environment to view art, with over bright lights, crowds, and random juxtaposition of various works. Some artists don't like fair sales because they sell too much too soon and are asked to produce "more of the same" and not develop further. (wish I had that problem!)
Some of the major art fairs listed in this chapter are Art Basel, Maastricht, The Armory in NYC, Basel Miami and Frieze in London.
Two chapters are about the uneasy relationship between art and money and how contemporary art is priced. So much of art is classified in terms of the money related to it: whether auction estimates, actual auction prices, rumors of who paid so much for a work, etc.
"It is easier to appreciate art when what is required is not an understanding of art history, just your memory of a recent article about high auction prices."
Dealers and artists are bothered by this, after all they went into the art business for an initial love of the arts. But they do have to earn a living. Experiments with government patronage do not work out very well. This has been tried in The Netherlands, France, and the U.K. But the artists that are in these programs are never heard from again. The U.S. spends very little compared to France on supporting artists, but on the dealers' lists mentioned earlier in this book, none are French but many are American. There have been studies on the relationship between subsidies and motivation and there is certainly a negative effect. (I know this from personal experience, when I was on unemployment benefits I did the bare minimum for job searching. When I graduated with my printing diploma I was very aggressive in looking for a printing job and was willing to travel across several states to do so, both of us were unemployed.)
Other subsidies are for art prizes (Like the Turner Prize at the Tate in London) which generate lots of publicity and controversy for a few and subsidies to museums so they can meet their operating expenses.
Museums have many works that are never on display but not sold. To remove anything from a public collection invites controversy and the general public views it as a loss, not a gain in funds for new works or restoration. Sometimes works are rented either to private individuals or to other, smaller museums.
Pricing an artwork is an art in of itself. The actual value of the materials or the time spent making it are of little consequence. The starting point is the dealer's status, pricing to reflect his standing but low enough to generate sales for a new artist. Later in the artist's career and acquire an history and reputation, prices go up. And prices must go up, a dealer must never reduce an artist's list price (though discounts can be offered privately). There is the implicit promise the resale value rising over time. And as mentioned earlier, dealers exchange artists who prices are going down.
For secondary works, dealers do "justified" pricing, to convince the buyer the price is fair compared to another piece in the same room. And there is the fine art of discounting, which is dependent upon the dealer knowing his client well and buyer psychology; this is why the gallery attendants never talk about prices, they are not authorized to do so since the prices quoted often depend on who's buying.
"Hot" artists have waiting lists with a pecking order favoring museums, important collectors and the gallery's best customers. New collectors have to submit a resume to be put on a waiting list! Waiting lists are good for dealers, but not for artists. A would-be buyer is interested in what he saw last year and waited a year for a similar piece, but the artist is changing directions and not producing the same stuff. And of course a "waiting list" in good hype for an artist and dealer.
An important concern are buyers who immediately resell or "flip" a work at auction for much higher than they bought it in the gallery. This is an uncomfortable for the dealer since they are reluctant to increase prices much as ten-fold to match the auction price. This would discourage their regular customers. Sometimes a buyer would flip by consigning to another dealer who then takes is to an art fair. Fakes are a big problem with contemporary art. Of course there are the forgeries of Old Masters and fakes of newer artists. The problem is that much "conceptional art" uses premade objects which are available to anyone and techniques like Damien Hirst's spot and spin paintings are easy to imitate.
Jackson Pollock's drip paintings are generating new controversy because of a found collection in a storage locker and the famous "junk shop" Pollock found by Terry Horton (see Who the $#%& is Jackson Pollock?). When there is a lot of money at stake motives are always suspect.
The chapter on art critics is very short. There haven't been any influential critics since Clement Greenberg (read The Painted Word by Tom Wolf). The power to make or break an artist has gone to dealers. Though a good writer can be illuminating about art and artists for those who read them, it seems those who really buy don't read and follow the dealers' or auction houses' lead instead.
Museums are a major factor in helping to establish an artist's popularity and prices. Curators at major and branded art museums are trying to acquire works by contemporary artists before the prices rise too high, sometimes demanding and getting discounts just so the artist can claim to be in certain museums as a selling point. Many museums count of blockbuster works that put them in all the guide books as a must see: for example the Mona Lisa at the Louvre. The recent high price paid for Portrait of Adele Bloch-Bauer I by Gustav Klimt is intended as the blockbuster audience draw for a new museum called Neue Galerie in NYC. Collectors wishing to make a contribution hardly offer grants for operations, instead the publicity is in donating works or funding new wings.
Many billionaires are starting museums to show off their collections (for example Ron Lauder and Neu Galerie mentioned above). Museums can also influence an artist career by "flipping" a donated painting as auction with the resultant publicity or giving retrospective shows. Though the selection for retrospectives are made in collusion with dealers.
The branding of museums has gone global with the Guggenheim using its name for museums in Bilbao, Spain; Berlin, Germany and other places around the world. To attract visitors, museums compete in architecture (which sometimes is cheaper than buying a blockbuster artwork!). The Frank Gehry designed Guggenheim in Bilbao, Spain is just one example.
End Game is the chapter the author summarizes what he has covered in this book. The questions he had answered were: who determined what artists were "hot" and what were the reasoning behind pricing something that can be easily produced by technicians and making it seem a good investment? With these questions there is a third one: what is going to happen to the contemporary art market and its crazy prices?
Conditions prior the the 1990 crash and current conditions are compared. Now there are more wealthy collectors around and the prestige art supply is constant, raising prices further. Because of the increase in museums, purchases for these institutions also drive up prices.
A danger to the contemporary art market would be the realization that "The emperor has no clothes", but I really wouldn't be concerned about that. As long as "supercollectors" buy this stuff, others will value it. There is always the concern of suddenly a large and important collection needing to sell off immediately. That would drop prices for certain artists.
A prediction is that auction houses will become more important than dealers and art fairs will continue to be popular making buying art like going to a shopping mall. This could mean more buyers but fewer collectors.
The book ends with the question: Is art a good investment? The answer is: NO. Most art will not appreciate and transaction costs can cut into a selling price. Different categories can cycle up and down. Most inexpensive art won't ever increase in price on the secondary market, never. Buy it because it pleases you, not for resale.
Press coverage is skewed toward reporting the most astounding prices for certain pieces, but taken overall, the profits can be very modest.
There is a history of groups buying art as an investment, most notably Paris's La Peau de l'ours formed in the early 20th century. Some international banks have art investment departments and new art investment funds have been recently formed. There have been failures in these ventures that are never discussed.
For those who want to invest in art (perhaps as an hobby) there is advice: get educated! This can take some time, talk to gallery reps about their artists (if they won't talk, leave), read newsletters from the art advisory boards of major banks (Citibank, JP Morgan, UBS Global Asset management), learn how to identify promising artists.
Or as an alternative to researching artists, you can investigate mainstream dealers and see how well they manage their stable of artists. Do they promote? Do their artists' shows get reviewed? What other clients they have? Will you can get an immediate purchase or just put on a waiting list?
There is much more advice in this chapter that I won't cover except this: watch out for new young artists from Russia, India and China.
After reading this book I was thankful that the art world covered in it isn't the only one. I obviously belong to a very different world. There are the artists who make a living with reproductions of their work, have specific niches (like American Western, landscapes, animals, etc) and manage to make a living. But they most likely will never get into a major museum.
In this world the artist is responsible for his or hers own marketing and promotion. A perusal of such publications such at The Artist's Magazine, American Artist, International Artist and Art Calendar have many articles about marketing and publicity for the individual artist. The internet has been a great boon for artists with online galleries and weblogs to generate interest.
Not just realistic artists are happier out of the major art scene loop: I talked to an artist in Galena, IL who had his gallery opened weekends only and made a living selling his large acrylic abstract paintings. His friends back in NYC are still struggling with low-paying jobs while still looking for gallery representation.
There are Superstars. This past fall I had the privilege to view a retrospective of Robert Bateman's work at the National Wildlife Museum near Jackson, WY. To view Chief, a very large painting of a bull bison, was awesome. To see the other works by artists new and old was a pleasure. I enjoyed Gutzom Borglum's sculpture of wild horses. (Who was Gutzom Borglum? Think Mount Rushmore!)
Don't forget America's second largest art market after NYC: Santa Fe, NM! Santa Fe, Taos and a small town call Madrid located on the scenic route between the two others have a great variety of art (not just cowboy and Indian stuff) and is comparatively inexpensive. It will just be an investment in pleasure, not for monetary gain.
What will it be like a hundred years from now? I predict Damien Hirst's shark will be mouldering in a basement while Chief will be on display still giving pleasure to its viewers.