Lately, there has been a groundswell of conversation in the art world about an existential crisis facing the gallery ecosystem. It has become the topic du jour among dealers, artists, collectors, and journalists, who have carried the discussion from art fair to art fair, and to events like the recent New York Times Art Leaders Network conference in Berlin.

Considering that art fairs themselves are often eyed suspiciously as a potential culprit behind this nefarious set of circumstances—due to the ever-accelerating pace of the global art economy and the need to outlay continually rising exhibitor costs to keep up—Art Basel’s Marc Spiegler has naturally been getting an earful of varying perspectives on the issue at hand.

As the global director of an art-fair empire with outposts in Europe, America, and Asia, Spiegler is heavily invested in both maintaining the dominance of the booths-and-aisles market model and also ensuring that there are enough viable galleries to populate Art Basel’s events with the freshest, most desirable art. He also has a rare perspective on the mechanics of the industry’s current struggle given his constant interactions with art dealers up and down the food chain. The problems, in other words, are clear. Solutions, however, remain frustratingly elusive.

But charting the challenges that galleries face today has value in itself, in that it keeps the conversation alive. In that spirit, artnet News’s Andrew Goldstein spoke to Spiegler about his perspective on the market’s tumultuous landscape in the run-up to Art Basel’s flagship event in Switzerland.

You have heard quite a bit about the various challenges that art professionals are grappling with these days. What kinds of concerns have people been voicing to you?

I think the fundamental concern is that the traditional model of the gallery—what people call “the Castelli model,” in which you build a roster of artists and then grow with them, doing the majority of sales in the gallery space itself—is not working the way that it used to. Artists, especially successful artists, will work with many galleries in the course of their careers, not only sequentially but also simultaneously. And with the exception of New York, and even then in some neighborhoods in New York, footfall in galleries is not what it used to be, and neither is the business being done in galleries. A lot more business is done at fairs, through intermediaries, and digitally.

Is it something you’ve been seeing happen over a five-year span? A ten-year span?

A lot of it has been true forever. [Dealer] Claes Nordenhake used to say that if you were a gallery based in Berlin, you were a traveling salesman, because you couldn’t sit in your gallery and wait for clients to come to you. That’s probably more true now than it used to be, everywhere. The other thing is that there are many more galleries and other market players operating at a high level than there used to be.

At the same time that dealers are talking about the decreasing amount of business being done in galleries, they are also saying that the level of sophistication of collectors, and the quality of interaction with collectors, has decreased. Everybody is busier than they used to be, everybody is more distracted than they used to be. If you look at the socioeconomics of wealth, the type of people who are positioned to collect today at the highest level are also much more active with their businesses than before.

There’s no industry that is less competitive at a global level than it used to be 10 years ago. That competition, of course, isn’t limited only to other galleries—auction houses are much more involved in truly contemporary art than they used to be.

A visitor interacts with Anish Kapoor’s Random Triangle Mirror at Art Basel Hong Kong. Photo: ANTHONY WALLACE/AFP/Getty Images)

I suppose this change could be partly ascribed to the sheer growth of the art market over the past decade or so. It used to be so much more of a boutique business, but now the heightened demand and global spread of the marketplace has raised the stakes tremendously—as if a flotilla of rowboats had suddenly left the lake and found itself out on the ocean. Or, maybe it’s like a growth spurt, where all of a sudden the body has grown larger but all the joints are aching.

It’s funny, because the metaphor I was about to use involves growing pains. It’s important to look at things both in relative and in absolute terms. In absolute terms: there are many more smart, cultured people, eager to learn, who are collecting art. But in relative terms: the percentage of people who are in the business for primarily financial reasons is higher, because a lot of people see art as a potential gold mine. A lot of those people will eventually realize that what they thought was a gold mine is actually a sinkhole—because they weren’t smart enough, they didn’t have good enough taste, enough access, or enough information to play the game well.

One of the things that’s confounding for people is that there’s a point where, if a gallery is successful, things get more difficult, not easier. Because the point arrives when you have artists who start getting invited to do a lot of biennials and museum shows—and museums and biennials lean heavily on the galleries that represent the artists involved to pay for their shows. And your artists expect you to do that.

You also have the problem that the best-selling artists within your program are often being pursued, either overtly or more subtly, by galleries that are bigger and better financed than you are. And perhaps the top-selling artists in your program are also starting to come up at auction, which means that you need to be able to marshal financial support to make sure your artists don’t get bought in, which wreaks havoc on their markets.

You’re talking about the middle-market galleries in particular, right?

This applies to everyone, but if you’re in the middle you’re getting hit from all sides. You’re getting hit by your artist for production costs, you’re getting hit by museums and biennials for exhibition costs, you’re getting hit by the bigger galleries who’d love to work with your best-selling artists, and you’re getting hit by the auction houses who are starting to put them into play. Compared to 10 years ago, there’s not one aspect of doing business as a mid-level gallery that’s easier than it was before.

How many middle-market galleries, then, are able to evolve to the blue-chip terrain where they can be more above the weather? I ask because it seems that we have seen the same mega-galleries at the very top for a long time now—Gagosian, David Zwirner, Hauser & Wirth, Pace—with very few credible challengers rising in the wings. Is this a bit like what we’re seeing in Silicon Valley, where you’ve got what the tech journalist Farhad Manjoo has called the “Frightful Five” of Google, Facebook, Apple, Amazon, and Microsoft at the top with so much competitive advantage and so much cash that newcomers have no chance in the arena?

I don’t know if I agree with that, because there’s a natural rejuvenation that happens within the art world—it’s very rare that a primary-market gallery gets passed on to a next generation. Also, there will always be artists and collectors who, purely on philosophical and intellectual grounds, will not want to deal with those bigger galleries.

I don’t think that the art market is at risk of becoming a hegemony. But many—or all—of the old models for running a gallery need to be seriously reconsidered. There are people like José Freire who say they don’t want to do fairs anymore. There are people like Stefania Bortolami who want to do a lot of projects outside the gallery—though she still does fairs.

What we’re seeing is a much more open discussion about the difficulties of running a gallery. A few weeks before David Zwirner’s suggestion that bigger galleries could pay “a little bit more” to subsidize the smaller galleries, I was part of a discussion at Bocconi University in Milan in which four different gallerists from very different parts of the world spoke openly about how difficult it is to run a gallery. Andrew Kreps said that he expected that if he ran a gallery for 20 years and was successful, his life would be easier than when he started, and that it isn’t the case at all.

For a long time, there was almost a template for how you run a gallery, and you thought, “If I do the 12 stations of the cross then I’ll arrive at the chapel.” What people are realizing is that if they want their businesses to survive, they need to constantly renew their core collector base, because people come in and out, interests wane, fortunes change.

If you understand the kind of collectors you want to work with, know how to develop them, and assiduously keep the ones closest to you motivated, then you can run a gallery of a certain size in a certain way. Because, up to a certain point, a gallery can survive with 12 dedicated collectors—a handful of people who really believe in the program.

Let’s be clear: In order to be a gallerist today, you not only have to have a great eye, you have to be strategic about everything. Because cash flow will always be an issue—it’s very hard to secure small-business loans, there are a lot of upfront costs, and there are many collectors who are in the habit of not paying for work for months. Somehow a tradition built up that galleries are expected to offer collectors interest-free loans when they purchase work from them, which is crazy.

One of the other issues that people are discussing, of course, is whether the increased importance of art fairs is having an unexpectedly pernicious influence on the ecosystem. What is your position on the topic?

Obviously everything I’m about to say can be seen as highly subjective, given my position. First of all, nobody forces a gallery to do a fair, and more and more galleries are radically reconsidering the fairs that they do. I’d say that good fairs create a moment of urgency for a gallery’s existing collectors to interact with their program, while also giving them a chance to rejuvenate their base by adding new collectors.

If a gallery does six fairs per year and at each of those fairs they meet a collector who becomes heavily engaged with their program, it can have an amazing impact. On the other hand, if galleries do fairs that don’t work for them, then of course, it can be disastrous. Because a fair is not just a six-day affair for a gallery—to some degree, a fair basically consumes at least a month of a gallery’s time.

So, when people ask if fairs are a good thing or a bad thing for galleries, my answer is: “It depends on the fair.” And how the gallery plays it. When some young gallery is blazingly hot, I advise them, “Don’t do too many fairs.” Because they will be invited to do every fair under the sun, but the most important thing at that point is to build up a support structure at home—you don’t want to burn through yourself and all your artists in a year because you got invited to do six different young sectors.

At the same time, I’ve seen galleries’ trajectories completely change after a fair, especially Art Basel Hong Kong. Because they’re forced to come up with a new strategy to deal with that entire hemisphere—and if it works out, then all of a sudden they have a network of new collectors in the region where the most wealth is being generated at the moment.

Well, for many galleries, doing a fair in Asia is a fairly significant risk as well, for all the reasons that you’ve mentioned. I would imagine that the reason why David Zwirner proposed a so-called “fair tax” at the Berlin conference—the idea that the bigger galleries should pay a little bit more to do fairs so that more smaller galleries would be able to participate—is that there is a widespread understanding that fairs have become a conduit not just for the way people buy art, but also for the way they see, experience, and learn about it. A top gallery, therefore, wants to ensure the smaller galleries can be present—despite all the factors militating against them in this shifting marketplace—because it helps the whole ecosystem.

It’s almost as if the fairs have become an analogue for the internet, in that it’s the way people get their information, and as a result there’s a desire for a kind of net neutrality, where it’s not just the biggest galleries that are able to broadcast their art. The notion that both David Zwirner and Pace Gallery’s Marc Glimcher were supportive of the fair tax, totally off the cuff, perhaps suggests they believe an existential threat to one part of the ecosystem is a threat to them as well. They want all the lively fresh blood to be able to enter the system so that someday it can nourish them too.  

So I think the question on the table is, how can a fair like Art Basel satisfy this almost cardiovascular reflex? 

First of all, Art Basel deals with roughly 500 galleries per year, so there’s a pretty diverse group that’s present in our fairs, and they’re all in the same halls, and the biggest booths are only twice as big as the smallest booths in the gallery sector—whereas in the real world, the square footage of these major galleries is probably 50 times these smaller galleries.

In that sense, it’s inherently a much more egalitarian platform. Everyone’s using the same walls and lights and everyone has access to each other’s collectors. That doesn’t mean that we can’t do more, and certainly one of the big discussions that we have within the committees is: How do we make sure that we have as broad, as interesting, as representative a mix of the highest quality of artworks and galleries?

I think the important thing about what David Zwirner said, and the fact that Marc Glimcher and Thaddaeus Ropac and Marc Payot from Hauser & Wirth then later supported, was the recognition that although they are highly successful galleries, they understand that it’s important for other galleries to exist. You know, you don’t see Uber trying to keep Lyft or other ride-sharing companies in business.

Visitors explore Mary Boone’s booth at Art Basel Miami Beach. (Photo by Joe Raedle/Getty Images)

So, the obvious question is, are there any measures that you guys at Art Basel are considering to answer this call to action? 

People have a lot of ideas about how the fairs could counterbalance the consolidation that’s happening within the art market, and we’re considering many of those. Realistically, however, there’s a limit to how much we can do, because the only thing we control directly is the price of square meters in our fairs. A mid-sized gallery that does all three of our fairs might be paying $150,000 to $200,000 a year in square meters—but that doesn’t by a wide margin represent the entire cost of doing the fairs. You also have production, shipping, staff, lodging, gallery dinners, et cetera.

In the long run, the solutions will have to be bigger. So part of the discussion that we’re having internally is about the fair mechanisms that could counterbalance the consolidation within the art market. But an even bigger and more important discussion is about what we can do to help galleries be more successful on an ongoing basis.

One thing we’ve done within our own fairs is to systematically make sure that our social media and media-relations teams are supporting the galleries who need it the most. Which is to say that we’re promoting the galleries that don’t have huge press departments, who don’t have the artists who are easily sold, and galleries that are coming to Art Basel shows for the first time. We systematically track the booth visits of our 30-plus VIP representatives to make sure that they are seeing all of the galleries, ideally with potential new clients.

This year, we’re launching a VIP weekend program in Basel that is specifically targeted toward the type of mid-level collectors who often patronize mid-level galleries. We wanted to make sure that those working collectors—the lawyers, doctors, notaries, and small industrialists who are tied to their businesses during the week—can come at the end of the week and feel like they also have a VIP experience. Because we recognize that those mid-level collectors are important to galleries in the same way that mid-level galleries are important to the fairs.

If the aim is to lighten the financial pressures on galleries that do your fairs, the Swiftian modest proposal would be to eliminate the requirement that exhibitors need to operate brick-and-mortar galleries to be eligible for application. That would be one way of dramatically lessening operating costs, because it would allow some galleries that wanted to stop paying rent to refocus their business on fairs and other more flexible channels.

Wasn’t the original “modest proposal” to help the poor by feeding their babies to the wealthy? I feel the same way about your Swiftian proposal that most people felt about the original Swiftian proposal, which is that it sounds highly efficient, but in fact it’s a short-term solution that creates a long-term tragedy. We strongly believe that unless there’s a radical shift in the art market, our platforms should be limited to galleries that are staging gallery shows for their artists. For one thing, we think it’s not fair to have a gallery that is keeping a full roster of artists, employing staff, and doing six to eight shows per year competing with galleries whose only cost is to do fairs. It would be like letting people who are taking steroids into the Olympics.

A collector coming to the fair might not object so much, because they would just be seeing even more bravura presentations in the aisles. 

The impact on collectors would not be felt at the fair. The impact on collectors would be that—both in their home city and when they travel—there would be fewer galleries open for business. There is no doubt in my mind that if we changed those rules a lot of galleries would consider closing their doors. Look, if the problem right now is that there’s not enough footfall in galleries, then the solution we should be looking for is not one that closes galleries, but rather one that increases people coming back into the galleries.

So what about the proposal that David Zwirner put forward, the idea of taxing larger galleries by charging them higher fees in order to charge smaller galleries smaller fees? Is that something you would take seriously as a potential avenue for change?

Let’s be clear. David didn’t put a percentage on his proposal, and only four galleries, including his own, have volunteered to go along with it. So we really don’t have something to consider in that way. The question is, how many successful galleries are really willing to pay more at the fairs, and how much more are they willing to pay?

Art Basel in Basel’s Messeplatz. (Photo by Michele Tantussi/Getty Images)

And how do you define what is a successful gallery?

Exactly. The reality is that a lot of galleries with big-name artists are still on the razor’s edge financially. So let’s leave aside the question of how much are people willing to pay, and look at the question of who should be paying more and who should be benefiting.

Because a lot of mid-career galleries are struggling just as hard as the younger galleries for all the reasons we discussed before, only with a lot more developed artistic careers on the line. When a gallery like Martin Klosterfelde or Andrea Rosen goes out of business, a lot of artists’ careers go into flux in a bad way. The question becomes, is it not just as important to support the middle galleries as it is to support the younger galleries?

The reality is there are a lot more galleries that could use the support of their peers than there are galleries that can support them. Because let’s keep something in mind: people like David Zwirner, Iwan Wirth, or Marc Glimcher don’t have easy lives—they just have a different kind of business struggle.

At the same time, when recently asked at a panel discussion about the uphill gallery climate, Larry Gagosian said, “I see no problem with this system.” It seems there are different vantage points on the topic up and down the ladder. Mitchell Algus, the famed so-called dealer’s dealer, has been vocal about his criticisms of the market structure, and the fair economy in particular. What do you think about his proposition that galleries that participate in a fair pay a fee proportionate to their booth sales?

Again, it’s complex: How do you define a fair sale? And here’s the term that applies: moral hazard. It’s not that such a system would be wrong, it’s just that it’s unenforceable. In the same way that people will always seek the right tax venue for their sale, if people have an incentive to close a deal the day after the fair ends, then they’ll do that.

You’d have to do gallery fees indexed against fair sales, e.g.: “These are all the reported sales at this fair, this is the amount of money necessary to cover the fair organizer’s costs, and the person who made 10 times as many sales pays 10 times as much, as their base percentage of that total cost.” But the gallery that is paying the biggest amount is going to start questioning whether other people are under-reporting their sales.

Another way to do this would be that your fair cost is indexed to your total annual profit from the previous year. In some countries, for example, the bigger your income, the more you pay for your speeding ticket. But it’s tricky: If one year you have shows by your two biggest painters, then you’re going to make a lot of money. But if the next year you have shows by your video artists and you make nothing, you’re still going to have to pay a lot more for your booth.

The other thing is that this would be bad business for the fairs. We have to pay rent, we have to pay for walls, lights, staff. How do you guarantee that the fair organizer is going to get their money back? We pay costs all year-round, but we only make money three weeks a year.

If you think about how much of a margin a gallery like Gagosian makes off an Art Basel booth next to the margin Art Basel makes off an entire fair, how would they compare? 

It’s pretty simple. Compared to the most successful galleries at the fair, our margin is very small. Compared to the galleries that don’t make any money at all, our margin is very big. The difference between an art-fair business and a gallery business is our costs are fixed way ahead of time, and our revenue is also predictable because we’re not taking a percentage of the sales. We have a very stable business in terms of forecasting six months out. So by definition, we’re going to come in between the most successful and the least successful galleries.

We have to maintain a fair model that allows us to stay in business and allows galleries to do business at the shows. For us to cut costs drastically would make our business precarious, which wouldn’t be in anyone’s interest. Honestly, we invest a lot in areas that we feel have the potential to make our galleries successful. But we can’t structure their businesses for them, and we can’t sell art for them. There’s an enormous complexity to the problem, and it’s situated in a rapidly shifting global economy. That’s why no one has found an easy solution. But it’s also why we have to keep considering more complex approaches.