In any marketplace where quality and value are almost entirely subjective, most buyers crave expert guidance. And the primary art market is a textbook example.
Even among relatively experienced collectors, a tacit assumption animates the gallery sector: Anyone with the confidence, passion, and resources to open a for-profit exhibition space in such an uncertain industry must know what he’s doing, at least to some extent. And the less knowledgeable the buyer is, the more willing he will usually be to trust in a purported specialist.
Unfortunately, such trust is not always warranted.
Unlike, for example, an attorney’s need to become bar-certified or a securities broker’s need to pass the Series 7 exam, an aspiring gallerist requires no formal scholarly or business training to sell art circa 2017.
In fact, opening an American gallery today demands less verified evidence of expertise than installing home-entertainment systems, braiding hair, or pumping gas—three occupations for which certain US states still require specific training or certification exams.
Professional associations exist in the art trade, but they are generally by-invitation-only groups with little practical impact. Case in point: As of June 2017, the most prominent such organization in the US, the Art Dealers Association of America, still did not count Larry Gagosian as a member.
The preview at the 2016 ADAA Art Show. Courtesy Art Dealers Association of America.
Instead, the art-sales business has historically had a different kind of barrier to entry: real estate. By controlling a physical exhibition space, a gallerist doesn’t just become a business owner. He automatically becomes a gatekeeper to the primary market.
Yes, his long-term success depends on other criteria as well, such as his sales acumen, management skills, and social savvy. But in the short-term, as soon as someone acquires a space, he acquires a patina of authority and the power to affect the financial futures of at least a small number of artists.
Asymmetry of Power
In light of the above, it’s little wonder that many artists develop deep-seated frustrations with the traditional gallery system. Gallery representation gives them their best chance at establishing sustainable careers, and yet gallerists themselves may have little exposure to art history, little vision for the discipline’s future, and/or little interest in nurturing the talent on their roster.
In the most extreme cases, galleries can merely be the end result of copious wealth, ample free time, and a fascination with the glamour of the art scene—in other words, a somewhat edgier alternative to time-honored vanity projects like opening a bar or restaurant.
This means that the careers of a vast number of artists—who, in fairness, require no more formal training to go into business than dealers—hinge in large part on the potentially questionable judgments of a comparatively low number of gallerists, who are incentivized to minimize the amount of talent they allow into the system at any given time.
These circumstances have historically made selling art a money-losing proposition for the overwhelming majority of living artists. Gallerists simply have too much market influence and too little financial motivation to make their rosters inclusive on a mass scale. With few other options to sustainably monetize their work, most talent has been shut out of the game almost entirely.
Even before Gagosian, Zwirner, et al became global brands, every physical gallery at every level of the hierarchy already acted as a rubber stamp of basic quality in a marketplace short on signaling.
David Zwirner’s 20th Street space in New York.
Photo: David Zwirner.
To use a bit of retail parlance, since gallerists maintain near-total control over who receives physical shelf space, the pure fact that they are showing particular artists’ works communicates to the public that those artists deserve attention. And since collectors also consciously or subconsciously grasp the gallery system’s importance in legitimizing artworks—aesthetically, financially, and socially—they also tacitly agree (via their open wallets) that it’s usually wiser to acquire based more on who is selling the work than on who created it, let alone what it looks like.
To use an imperfect comparison, then, the issue isn’t just that being exhibited by Zwirner does for an artist’s work what being branded and sold in an Hermès store does for a patterned scarf—meaning, instantly transforms it into a sought-after, and therefore expensive, luxury good. It’s also that being exhibited by even a quaint local gallery provides a baseline assurance of “quality.” And even this modest amount of security is worth a significant upcharge.
Digital Dream Deferred
Of course, the internet has complicated this scenario. The traditional gallery system no longer dominates artists’ ability to reach potential buyers. It is now possible for talent everywhere to sell work on primary-market platforms without the co-sign of a supposed expert. And this prospect means that, in 2017, securing representation is less important than ever to an artist’s ability to generate some amount of revenue from his passion.
But this apparent win for democracy is not changing the game quite as quickly as some may have hoped. Clare McAndrew’s 2017 art market report—which, I should remind you, is a study whose numbers I view as skeptically as the punch bowl at an orientation-week frat party—alleges that the online market grew 4 percent year on year from 2015 to 2016. More importantly, though, she acknowledges that this estimate failed to live up to long-held expectations in a fairly dramatic way.
She writes, “The rates of growth… for the last two years are significantly less than the growth rates forecast three or four years ago when estimates predicted double-digit increases in sales in the sector in excess of 20 percent.”
What’s happening here?
A closer look at the underlying dynamics suggests a reality that neither unrepresented artists nor Silicon Valley wants to hear. Open-access e-commerce may solve one of the longest-standing and most distressing problems in the art market, specifically by allowing any and all artists with an internet connection to slip past the traditional gatekeepers and reach buyers directly.
However, this new sales platform also creates (or at least, intensifies) a new problem—one that may be just as antagonistic to rank-and-file artists’ prospects as the old system of exclusivity and discrimination.
A Zero-Sum Game
To try to predict the impact of independent online-sales platforms on contemporary artists, it’s useful to look at three creative media where the model is somewhat more developed: books, music, and film (by which I mean everything from feature-length movies to episodic series to YouTube content).
Before diving into those comparisons, though, we must first acknowledge an important distinction. With the exception of digital artworks—assuming they’re marketed in a progressive way—fine art is what economists call a “rival good,” or a resource whose consumption (see: acquisition) by one party directly affects its availability to another.
A simpler way to say this is that collecting art is generally a zero-sum game. If I buy one of Andy Warhol’s Jackie paintings, you can’t own the same one unless, or until, I decide to resell it. And this scarcity element helps launch the price for sought-after works into orbit.
Gagosian’s opening reception for an exhibition of Julian Schnabel’s recent paintings on February 21, 2008 in Beverly Hills, California. (Photo by Frazer Harrison/Getty Images)
Books, music, and film, on the other hand, all generally qualify as “nonrival goods.” Scale becomes the route to profitability, whether we’re talking about an Oprah’s Book Club selection, a smash pop single, or a Hollywood blockbuster. The profit from each individual sale is relatively small, but those small profits add up to a large total when sellers get to collect them thousands or, even millions, of times.
Art is the opposite: Instead of making a small profit a large number of times, the gallerist or dealer seeks to make a large profit a relatively small number of times.
Despite this fundamental difference, however, online mass-media sales trends are still useful omens for online art-sales trends. Why? Because their shared reliance on the internet introduces some of the same crucial market dynamics to both.
The Tyranny of Options
Since any author, musician, filmmaker, or contemporary artist can now use an open-access e-commerce platform to reach potential consumers directly, opening a browser tab to peruse independently released works in any of these media now resembles opening a porthole from inside a fully submerged submarine.
The result is an instant flood—one liable to overwhelm the buyer and, in the process, make most independent artists as indistinguishable from one another within their discipline as the individual water droplets barreling into a breached vessel 20,000 leagues beneath the sea.
I call this phenomenon the tyranny of options. It reflects that, to some extent, technology’s overthrow of the traditional gatekeepers backfires. Yes, an open-access market for creative works of any kind is vastly more democratic than the traditional gatekeeper-controlled one.
But such a marketplace also becomes vastly more difficult for the average buyer to navigate. The reason being that the gatekeepers—be they record labels, Hollywood studios, or gallerists—still double as their medium’s most reliable signals of quality. Remove the former and you necessarily remove the latter.
Open-access e-commerce platforms thus strip artwork of many of the traits that made its marketing, valuation, and sale so unique in the pre-digital era. They effectively challenge this niche medium to play by mass-medium rules.
Therefore, any artist who fails to square this circle should expect his number of sales, as well as his profit margins on those sales, to be very low. And in a globalized marketplace sans gatekeepers, the sheer scale of competition means that this outcome will, in all probability, remain the standard for artists.
To look at the results from the collector’s point of view, we’re likely to be left with the phenomenon George Packer captured in a 2014 story about Amazon’s effect on the publishing market: “When consumers are overwhelmed with choices, some experts argue, they all tend to buy the same well-known thing.”
Schneider’s book. Cover image: Tim Schneider.
This is the second of two excerpts from our art-market columnist Tim Schneider’s new book, The Great Reframing, which delves into the primary art market’s fraught relationship with technology. The full book is now available for download on Kindle.