Creating 'value' in the contemporary market

September 28 2015

Image of Creating 'value' in the contemporary market

Picture: Christie's

Scott Reyburn in The New York Times* looks at how values for contemporary artists might be set:

Say, for example, I discover a brilliant young artist on Facebook. After a crazy week at my house in the Hamptons, he has made 30 abstract paintings for me, which I’ve bought for a total of $90,000. Having posted examples on Instagram, I enter one of these paintings into a contemporary day sale and ask two business associates, who are cut in on the deal, to bid it up to $150,000. After the sale, a benchmark auction price posted on Artnet, and news of the artist’s inclusion in a forthcoming museum show — which happens to be curated by a friend of mine — establishes my new acquaintance as a hot young artist. Over the next six months, we discreetly sell 20 more paintings at auction and privately for an average price of $70,000 each.

This fictional scenario may or may not have parallels with last year’s mania for “flipping” young art at auction. But there’s no escaping the increasing opacity of certain moments at recent public sales. Just what exactly is going on when a dealer tops up the bidding on a young artist in whom he has taken an investment position? And are there conflicts of interest when an auction house shares a financial guarantee with a third party?

Does this sort of thing happen? Of course. Which is why the auction market is a perfect way to stoke prices for contemporary art - there are so many ways people with a vested interest can help massage the figures, and those figures are so publicly accessible. Add in a bit of glitz, fashion and prestige, and hey presto - it's boomtime.

But the practices outlined by Reyburn can only happen as long prices overall go upward. In a deflationary market, very few people are going to pile into auctions to help fix 'values', because they'll know nobody else is waiting to follow suit and pick up the baton. In other words, the contemporary market, at all levels, is mostly still driven onwards by genuine interest and competition. At least, for now.

The question on everyone's lips is - should we 'regulate' this market? I don't know if that's possible for a start. The market is too international and fluid. And in any case what is there to regulate? Authenticity? I'd like to see governments try that. More likely to be regulated is the financial element of things. Certainly, I think it's wrong, given the importance of published auction prices in this market, for false 'prices' to be published - as they sometimes are when you have guaranteed lots.

But mostly this question comes down to whether buyers are well-informed or not. All these alleged dodgy practices are in fact fairly well known. It should be fairly obvious when an artist of little track record is suddenly 'worth' lots of money, merely because a few of their works have sold well at auction. You just need to do your homework, like you would when you buy a house. In my old-fashioned view of the world, there's still something to be said for keeping responsibility in the hands of the buyer. The state can't always protect us from ourselves. Caveat emptor.

Update - Robert Millburn on notes how top heavy the modern and contemporary market is:

Art investors should also note that the market is built on an increasingly flimsy foundation. Based on 2014 total sales volumes, investors buying top-ranked artist, Andy Warhol, spent a whopping $653 million for the privilege. By comparison, the value at fine art sold at auction last year was $16.2 billion. The top ten artists in 2014 accounted for almost 20% of the art market’s entire value; back in 2005, the top ten accounted for just 13% of the total.

Of course, the work of artists like Warhol is perfectly suited to an auction market boom; auction prices make his work easy to price, with all those series and formats. So if a 'Triple Elvis' makes $Xm, then a double is worth so much, and so on. But such 'values' depend entirely on whether the price set is both a) accurately reported and b) set in a competitive manner. 

* I learn via Art Market Monitor

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