Art Commotion: Commodity or Devotion?

The Contemporary Art Market by Nadia Zayan

Looking at a market which has been valued in the last year at $64 billion, one might ask how did we get here? Contemporary art wasn’t always the sought after commodity it is these days. There was a time, one which most people probably can’t remember where Old Masters dominated, and Contemporary was represented by merely a fraction of its current market share. So, how did we get here?

Edward Dolman, Chairman and Chief Executive of Phillips auction house believes that “collectors want to be associated with the new and the now. We have no intention of selling Old Masters pictures or 18th, 19th Century pictures, because these markets are now so small and dwindling.”. He spent a large part of his career at Christie’s securing the top consignments for Old Master works but he now focuses entirely on Contemporary art in his new role at Phillips. “The new client base at the auction houses - and the collecting tastes of those clients - have moved away from this veneration of the past.” This shift in buying behaviour is a by-product of several developments. Significantly, supply for the strongest Old Masters works has gone down as production ended long ago. As a result, there is less talent in the form of specialists joining businesses. Moreover, for those interested in glitz and glamour; the highest-selling pictures are all to be found in the Contemporary art sales, making those of Old Masters more banal by comparison. A combination of all of these changes are responsible for the shift in emphasis.

To clarify, the Contemporary category, or Post War Contemporary as Christie’s refer to it, covers the period 1945 to present day respectively. The Post War period will feature those artists which have typically already passed and been historicised within the canon, however Contemporary is where there is still room to see where the artist’s career will go as they are alive and practicing, in most cases.

Local tastemakers such as Saatchi in the mid-nineties also helped provide a huge boost to this collecting category. He put student shows on the map as a place to spot rising talent and helped to make people reconsider the at times more risqué side to Contemporary art, such as a Damian Hirst’s shark encased in formaldehyde or Tracy Emin’s very controversial My Bed. He also organized Sensation, an exhibition based on his collection of Contemporary works, including many works by Young British Artists, (YBAs). This took place in 1997 at the Royal Academy of Arts in London and later toured to the Hamburger Bahnhof in Berlin and the Brooklyn Museum in New York City. The show generated controversy in London and New York City due to the inclusion of images of Myra Hindley and the Virgin Mary and was eventually closed by New York City mayor Rudolph Giuliani for this reason. Although a shrewd move by Saatchi to institutionalise those artists which had made their way into his collection, the show was criticised for attempting to boost the value of the work by showing it in public museums.

If you are not Saatchi, however, with access to museum contacts, who can help to validate and reinforce the buying choices you have made, it can be a more daunting prospect when deciding which artists from the Contemporary market you wish to buy. For those less experienced players, participating in the Contemporary market can be likened to rolling the dice. How do you really know what your work will be worth in ten years time? Advisory services, have proliferated in recent years. Their role is to try to be able to tell their clients, based on their tastes what works will also hopefully deliver some kind of return in years to come after their purchase has been made. However, to know these things concretely in a market which is constantly active and in a state of flux is a difficult task, even for the professionals. As a form of protection, they will always deliver the same romantic tag line, ‘buy with your heart.’ As a concept, this is the true reason one should buy, however this could also likely be a way of shifting any liability onto the buyer if for some reason they don’t net the expected return when reselling the work.

We have covered many of the reasons for the increase in buying from the Contemporary market, changing tastes, dwindling supply and an increasingly glamorous scene. However, one major issue to consider is the knock-on effect of zero interest rates which has been an ongoing problem globally. When interest rates dropped to zero and people were no longer generating returns from the money in their accounts, the art market became increasingly prey to a group of buyers who were looking to diversify their portfolios and invest in what they saw as being an alternative asset class. They buy the work as a commodity in the hopes that their high-risk investment will generate a high return. Case in point when collector recently turned gallerist Adam Lindemann purchased Jeff Koons's Hanging Heart (Magenta/Gold) from Gagosian in 2006 and then followed by flipping the work at Sotheby's in 2007 for a then-record of $23.6 million, Lindemann netted a record return in a remarkably short space of time. Rumous has it, the sculpture wasn’t even taken out of its crate before being sent straight to Sotheby’s for auction. In an interview with Artspace Lindemann professed:

“Look how many people are in the art market to speculate—everyone’s a gambler, everybody’s a wise guy now.  And I think that even if the high end of the market slows down—and the middle of the market has already slowed down— the speculator stuff is going to keep going. Because this is like going to the racetrack, or going to Las Vegas. Everybody wants in on this. I’m shocked at how much money people pay for artists that haven’t even shown yet just on the rumor that they're going to such-and-such gallery, or somebody might pick them up. I mean, it’s really amazing, and I think it’s definitely here to stay. And it’s growing.”

This is inherently where many of the recent problems experienced lie. For those artists which have either passed away or are old/established enough to have been historicised, this type of speculation is less harmful. However, for those younger artists still trying to find their way, this type of speculative behaviour can be detrimental. For example, if the work of a young trending artist which is priced by the gallery for $10,000.00 - $20,000.00 sells out, the gallery will begin to amass a waiting list. When the said collector is faced with such obstacles, this scarcity and frenzy typically deepens their interest. In this case, upcoming auction sales where the work might be being ‘flipped’ then becomes a playground for the wealthy to clamour at works which were otherwise unavailable. One of the most apt examples in recent years would be artist Oscar Murillo and the incredible frenzy which his trendy paintings generated. “A Murillo that had been bought for $7,000 in 2011 was auctioned for $401,000 at Phillips; in February 2014, a three-year-old painting, with BURRITO written on it, sold for $322,000 at Christie’s, and the prices of stacks of his other works had soared too, appreciating by as much as 3,000% in just two years.”

What ensues when a work by a young artist increases by too much in a short space of time? That artist’s market then becomes distorted as realistically the monetary value does not reflect the actual price of the work. Although represented by blue chip gallery David Zwirner, the artist had not even had a solo exhibition in New York by the time his prices had reached astronomical levels. An artist’s value is something which increases gradually over time. This happens through placing the work in the right collections, doing solo exhibitions or art fair presentations which gain notable press and ultimately arriving to the top tier of validation in the form of museum exhibitions and acquisitions. In the case of Murillo, as Allan Schwartzman the art advisor stated, “He went from an art fair to an auction house without basically having shows anywhere. [...] Almost any artist who gets [too] much attention so early on in his career is destined for failure.” Galleries who are the safe keepers of their talent, have now started to place contractual bans on clients who are buying hot young new artists, in anticipation of this behaviour, to protect and ultimately salvage their markets. The dangers in not taking these precautions is that a bubble is created, and ultimately bursts. When the prices are not in keeping with an artist’s development and recognition one cannot sustain the increasing prices of their works. This ultimately ends in a crash which burns off the bloom of budding talent. As is apparent, when artworks are literally traded as commodities things become distorted.

In this sea of players, the question is, who is to blame for creating this mentality and proliferating this sort of behaviour? The buyers, the artists, the dealers, the financial market or is it a mixture of all of these aspects?                                                                                                                                       

There are some artists whose modus operandi would suggest that their work is a commodity or should at least be treated like one. Damien Hirst not only has a company set up which is named Science UK Ltd, he also hires a studio full of assistants to either help or entirely produce his work themselves, as opposed to  something made by his very hand. This hands-off approach is a tenuous issue in Contemporary art and has arguably been going on even as far back as Rubens with his many studio assistants. Hirst sparked a whirlwind when in 2008, the night before Lehman Brother’s went bankrupt, the artist performed the ultimate mercenary act, when he cut past his longstanding gallery White Cube and sold his works directly at auction netting the full 100% from his sales, as opposed to doing the usual 50-50 spilt with his gallery. The sale raised £111 million ($198 million) for 218 items. However, the issue was that he gave a clear signal to the market and his buyers that not only did he not mind by passing his dealer Jay Jopling, but what it came down to, at least for that evening, was the money.

We find ourselves in a time where the interest in art has spread out internationally across the world. Art fairs are a burgeoning part of the the scene, which inevitably attract much attention with their pull of glamour and intrigue. Though many are devoted to Contemporary art by virtue of their genuine love and interest for it, in many ways it has also become a commodity as a result of the behaviour of players and feverish buying and selling activity surrounding the market. When Banksy's coup of his work "the Girl with Balloon" shredded itself during a recent live auction at Sotheby's, it was reported that the artwork's selling price had doubled. The work was subsequently renamed "Love is In the Bin". Such is the game and riddle which can often times characterise the Contemporary market.

To conclude, the Contemporary art market at the best of times is an exciting landscape full of possibility, international participation and place burgeoning with young and gifted talent. At the worst of times, it can also feel slightly like a landmine where one does not quite know where we lie, and what might happen next. The attitude of some of the markets biggest artists towards their own works, in combination with the approach of many new-found buyers/investors has reduced the buying and selling activity in many ways down to a trade. As a response, galleries have tried to counteract the dangers of the secondary market and the resale of works, by playing closer attention to their terms of sale and prospective clients. Whilst this may help to curb things to an extent it is a relatively new way of dealing with this behavior and its impact can only be quantified with time.

Nadia Zayan is a gallery Sales Associate at Rosenfeld Porcini Gallery, has previously for Vigo Gallery and partaken in art fairs internationally.