So you want to invest in art...

Here’s the thing: you will need to know what you are doing.  Within the last decade or so, art as an asset class has performed especially well, notwithstanding significant recessions and a global banking crisis that makes it an extremely attractive investment.  The Artprice Global Index shows that fine art as a whole has appreciated by 120% over the last decade, with all-time records being set at Christies and Sotheby’s for blue-chip artists like Pablo Picasso and Roy Lichtenstein.  When you compare these returns to a lackluster portfolio of equities and bonds, there is no denying that an investment in fine art could provide a tremendous boost... when well executed.

This is a relatively new perspective within the investment finance world, where art as an asset class has previously been considered something of a niche market.  But as more and more collectors purchase art with an eye towards its appreciating value, art investment advisory firms have expanded and financial institutions have increased their art finance related-services.

The note of caution within all of this however, is that we are talking about not only a savvy art collector but also a financially sound and intelligent investor.  The big names that you hear about in the art media have more money than most people could dream of and are able to absorb the shock of purchasing and possibly losing a vast amount of money on a single piece of art.  This is not to discourage the 99 percent from considering art as an investment, as it is an asset that has proven to outperform stocks, but rather to advise collectors and possible investors to go in ‘eyes wide open’.

Smart collectors know that art is not a traditional investment, in that the art market is not liquid.  If someone does not have a lot of cash on hand and the economy were to take a turn, they most likely could not afford to have their investments tied up in art, as it is not a simple process of cashing out.  The goal with an art investment is obviously to sell high and make a profit, but that may not be possible for someone who is strapped for cash and needs to put their art up for auction at the time of a market pullback.  That is why investment advisors think that art is an excellent diversification tool for an overall wealth portfolio (regardless the amount of wealth in the account) as it is a high performing asset that can pay off with large returns, but only when paired with other liquid securities, equities, etc that someone can fall back on in times of need.

Long story short, go for it.  Invest in art.  Just try to do it smartly.

Is contemporary art going digital?

 

While not an entirely new concept within the visual art world, digital format artworks are garnering more attention then ever, as dealers, artists and online marketplaces seek ingenious ways of revolutionizing the way we are able to view and collect.  Most art appreciators do not deny that this new world of digital imagery (be it GIFs, Flash animations or projections) is a fine art in its own right, but until very recently, the ability to exhibit and commercialize such digital creations has been met with much skepticism.  How can such non-traditional pieces of art be displayed, let alone collected, when the work itself is incapable of being possessed as a physical object or displayed as a framed artwork that hangs on the wall?

The newly launched and heavily marketed online platform, s[edition], seeks to answer these questions with the creation of their web-based marketplace where collectors can purchase limited edition digital artworks by such blockbuster artists as Tracey Emin, Damien Hirst and Michael Craig-Martin.  Once purchased, these digital artworks can be downloaded to the owner’s hard drive, iPad and iPhone and can only be displayed on these devices.  The s[edition] venture aims to redefine the art world by marketing to a new breed of digital art collectors.

Well known British artist, David Hockney, is also at the forefront of digital art and as a proponent of the iPad and iPhone, he has used both to craft hundreds of fresh flower digital drawings.  Originally created to be shared through cyberspace for his friends’ enjoyment, the artist jumped at the opportunity to exhibit his virtual flowers in 2010 at the Fondation Pierre Bergé - Yves Saint Laurent in Paris.  In an interview with the UK’s Telegraph on the eve of his exhibition, Hockney stated that “anyone who likes drawing and mark-making will like to explore new media… Picasso would have gone mad with this… I don’t know an artist who wouldn’t”.  Displayed on iPad and iPhone screens, and also enlarged as digital projections, the exhibition “David Hockney’s Fresh Flowers: Drawings on the iPone and iPad” was so successful that it has since gone on to tour the world and can currently be seen at the Royal Ontario Museum (through January 2012).

As artists from a variety of media backgrounds, including David Hockney, begin exploring the latest technologies and go so far as to produce artwork within the digital realm, their galleries and dealers have rushed to find ways in which they can 1.) Safely exhibit such artworks, without falling pray to online pirating and illegal uses of such digitally formatted artworks and 2.) Market such works as acquirable pieces of art that have been editioned in limited quantities by the artists and can be taken offline for the sole enjoyment of the collector; on his/her own drive space.  In some cases, the collector can also have their names added to the actual digital files, so that when publicly viewed online, the end result acts much like that of a museum loan plaque.  Either way, it is daunting to those of us in the art world accustomed to the more traditional format of paintings and sculptures.  But as technology continues to progress and consumers become more digitally adept (consider our obsession with iPhone and Blackberry Apps) the art world appears to have no choice but to adapt… quickly.

I'm In Miami B*tch

For those of you who don’t recognize the risqué lyrics above, the refrain is taken from a popular song that has become something of an underground anthem for Miami and quite possibly to one of the city’s major art gallery owners, Gary Nader, as well.  Announcing recently that he plans to host an over 100 lot auction to coincide with the behemoth known worldwide as Art Basel Miami Beach, Nader claims that this will be the first of many auctions to be held in his 55,000 square foot Miami gallery space.  Explaining his decision to launch Miami’s first ever boutique auction house in a recent interview with ARTINFO, Nader claims “Miami has become a melting pot of extraordinary collectors in the last ten years… it’s like the perfect storm of elements to make Miami a major hub”. 

While all of this may be true, there is no denying that this cross over from art gallery to auction house is a bold move for one man to take on, particularly in a city that has yet to be formally recognized as a top international art market player.  Auction houses may have already crossed over into the world of private sales, with Christie’s acquisition of Haunch of Venison and Sotheby’s recently opened S2 gallery space, but both of these houses have thousands of employees and massive amounts of capitol in what is a marked comparison to the one man gallery run auction Nader is preparing.  A fact that Gary Nader himself, sees as an asset rather than a hindrance to consignors and collectors alike.  Operating in a smaller scale with a concentration on modern, contemporary and Latin American art only, Nader has been able to curate a highly selective grouping of blue-chip lots worth an estimated $30-40 million for his December 1^st launch.

There is no denying his determination and ‘if you build it, he will come” strategy, as some of the most important collectors in the world will be arriving in Miami for Art Basel, but the international art community is skeptical about a permanent auction house in Miami and will remain so until Nader’s results are realized.  Present economic downturn or not, as Nader himself states “I’ve never been worried about the economy.  That doesn’t worry me.  I’ve never had a bad year… my real clientele is not affected by the economy”.  Bold statement? Yes.  But it suits the man in his current endeavors and we are certainly looking forward to Miami in December.  Let's Get It Poppin'!

Wrangling over resale royalties

Debating whether or not American visual artists deserve to collect royalties on the resale of their artwork is akin to debating religion or politics, so get ready for a heated argument no matter who you might be speaking with.  Be it artist, dealer or collector, everyone has a different opinion and given that California is currently the only state in America to have a law in place that seeks to provide artists access to resale royalties, this debate is far from being over. 

That is why the impending lawsuits against such power houses as Sotheby’s, Christie’s and eBay, filed within the last few weeks by top visual artist Chuck Close and the estates of sculptor Robert Graham & L.A. painter Sam Francis, will be so closely followed by the art world.  The lawsuits claim that the auction houses have violated the California Resale Royalty Act by purposely going out of their way “to conceal the fact of a seller’s California residency” as a way to get around paying the 5 percent royalties due as agents for the sellers.  (As a side note, it is interesting to observe that the estate of Sam Francis is joining the suit against Christie’s but not the suit against Sotheby’s, who is currently hosting a major exhibition of Francis’ work in their newly launched S2 gallery space).

Inspired by music industry royalties and European ‘droit de suite’ rights, the California Resale Royalty Act is currently the only law within the United States that addresses the right of artists to collect a portion of the appreciated value of their works when resold.  This California law states that sellers who reside in California must pay the artist (or in some cases the artist’s estate) five percent of the resale price and that it is the seller’s responsibility to seek out the artist for due payment.  The ambiguity within this law is that it often goes unenforced as it requires that artists proactively follow the trail of ownership and obtain undeniable proof that the reseller resides in California (or that the sale took place in California) and even then it often requires the assistance of lawyers in order to collect royalties due.

In the lawsuits filed by Chuck Close and the estates Robert Graham & Sam Francis, these widely known artists are not only demanding legal attention to this long overlooked issue, but they are also setting the groundwork for lesser known artists to benefit from the international headlines their suits have been receiving.  As recent as last week, Los Angeles artist Mark Grotjahn filed papers claiming that his former collector Dean Valentine resold three of his artworks and then refused to pay the five percent royalty fee, in a story that was covered by not only Artinfo.com but also the Los Angeles Times.  In a quote to the L.A. Times, Valentine responded to the complaint by stating the he does not “see any reason why I should have to pay in a situation when other collectors (residing outside California) do not.” 

In a world where it is public knowledge that Valentine originally purchased the artist’s paintings for under $10,000 and that in 2008, the auction house Phillips de Pury resold a different Grotjahn painting for $1.2 million, it becomes a serious issue that artists, dealers and collectors alike, will be actively following over the coming months.  In a time when auction houses and their consignors are regularly realizing astronomical prices for artworks that were initially sold by the artist for far below these record numbers, we are past due for some serious legal precedents regarding visual artist royalty rights. 

Art dealers are like cockroaches, they refuse to die.

Art dealers are like cockroaches, they refuse to die.

 While this phrase is something of a joke within the art world, there is no denying that it is an incredibly tough business, filled with a market that is constantly looking for the next ‘big thing’ with no qualms about tossing aside the current ‘it’ darling in favor of the next.  Add to this the present economic climate, in which onetime buyers never lose sight of the fact that the fine art they are purchasing is viewed as a luxury in many circles and when pressed, is often the first expense they are willing to cut.  This in turn creates a substantial loss to their former dealer or gallery. 

But as the joke goes, while the storefront may disappear, the dealer does not cease to exist.  Art world veterans are accustomed to working within a fickle market and have learned how to evolve or reinvent their businesses so as to stay relevant.  Which leads to the question, how has the business of art changed in order to stay solvent within the present economy?  The answer, as far as we can tell, seems to be two tiered:

1. Go global. There is no denying that the majority of money being invested into the art world right now is coming from outside the United States, so rather than wait for collectors to travel to a gallery or stumble upon a website, many dealers have bravely begun expanding their art businesses within the Asian and European markets- bringing the mountain to Mohammed so to speak!

2. Mimic the event-driven marketplace that has proven to still be successful within the auction world, despite the current economic downturn.  The cover of today’s Artinfo.com auction review is titled “Christie's Once Again Defies the Market, Pulling Off a $60 Million Triumph in Its London Contemporary Art Sale” (Judd Tully, October 14, 2011).  Seeing these results and knowing that people, especially within the art world, thrive off the high of a time sensitive purchase, is what led in part to the booming new phenomena- the art fair!

A frenzied and sometimes exhausting existence, the art fair allows galleries to purchase booths in different locations throughout the world and display the cream of their fine art crop for a short period of time (usually no more than 4 days).  Combined with the convenience of ‘one-stop-shopping’ the finest galleries in the world, the global art fair has managed to create a new economy built for and around the international clientele it has been courting for so long.  Big time collectors and celebrities love the glamour that goes hand in hand with such art fairs as Art Basel (Basel, Switzerland), Frieze Art Fair (London, England), TEFAF Maastricht (Netherlands) and SH Contemporary (Shanghai, China) to name only a handful of the top art fairs taking place throughout the course of one year.  There is no denying that so far, the art fair has proven to be a successful strategy, as it opens a gateway for dealers and galleries to tap into the global market.

In a time where people are hard pressed to find someone that has not walked past at least one vacant storefront where an art gallery used to be, galleries and dealers have learned a new way to survive… so perhaps the joke is more fact than fiction.