Behind the Canvas: A $68b Market Driven by Taste & Speculation
Pt. 2: Primary vs. Secondary Markets, Artist Challenges, & Origins of Modern Art Market
(Henry Taylor; Untitled, 2022. Acrylic on canvas)
Welcome back to Part 2 of our exploration of the enigmatic global art market. In Part 1, we dissected this exclusive world, exploring the surprisingly small yet influential market size and the intricate roles played by galleries and museums. We unraveled how art, often perceived as a cultural symbol, doubles as an asset class to certain high-networth-individuals. Now, we're venturing deeper into the primary and secondary markets, uncovering the real challenges artists face and highlighting the intricate strategies that shape their careers. We'll also trace the evolution of the modern art market, revealing how historical shifts have influenced today's art world. Join us as we continue to demystify the complex mechanisms driving this $68 billion industry.
Primary vs. Secondary Market
Artworks are purchased either on the primary or the secondary market. The primary market encompasses the initial sale, either from the artist or a gallery to the buyer, whereas the secondary market involves resales, often taking place at auction houses like Christie’s or Sotheby’s. The secondary market is a major point of contention for artists. Unlike the primary market, artists don’t earn any money when their works are flipped. Additionally, out-of-control auction prices can be debilitating to a young artist’s career as Zwirner highlighted earlier.
Many artists would prefer to know and retain some level of approval in regards to who’s collecting their work. The secondary market rips them of this autonomy. Self, who has seen six-figure resales of her work (a fact that is proudly highlighted on her Artsy bio) considers auction sales “vulgar.” She says, “I care a lot about who buys my artwork. The work has its life once it leaves your studio.”
An inflated sale in the secondary market can be advantageous for an artist. It’s a flashy headline that generates buzz and contributes to an artist’s mystique, which can increase an artist’s profile, demand, and price. But we’re talking about an extremely dubious market, so the potential benefits in the secondary market are not guaranteed.
Amy Cappellazzo, former Chairman of the Fine Art Division of Sotheby’s, doesn’t have much sympathy for artists with disdain over secondary market sales, “You want to make a living. You need that big, bad market out there,” she continues, “If you traded it [the artwork] for money, that’s the way it goes.” She goes on to argue that 99.9% of artists would be blessed to consider the secondary market a problem.
In the music industry, another market often accused of murkiness and exploitation, musicians can elect to retain their ownership rights throughout their career, thus benefiting from future sales.
Droit de Suite
In Europe, a law exists titled “droit de suite” which means “right to follow”. In this legal provision, artists are granted a royalty whenever their work is resold, allowing them to participate in the appreciation of their work's value, and potential profits at resale. Oddly, the royalty rate is capped at €12,500, meaning if an artist’s work is resold for €5m, they would only receive €12,500, which is outrageous, but it’s something, considering the US has no such provision.
Artists Are Priced Out
The vast majority of artists aren’t making any money–85% make less than $25k, while 4% make over $100k per year, and roughly 1% make over $1m per year. Tom Sachs, a prolific sculptor, whose work has been featured at The Met, The Whitney and has seen six-figure auction sales, says, “I’m not an art collector. I don’t have the resources to buy the art that I want.” Self also admits to not being able to afford her own work in the primary or secondary markets.
Gallery Tactics
The process of buying an artwork from a top-tier gallery is another purposefully elusive endeavor. If you walked into one of David Zwirner’s galleries and requested to pay a $350k price tag for a piece on the wall, you’d likely walk home empty-handed. “I’d wanna know who you are so the transaction would not be instantaneous, it would be let’s get to know each other, we would find common ground, people that we know, art that you collected that I would know, we would become friends and you’d become a client,” Zwirner explains regarding a random attempting to make a purchase. A gallery would want you to know about your collection, whether or not you have buddies on the board of institutions, and what type of influence you may have. In other markets, this type of vetting is abnormal unless you’re trying to purchase the New York Knicks. Want an Aston Martin? As long as you have the cash, it’s no big deal.
David Zwimmer uses his artist Luke Toyman (a Belgian painter in his 60s) as a paradigm for what an exemplary gallery can do for an artist: His prices started at $8k, and now primary market sales are hitting $2m. He describes the approach as logical, which included strong institutional support over the years to warrant price development.
“The art world is so f*cked up that they'll tolerate a certain amount of lying as long as it’s worth their while to do the next deal,” says prolific sculptor, Tom Sachs. Collectors have a reputation for assuring galleries and artists that they won't resell artworks, yet frequently and boldly break these promises. Galleries, in their tactics, may bundle less sought-after artists with their prominent ones, insisting collectors purchase works from both to secure a deal. This practice, along with other methods like influencing auction house prices, reflects the art market's more questionable strategies. “It’s always the gallerists that lie,” Sachs says.
Origins of the Modern Art Market
The origins of the modern day art market can be traced to the post-French Revolution, when auction houses began selling off aristocratic collections to new money, industrial-age entrepreneurs. Prior to this, art wasn’t as commercialized; it was more a signifier of wealth to be gifted, inherited, and treasured.
In the 1850's, French dealer Paul Durand-Ruel began to intellectualize art by using literature such as biographies and other publications, thus the birth of canonization. This innovative approach, later amplified by influential critics like Clement Greenberg, set the foundation for today's art market dynamics, where an artist's value extends beyond the canvas, intertwined with their historical and critical significance.
Conclusion
The art market is sexy and shady, alluring and a bit sketchy. It’s strategically complex and elusive in order to perpetuate a high-stakes, elite poker game, exclusive to members only. Despite this, my dive into the art world over the past weeks has left me inspired, especially by artists like Kerry James Marshall, Alice Neel, and Philip Guston. This exploration has led to a new addition on my bucket list: “become a collector.” My hope is that this article sparks curiosity and shines a light on the art world's exclusive club.