Charles Shepard, FWMoA President & CEO
I frequently talk about the price of art in one context or another. In a recent post, I focused on great artists who, over time, have largely been forgotten. My perspective in that post was that the work by many of these artists was still as good today as it was perceived to be in their heyday, but that its value had suffered a downturn. So, while the quality was still solid, changing tastes had driven the art work’s price in the market ever downward. As a museum director, I’m delighted, of course, to find excellent, historically significant art at bargain basement prices. It’s great for the Museum’s collecting budget to discover a bargain, and it’s also good for the artists’ posthumous reputation to be included in a museum’s collection. But is it really just changing taste that robs a work of art of its relevance and value?
Today, let’s explore the pricing of art from a different perspective. Start by considering two artists whose work is in the Museum’s collection: David Shapiro and Dorothy Gillespie. Both these artists were professionally trained, produced high quality work, were represented by topnotch galleries, and enjoyed six-figure incomes at the peak of their careers. Both David and Dorothy routinely sold their art for prices that ranged from $10,000 to $20,000 on the primary market. By definition, the primary market refers to an artist selling their work through a gallery, which promotes and presents their art for sale to the public for a prearranged price, making money for both the artist and their gallery. Usually, the artist would get 60% of the sales price and the gallery would keep 40% as its share. This part of the art market is referred to as “primary” because it represents the first sale of a particular work of art after it was created. So, an art buyer/collector ventures into the gallery, sees something they like, and decides to buy it. If the price of the artwork is $10,000, then the gallery would be immediately entitled to $4,000 and the artist, within a few days, would get a check for $6,000. The primary market is a perfect system in both the eyes of the artist and the gallerist: each has a significant amount of control in establishing the price for the art and sharing of the profit. As an artist’s work becomes more popular and the demand for that work increases, generally the price will increase as well. Maybe now the artist and gallerist up the price of all the $10,000 paintings to $12,000. The 60-40 split stays the same; but now, the gallery gets an additional $800 while the artist gets an extra $1,200. But what does this increase in price mean to the buyer who, a year earlier, bought a similar painting for $10,000? Is that painting now worth $12,000?
Technically, yes. That buyer can pat themselves on the back for investing in art that is now worth more than they originally paid. But to realize that gain, the buyer would have to put the painting on the market for a second time. And this time, neither the artist nor the gallery will be involved in the sale or the potential profit. The buyer will become the seller as they attempt to reap the $2,000 profit from the artwork’s new market price. Whether the seller attempts to make a sale on their own, or seeks the help of an auctioneer, the artwork is now on the secondary market. And the truth is that most art buyers are not equipped with the same skillset as professional gallerists, so this seldom goes well. The amateur art seller would almost always do better to hold on to the artwork and enjoy it.
But to swing back to the careers of David Shapiro and Dorothy Gillespie, they were well established in the primary market with a few respectable galleries representing each of them in major cities. The market for their work increased over time and, accordingly, the price of their artwork grew until it hit a pricing plateau in the 1980’s. This is nothing odd and happens with most artists selling at all price points: their artwork simply hits a price that is more or less the peak for that work in the marketplace. An important thing to note is that even though it sounds really good for an artist to be able to support themselves solely on the sales of their artwork, and even better to be in a position to steadily sell work at prices above $10,000, it isn’t as good as it sounds. Consider this: serious collectors tend not to buy art priced at under $20,000 unless their well-honed instincts tell them that the work is currently under-valued by the market. This level of collector is primarily interested in much higher priced art that, in time, will further increase in value.
Long ago, I had a collector friend in this category whose mother was also a serious collector. When he was a teen, she purchased a $10 million van Gogh at Sotheby’s and left it to him (along with other great pieces) in her will. When she died, he decided to sell just one of the paintings, the Van Gogh, so he could expand his collection in a new direction. In the spring of 1990, Christie’s sold the van Gogh for him for $82 million dollars. And while that sale set a record for van Gogh that year, multi-million dollar sales have been the norm for almost fifty years. Among the top sales last year, we saw Andy Warhol’s Double Elvis go for $53 million, Picasso’s Femme au Chein for $54 million, and Jeff Koons’ Rabbit for $91 million. Admittedly, this activity and these prices exist only at the highest end of the art market. But, I mention this level of the game to put into perspective the type of activity and pricing that happens day to day in the more ordinary part of the art world. And I think each of us knows, personally, a number of really good artists who would truly envy the careers that both David Shapiro and Dorothy Gillespie had, from a financial perspective, due to their ability to steadily sell their work in the $10,000 – $20,000 range.
But, as the Bard once said, therein lies the rub: even while David’s and Dorothy’s work was doing well on the primary market, it also began to show up on the secondary market, largely without their knowledge. The very same thing occurs to a high number of artists, living and dead, whose only shortcomings were to be collected by people whose motivations and budgets were very different from those of the folks I described previously. The marketplace for David’s work and Dorothy’s work might have been strong throughout their careers, but it was made up of people with the kind of money that enables them to own more than one home and to furnish them well, filling them with nice art but not necessarily investment grade art. I mean this in the nicest way possible: but the buyers capable of and willing to spend six and seven figures on a work of art probably never set foot in the galleries that exhibited David Shapiro’s work. It’s unlikely that those types of galleries are even on the radar screen of that level of collector. And that’s fine. Totally understandable. But where does it, ultimately, leave the artist who creates excellent work that sells predictably well in the $10,000 to $20,000 price range to a marketplace dominated by folks that enjoy shopping for art in that price range? Well, I hate to say it, but it leaves these artists or, rather, their artwork, at the doorstep of the secondary market for non-investment grade art.
How that happens is that change occurs in the lives of those good, art-loving, well-appointed, souls. Divorces raise their ugly heads, deaths occur, health changes, and all manner of similar things are made manifest that lead people to want to get rid of their stuff. It’s a terrible word to use when we’re talking about art, but it’s accurately reflective of how a great many perfectly wonderful people feel about art and the other things with which we tend to decorate our lives. The art, the sailboat, the Porsche, and all our other stuff, at some point, will just have to go. And when that moment arrives, there will always be an auction house ready to help you bring your art to market. And while most people would like to at least try to get a decent return on the art they consign to the secondary market (that’s why they chose to go to auction rather than donate), they usually are aware that the things that they are consigning are not investment grade pieces. So it’s not off to Christie’s, Sotheby’s, or any of the grandest auction houses, but to a sturdy regional auction house that has a good record of selling fine things for under $50,000.
These auctions are exciting events, especially since everything has moved online in the past few years. Pre-Covid-19, there would be spirited live bidding, phone bidding, and online bidding at a rapid pace as the auctioneers encouraged bidders to fight it out until a winner emerged. Often the seller has agreed to waive the reserve to guarantee a sale, even if not at the desired price. I participate in auctions like this monthly, if not weekly, seeking a “find” for the Museum’s Collection. My heart pounds and my fingers fly over the keyboard logging my bids and fighting off the competition! And I often do very well wresting a prized print or glass sculpture away from the other bidders and securing it for our Museum. But my success is only possible because most sellers are primarily motivated to unload their stuff. That’s why I can land a great piece of art, frequently for a fraction of the original price.
So to go back to my opening question about whether changing tastes in art are the main factor in the eventual drop in value of a great many very good works of art, I want to say “No”. I think the major factor is that there are more consumers in the art world than collectors. And, at the end of the day, circumstances will always convince consumers to sell. And we collectors will always be ready to buy.