The Art Business

A Closer Look at the Global Art Market & Beyond

Art washes away from the soul the dust of everyday life — Pablo Picasso

What is truly remarkable is that: As per the New York Times:

“The Brooklyn-born Basquiat went from graffiti artist to an art collector darling in the span of a mere seven years. He died at 27 of a drug overdose in 1988. Last year, Basquiat became the highest-grossing American artist at auction, generating $171.5 million from 80 works, according to Artprice, and his auction high has increased at least tenfold in the last 15 years”

Art is Deeply Personal

1. Art gives me life. Every morning, as the rays of the sun glint on Gustav Klimt’s “ The Kiss” hanging on my wall, it provides me inspiration to create my own masterpiece even if it is a silly poem.

2. This article is my 50th article since I began writing on Medium last year. While I don’t profess to have the writing genius of Edward P Jones, Michael Chabon or Junot Diaz, I can understand how the young Jean Michel Basquiat would have begun his journey as a a young painter. Again, I am not claiming that my writings are as great as Basquiat’s paintings, what I am saying is that like a young, anonymous artist who begins his journey- I write because I love to write and my art is my own reward.

My journey has been immensely rewarding. My readers have learned, given me genuine criticism and have started to love my style of writing. So, thank you to all of you who have helped me.

3. There is no topic besides Art that I would rather dedicate my 50th article to. I have been a painter for 4–5 years of my life dabbling in charcoal portraits and water colors. There is no achievement greater than your own creation.

4. Finally, Basquiat, like me, was an immigrant to the United States and he was very passionate about the themes I love to write about:

Basquiat’s art focused on “suggestive dichotomies”, such as wealth versus poverty, integration versus segregation, and inner versus outer experience. He appropriated poetry, drawing, and painting, and married text and image, abstraction, figuration, and historical information mixed with contemporary critique.

Overview of the Global Art Market

The global art market is anywhere between $45 billion (as per the latest TEFAF art market report) to $56 billion as per a report commissioned by UBS and Art Basel:

(TEFAF: The European Fine Art Fair Report, 2017)

Demand: Who is Buying?

As per the UBS report, there is a wide spectrum of buyers from private collectors to international museums:

Supply: Who is Selling & Where?

Art is sold through auction houses, online sources, art dealers or through exhibition at galleries. Below is the distribution of sales by geography:

As per the UBS report, there is a wide spectrum of suppliers from private collectors to galleries to every seller. For instance, art dealers source their art as follows:

What is happening to Prices?

Buyers are increasingly willing to pay higher prices for reputed artists.

As per artprice, the price paid for the works of new stars of the contemporary art market can easily double in 2–3 years.

In 2016, despite a nearly percent 19-percent drop by dollar-value of art and antiques sold at auction, prices on an aggregate basis have not fallen as far, and are, by contrast, down 8.6 percent. The report notes a drop in prices of Modern art sold at auction in the U.S. and Europe. Meanwhile contemporary art prices at auction in those region are about 4 percent higher (source:TEFAF report, 2017)

The MEI Moses Art Indices

The MEI Moses indices, acquired by Sotheby’s comprise a constantly updated database of 45,000 repeat sales of objects in eight collecting categories, approximately 4,000 of which change hands each year

As per Sotheby’s:

“Widely recognized as the preeminent measure of the state of the art market, the indices use repeat sales — the sale of the same object at different points in time — to track changes in value”

A Look at Global Auction Houses

This info graphic from statista captures the top 10 auction houses by revenue in 2016:

The emergence and strengths of Chinese players is very evident from the table above.

What is remarkable is that while Sotheby’s and Christies were founded in 1744 and 1766 in the U.K., Chinese Guardian was formed as recently as 1993.

Tips for Wealth Managers

As an alternative asset class, art has outperformed bonds, real estate but not gold or equities:

However, as per Bloomberg, the global art market has dropped by 11% in 2016. 2016 marks the second year of decline in the art market. The outlook for 2017 remains cautious at best with many debating that the Chinese market has already peaked.

As per artprice, the art market is a mature and liquid market delivering annual returns of 10–15% on works valued at $100,000 or above.

While there has been an increasing trend in prices and size of the global art market driven by China’s rise and the growth of High NetWorth (HNW) worldwide, art remains an illiquid investment.

This is because of the complexity in valuing a piece of art. No wonder then, art is frequently sold by auction houses to private collectors.

For private collectors like Yusaku Maezawa often have deeply personal reasons for buying and putting a price on the art. As per the New York Times, Yusaku bought the Basquiat to add to a museum in his hometown of Chiba, Japan.

Collectors insurance also becomes very critical to owning a collection of art.

While there is no doubt that as the ultra wealthy in Asia increase their influence, art will become a great way for them to leave a personal legacy.

Some collectors consider art a culmination or reminder of a successful life.

Indian Art

While China’s position as the driving force in the global art market is indisputable, art in India has shown tremendous growth. The beginnings of an art uptick were laid by Tyeb Mehta in 2002. His painting which sold for $1.25 million at Christies put in motion an unpredictability art boom that put Indian artists firmly on the international map.

Today, Vasudeo Gaitonde’s Untitled(1995) which sold for $3.7 million in 2014 is considered the most expensive painting sold by an Indian artist. Once again, it was sold by Christies at an art auction in Mumbai, India.

My favorite Indian artists are Tyeb Mahta, Lakshman Shreshta and Raja Ravi Verma. I also consider RK Laxman as a great and witty artist who captured the Indian political zeitgeist brilliantly.

A Historical Perspective

While art has an history as old as the Stone Age, the 20th century history consists of:

Post impressionism, Fauvism and Expressionism, Cubism/Futurism/Supremativism/Constructivism/De Stijl, Abstract/Pop Art and post modernism.

Beyond Business

Everybody lives and dies. Some transcend time by leaving a legacy and live on forever.

Art is about leaving a personal legacy. Whether by a short poem, a painting, a sculpture or a book, art is about leaving a personal imprint on civilization. It could even be a digital photograph shot on an iPhone that can freeze time. In fact, technology has accelerated the creation of art. It is relatively easy to create an Electronic Dance Music (EDM) using software to create synthetic sounds.

While I understand that not everyone is interested in Art, I recommend everyone should- not to earn a profit on investment but rather to celebrate humanity. World Art Day is celebrated on April 15 every year.

There is no age to start learning about art or actually pursuing art. You could even begin by watching the series Abstract on Netflix as a lighter way of appreciating the designs of Nike, graphic design or the architecture of Bjaarke Ingles.

In the words of Maya Angelou:

“Find a beautiful piece of art. If you fall in love with Van Gogh or Matisse or John Oliver Killens, or if you fall love with the music of Coltrane, the music of Aretha Franklin, or the music of Chopin — find some beautiful art and admire it, and realize that that was created by human beings just like you, no more human, no less.”

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Writer @ The Intersection of Finance, Tech & Humanity. Stories of a Global Language: “Money”. Contributor @ Startup Grind, HackerNoon, HBR. Twitter@akothari_mba