UNDERSTANDING THE ART MARKET

hi i'm boriana and i'm phillip and you're watching art unplugged in 2014 this painting by mark rothko sold privately for 186 million dollars and this one by willem de kooning in 2015 sold for 300 million chances are that if you do not have a special interest in art you'd only vaguely know who these artists are or not at all it's only logical to conclude that artworks that sell for the highest prices are the best ones right but for works like these two many people would say that even a five-year-old can do better and this is how a feeling of resentment starts to grow often directed towards art and artists especially contemporary ones this video is about the art market and i have invited philip who understands economics and money much better than me to help me clarify what's going on there is a difference between why we like a certain piece of art and what makes it valuable in the market we may like an artwork because we enjoy looking at it and it makes us feel and think in certain ways it also reflects who we are and what we value while these things might play a part in what defines an artworks market value there are other more influential factors one of them is the fame and reputation of the artist anything touched by picasso's hand is valuable salvador dali's wife gava abused his fame by making him sound fakes and even empty sheets of paper and selling them a work of art may rise from obscurity to stardom only by being attributed to a famous artist this is the massacre of the innocence a fine painting which remained largely unnoticed when it was identified as a rubens however the value of the painting skyrocketed overnight although nothing had changed in the painting itself another factor is historical significance there are artworks that might not look like much but they're part of a new movement that changed the course of art history or mark a new period in an artist's career or are associated with historical events of the time this painting by renoir one of the impressionists is priced at 200 000 euros as a painting it's mediocre at best while this painting painted in the impressionist manner by the russian artist olga kuzmina in 2018 can be bought online for 650 euros only shipping included artistically it's much better than the renoir and it's even bigger in size another factor that has nothing to do with what the artwork looks like is provenance that is who has owned it in the past for example this painting by mark rothko was bought initially for ten thousand dollars by the rockefeller family in 2007 it sold for 72. 8 million dollars at auction much higher than the normal prices for this artist at the time just because of the rockefeller name and it's known as the rockefeller rothko providence is so important that many art dealers will not sell certain artworks to just anyone ready to pay the price finally during an auction prices can go through the roof just because two people with money are obsessed with the idea of winning as valuable objects artworks have always been a form of investment for their owners but from the 1960s the idea of investing in art like in any other commodity took hold the phenomenon of the multi-billion dollar art market of today started taking shape after the opening of russia and china new oligarchs and lich businessmen entered the game to be followed by oil shakes hedge fund billionaires and silicon valley entrepreneurs today there are 2 189 billionaires in the world with a joint net worth of 10. 2 trillion us dollars arsene news keeps a list of the top 200 art investors which is updated each year these people belong to the super rich many of them owning as much as one billion dollars worth of art each the total value of our sole adoption each year according to our net news is around 14 billion us dollars and it's estimated that the same value is sold privately add in art gallery sales on the growing segment of online sales and you reach an estimated total average market value of around 64 billion dollars a year according to syllabus whichever way you look at it that is a massive market compared to the other commodity markets the art market is largely opaque and unregulated which makes it a fertile ground for manipulation where there is big money and ecosystem forms of interconnected institutions helping each other to make more money with their help art has become not just a form of investment but an investment tool so what are the elements of the art market ecosystem collectors and investors these are wealthy individuals who are mass collections of valuable artworks in some cases they have very limited interest in the art itself some own large enough shares of the work of certain artists to be able to control their prices in the commodities market there are laws against such practices but not in the art market there is another kind of patron which we call the contemporary art incubator these are rich people who commission less well-known artists to produce to work which they sell for profit the man who said this trend was the advertising magnate charles sachi in the mid-90s he pan-picked a group of art school graduates to work for him with the appropriate pr support sachi created the movement known as young british artists which was arguably the last big thing in art in the last 25 years other super rich investors followed suit and today the business of grooming superstars for sale is thriving with everyone looking out for the next big thing the artist businessman by this we mean people whose artistic work serves the objective of beating the art market at its own game they're not many and they're not heroes the first one was andy warhol who built himself as a brand and started selling mass-produced artworks of little artistic value for bombastic prices the most highly rated one is jeff coons whose work inflatable rabbit is the most expensive artwork ever sold by a living artist and the most outrageous is damian hurst who was one of sarchi's prodigies all three have one thing in common they are astute businessmen who built themselves as brands first and then set up production facilities staffed by assistants to churn out artwork for sale at hard prices the business model is fine the merits of the art often questionable you would think that this contradicts one of the fundamental rules of the free market the higher the supply the lower the price right but here's the catch in a market manipulated to inflate the prices the more war holes that are in circulation the more opportunities there are for selling them at higher prices in this way increasing the value of all of the war holes that are out there so much the better if you're still alive and churning dot paintings or inflatable doggies that is why in the multi-million dollar segment there is a tendency to see the names of the same men again and again women forget about it presently the best-selling female artist is john mitchell and she sold less than half the value of number 25 on the men's list basically the role of galleries is to develop and protect the market of the artists they represent a gallery can make an artist's career but it can break it too to meet the needs of their clients galleries can put pressure on artists to produce more of what sells and this can kill an artist creatively there are a handful of big international galleries who dominate the multi-billion dollar prize segment who have been known to engage in darker practices a bbc documentary revealed a few years ago how certain galleries bid in auction for their own artists in order to inflate the prices or make sure that works are sold if you want to find out more about this i have put a link in the description below in 2007 damien hirst exhibited the most expensive artwork ever created a human skull encrusted with real diamonds priced at a hundred million dollars the ultimate trophy for someone obscenely rich and though i appreciate the irony which is the only idea behind this work to me it is overshadowed by the cynicism of first's intention months passed and there were no buyers then hearst gallery announced that the work had been sold for its asking price to a consortium and investors as it turned out the artist and his gallery still owned a controlling interest in this artwork in the shares market it's illegal to conceal the failure of a sale but not in the art market so all is good in 2009 damian hurst made an unprecedented move by auctioning many of his works independently by passing his own dealers and what did they do swallowed their pride went and bit like good boys why because if hers work remained unsold the prices of their own stocks of hearsts would lose their value in the past auction houses were places where art dealers bought out cheaply to sell to their clients at a profit nowadays establishments like sotheby's have turned into art market dynamos offering private sale opportunities advisory and financing services critics see certain practices in that area as strategies to manipulate the markets in order to maintain high price levels in 1987 this painting by van gaal sold adoption for 53.

9 million dollars the buyer could have fought a bid this high because sotheby's lent him half the price this caused an uproar which led to an inquiry into the art market by the new york state assembly it had to do with the sale of the van gogh painting the irises in which there was an australian named alan bond who had about 25 million dollars a japanese gentleman who had about 50 million which meant that the painting should have sold for about 26 million sotheby's decided to lend mr bond uh another 26 million and the net result of that was a dramatic bubble in the cost and prices for french impressionism the picture that is forming is of a monstrous incestuous family having a ball shuffling billions in a cozy unregulated environment you may ask so what a bunch of super-rich people scamming other super-rich people how does it affect all the rest of us well it affects us in two ways first more and more good art board for investment ends up buried in high security vaults and we may never see it again second a good deal of the billions shifted by the art market come from taxpayers money yes here is how very rich collectors often donate artwork to public institutions or set up their own private museums looks like philanthropy at first glance but in many countries like the us for example when collectors do this they get significant tax breaks the money they save is compensated by the taxpayers in the u. s you can donate the equivalent of up to 30 percent of your gross income annually so if you make a hundred million dollars you can donate 30 reducing your taxable income to 70.