Money, Mega Dealers, and the Rise of Contemporary Art... What's next?
Michael Shnayerson’s book, "Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art", published in May 2019, is dedicated to Larry personally and to the era that he represents. The era of explosive price increases for Blue Chip Artwork in general, and the Contemporary Art in the first place. The era of the unprecedented boom in the Art market, which they created.
On the same day - 16th of May 2019 - NY Times and Bloomberg have published articles, half of which are about Larry. Sounds like an “ode” to his honor, doesn't it? Here are a couple of quotes from there:
-"Gagosian is the art world’s billion-dollar man - this is the generally accepted figure for his annual gross sales, outpacing all his competitors - and“ Boom ”sets about explaining how. When art becomes a commodity and an investment, premised on “the exciting if not always reliable notion of art as an alternative asset,” it is price, as much as merit, that begets price."
-"Gagosian, in turn, used Castelli's imprimatur to pioneer what Shnayerson describes as a new market dynamic: “The higher the prices, the more his wealthy clients vied to pay, hoping that the more they paid, the more valuable their new works would become"... He (Gagosian) began to make serious money. In 1988, the same year Basquiat died, Gagosian bought a town house on East 69th Street for $ 4 million and, soon after, an 11,000-square-foot beach house in Amagansett, N.Y., for an estimated $ 8 million."
He is being called the “most outstanding exchange broker of the Art Market” in the articles, - a mega-dealer whose dominance has swept the whole earth. A person who decides which museum, collection or rich client can get something “hot” and at what price. It’s Gagosian, along with a small number of mega-dealers, who has led the Art market for many years, ahead of auction houses.
Gagosian was not afraid to name prices 3-5 times higher than the previous rates of works, and his clients, super-rich people, paid. They believed that the more they pay for the artwork, the higher the market price of their acquisitions will be (i.e. their “capitalization").
Schneerson quotes artist Peter Doig, whose work “Rosedale” was sold for $ 28.8 M at Phillips in 2017: "Auction houses speak of masterpieces. But, there is no such thing as a modern masterpiece. It can’t be decided on your own time. So, it’s all marketing."
But it seems that this approach will no longer work. Art Basel 2019 was the “final call” for the old scheme of “constant price increases for Blue Chip Contemporary Art”.
“Boom” has become a “compulsory reading” for art investors who now know more about the schemes of the Art market. Many previously understood that Contemporary Art has become an upscale brand thanks to the money they paid for it. Just now, after the release of the book, it would be strange to pretend that this is not so.
It is significant in this regard that the record bid for Salvator Mundi by Da Vinci took place in the Contemporary Art session not among the rest of the works of the Old Masters. Why? Specialists of the auction house put it up for auction at that session in which a more significant number of UHNWI participated i.e. in the Contemporary Art.
So, there is no doubt that Blue Chip Artwork, or at least 90% of which is acquired for investment purposes, now is a kind of financial instrument for the richest. Low liquidity tool? Yes. But it does not require disclosure and, with proper organization of transactions, is not taxed.
But for how long can this go on? Millionaire dealers have already sold many works of their millionaire artists to their millionaire customers. What's next? Will the same millionaire investors buy the next work of the same millionaire artists even more expensive? For hundreds of millions, not for tens. Unlikely.
Will the same mega-dealers succeed in growing new top-level mega-artists, i.e. new stars of their own “Premier league”? Unlikely too, as it takes time.
Perhaps the first wave of the Art Boom has already reached its peak. The price for the works of mega-artists was being raised by mega-dealers for the previous thirty years. They have reached their maximum and can no longer be sold into single hands for a large price.
This means that there will be no explosive rise in the price of their works while maintaining the current situation on the market anymore. Despite all the talks about eternal and exalted Art, market players are forced to wonder if they can sell for a profit what they have bought at the peak price, given the commission of auction houses and dealers.
It seems that the era of mega-dealers working only with UHNWI is passing before our eyes. Meaning the age of “Mega-Artists”, where dealers grew like sports managers, closing the road to dozens of young talents, for the sake of artificial selection of “Super Stars” is coming to an end... Not everyone can play in the “Premier League”, right? For about three decades, the right to decide which “Best of the best” was in the hands of a small group of players, who still constitute Oligopoly in the global Art market.
Where will the market go? Will the new collectors, who are coming now, buy the works of mega-artists for tens of millions of dollars following the old scheme, re-buying them with profit in favor of UHNW-collectors, mega-leaders and the leading three auction houses? Unlikely. New collectors do not want to overpay.
The only possible way to buy works that have a multi-million dollar provenance is in parts, following Gagosian’s formula “price, as much as merit, that begets price”. Indeed, all these years our new collectors stood “behind the fence” of this bright Disneyland, without a “ticket” worth several million dollars to go inside. So who is the first to offer them this?
Larry famously “plowed the field”. It’s even strange that no one calls him openly “Larry Bulldozer” or something like that. Indeed, it was he and other mega-dealers who attracted the so-called “new collectors”, “online collectors” to the Art market. They were also often called “Millenials,” although this is not entirely true according to Artsy’s latest report. In the group conditionally distinguished now as “new collectors”, there are not only millennials but also other age groups up to and including 45 years.
In my view, they came to the Art Market not because there are many “Indigo Children” among them, who, suddenly, felt a love for the beautiful somehow stronger than previous generations. I think they came, attracted by numbers of Super-Sales, the news of which accompanied all their childhood and youth. For new collectors, the Art market is the tradable asset Market where Art assets are Assets right away. They finally want to get their cut, that could not take earlier.
As it often happens, the second - a more massive wave of consumers - wants what was previously available only to the first wave - VIP, HNWI, UHNWI... So, let them “tear into pieces the riches of Rome”, acquired a part of Blue Chip Artwork to their personal property!
Crypto-ID, Crypto-certificates, art-asset-backed securities tokens - all these are new terms, reflecting one thing - the OPPORTUNITY to OWN parts of Blue Chip Artwork and freely exchange them in the secondary market. Thanks to the increasing penetration of Blockchain and DLT technologies into FinTech and Art sphere, this is becoming possible right now.
The show must go on!