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Summer reading: The $12 Million Stuffed Shark

Saturday June 7, 2008 | 14:10 by András Szántó in Brooklyn | permalink

Shark_Thompson.jpgA side benefit of the boom has been a stream of new books on the business of art. Given the lack of independently verifiable data, especially about the gallery trade, these books usually promise more than they can deliver. Don Thompson’s The $12 Million Stuffed Shark: The Curious Economics of Art and Auction Houses (until recently available only in the U.K.) is no exception. But it qualifies as recommended reading for anyone looking for a quick overview of how the art world works.

Thompson, an economist and branding expert, undertook a yearlong “journey of discovery” for this entertaining study of the “economics and psychology of art, dealers, and auctions.” By his description, the book “explores money, lust and self aggrandizement of possession, all important elements on the world of contemporary art.” He admits “much of the anecdotal material and some of the numbers in the book are single-source stories and facts,” which are often “embellished in the retelling” and “accepted as fact because they are repeated as fact.” The candor is refreshing. And to be sure, Thompson has a keen eye for the telling statistic.

With these provisos out of the way, and no endorsement of the accuracy of what follows, here is a glossary of facts and figures from the book (all offered by the author without the benefit of direct references or footnotes):
• “Eight of ten works purchased directly from an artist and half the works purchased at auction will never again resell at their purchase price.”
• “For a branded dealer in a strong market, there is little financial risk in opening additional galleries. When paintings sell for $50,000-100,000, three sold-out shows pay for leasing and renovating the new gallery.”
• “Conventional wisdom in the art world is that four out of five new contemporary art galleries will fail within five years. Ten percent of galleries established for more than five years also close each year.”
• “Only one artist in 200 – and that is 200 established artists – will reach a point where her work is ever offered at Christie’s or Sotheby’s auctions.”
• “The past twenty-five years have seen a hundred new museums around the world, each intent on acquiring, on average, 2,000 works of art.”
• “[T]he world of contemporary art is not that big. There are about 10,000 museums, art institutions and public collections worldwide, 1,500 auction houses and about 250 annual art fairs and shows. There are 17,000 commercial galleries worldwide, 70 percent of which are in North America and Western Europe. Average turnover per gallery is about $650,000, implying gross sales for the primary market and part of the secondary market of about $11 billion – of which $7 billion could be considered contemporary art.”
• “There are approximately 40,000 artists resident in London, and about the same number in New York. Of the total 80,000, seventy-five are superstar artists with a seven-figure income”
• “In 2006, 810 works of art – all art, not just contemporary art – were auctioned for more than $1 million; of these 801 were sold at one or other of the two [main] auction houses.”
• The $135 million paid by Ron Lauder for Klimt’s “Portrait of Adele Bloch Bauer I” equals “the price of a fully equipped Boeing 787 Dreamliner, an aircraft capable of holding 300 passengers.”
• “The number of wealthy collectors is probably twenty times larger today than it was before the 1990 crash.”
• “Fewer than half of the modern and contemporary artists listed in a Christie’s or a Sotheby’s modern and contemporary auction catalogue twenty-five years ago are still offered at any major auction.”

I would be curious to know if all of these figures sound realistic to Salon members.

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7 Responses

  1. 1. Greg Allen Says:

    That $135 million figure for a Dreamliner VIP seemed alarmingly low. Base price without custom interior buildout was $153 million in 2007, but I was actually thinking of the Airbus A380 Flying Palace, which is $319 million, plus another $176 million for the interior [if you're Prince Al-Waleed].


  2. 2. Greg Allen Says:

    While we’re [or I, anyway] on the subject of art and planes, I laughed at the Basel travel habits on display in the NYT’s article on Hans Ulrich’s shoe party:

    “Across from her were the super-collectors Don and Mera Rubell, who had flown in from Miami (’economy class!’ they assured).”

    vs.

    Tiqui Atencio Demirdjian’s “‘All the collectors spent the weekend going to openings in London, and then on Monday everyone jumped on a NetJets plane in time for White Cube’s dinner for Damián Ortega at the Kunsthalle restaurant.’”

    One statistic that seemed to be missing from media accounts of Basel this year was NetJets traffic, the growth of which had previously been provided or quoted as a [conveniently sponsor-friendly] economic indicator of an art fair’s currency, so to speak.


  3. 3. Steven Kaplan Says:

    “Conventional wisdom in the art world is that four out of five new contemporary art galleries will fail within five years.” Call me unconventional, but despite nagging recession fears, an 80% attrition rate seems kind of high. Especially here in New York, which might have the highest concentration of art galleries in the world, and therefore be a super competitive milieu. Or is there safety in numbers? But thanks for the tip. I’ll be sure to visit those young galleries soon, before most fold their tents and skulk away.

    “Ten percent of galleries established for more than five years also close each year.” So if the 300-odd galleries currently in Chelsea are representative, then thirty of them should close over the next calendar year. Not such a great loss. Can I pick the thirty?

    ““For a branded dealer in a strong market…” Branded? As in The Scarlet Letter, but with “A” for avarice (rather than adultery)?

    “Fewer than half of the modern and contemporary artists listed in a Christie’s or a Sotheby’s modern and contemporary auction catalogue twenty-five years ago are still offered at any major auction.” And here I thought it was “Vita Brevis, Ars Longa”.


  4. 4. Clemens Bomsdorf Says:

    Firstly I have to admit not having read Thompson’s book, but it is on my virtual list for the summer (positioned just after Freaconomics, but as every summer I am afraid some will stay on the list even after august and I do not mean for re-reading). Secondly having a background as an economist I do not want to refuse András’ invitation commenting the figures he extracted from Thompson`s book.
    As András states there is a lack of verifiable data. Without that much can only be speculation. But speculating often is exactly what dealers have to do when setting a price for a work. So, why not speculate a bit as well?
    • “Eight of ten works purchased directly from an artist and half the works purchased at auction will never again resell at their purchase price.” means nothing else than that two out of ten works (20 percent) reach at least their first price again and in auctions even every second does. Nothing is said about inflation so let`s assume it is meant in real terms. But essential information is missing: is the statistic only about works which are in fact resold or does it also include those which the first buyer tries to resell, but does not succeed (not even to a price lower than his purchase price). In case also the works which are offered but not sold are included, a quota of twenty percent seems very high. Even in case it is only looked at those works which are sold again, in my view that quota is astonishingly high. However the figure would say even more about the art market if information would be available about how many years later the works are sold for the second time and how big the price difference is. In that case it would be easy to calculate the monetary annual yield the investment in the works led to.
    • “For a branded dealer in a strong market, there is little financial risk in opening additional galleries. When paintings sell for $50,000-100,000, three sold-out shows pay for leasing and renovating the new gallery.” Again Thompson would have helped us providing some more data. We can all imagine that the gallery keeps 50 % off the turn over. But how many works are in the show (and hence sold) and how high are the costs? But it sounds feasible that a well established dealer in a strong market takes little risk opening a second gallery. But what about a third or a fourth one? If the same also holds after having opened the second one, the question is why do we not see more strong dealers opening a whole chain?
    • “Conventional wisdom in the art world is that four out of five new contemporary art galleries will fail within five years. Ten percent of galleries established for more than five years also close each year.” Well the first at least surely does not hold for the market I am mostly looking at - Scandinavia. A bunch of new galleries have opened mainly in Copenhagen, but also Stockholm and more than the cited eighty percent survived the first years I guess (sorry, for not being better than Thompson and not having a statistic by hand). I would guess that the quota is also better in Berlin. I would very much like to see a graph showing the development of numbers of galleries in a city based on these two statements- Anybody who wants to create that? To make it easy one could assume ten new galleries every year and that as many fail in the first as in the other four years (of the five year period which most do not survive)…
    • “Only one artist in 200 – and that is 200 established artists – will reach a point where her work is ever offered at Christie’s or Sotheby’s auctions.”
    I would even believe the quota is lower. Again, a very vague statement as “established artist” is not defined.
    • “The past twenty-five years have seen a hundred new museums around the world, each intent on acquiring, on average, 2,000 works of art.” That would be only four a year and therefore sounds quite underestimated. How many of those according to Thompson do not survive their first five years….?
    • “[T]he world of contemporary art is not that big. There are about 10,000 museums, art institutions and public collections worldwide, 1,500 auction houses and about 250 annual art fairs and shows. There are 17,000 commercial galleries worldwide, 70 percent of which are in North America and Western Europe. Average turnover per gallery is about $650,000, implying gross sales for the primary market and part of the secondary market of about $11 billion – of which $7 billion could be considered contemporary art.” Assuming that an artist needs an annual turnover of 100 000 USD to feed himself and his dealer that would make 110 000 artists.
    • “There are approximately 40,000 artists resident in London, and about the same number in New York. Of the total 80,000, seventy-five are superstar artists with a seven-figure income” If my above calculation holds the rest of the world would not have many artists.(Hence, I probable did a too easy job and am wrong.. or Thompson is or even both of us..)
    • “In 2006, 810 works of art – all art, not just contemporary art – were auctioned for more than $1 million; of these 801 were sold at one or other of the two [main] auction houses.” Strongly believe in the share of the main auction houses, but at least this fact should relatively easy be proven.
    • The $135 million paid by Ron Lauder for Klimt’s “Portrait of Adele Bloch Bauer I” equals “the price of a fully equipped Boeing 787 Dreamliner, an aircraft capable of holding 300 passengers.” I did not know huge jets were so cheap.
    • “The number of wealthy collectors is probably twenty times larger today than it was before the 1990 crash.” Surely a good guess, already for only one reason: probable there were almost no wealthy collectors in China and Russia at that time.
    • “Fewer than half of the modern and contemporary artists listed in a Christie’s or a Sotheby’s modern and contemporary auction catalogue twenty-five years ago are still offered at any major auction.” Sounds like a good quota anyhow.

    Well whatever one might think about Thompson’s ideas, at least one can think about them.
    However, for an economist working as an academic Thompson astonishingly often is very vague. He fails to provide essential information (unless he does it somewhere else in his book, above are only quotes). Terms like wealthy collector, established artist etc. need to be defined. And even than due to a lack of data it would be hard to prove or disprove him. Hence, he is arguing more like a journalist than a serious economist. One question remains open: what is decisive for the price of a work ? Off course demand and supply, but which factors are behind them?
    And not to forget: after all, (almost) nobody is in it only for the money. We all know that most artists and dealers (and maybe also art journalists) would be better of choosing another job. Better off financially of course. But there seems to be something with art that goes beyond the return that can be calculated in monetary terms. But maybe somebody is opposed to this hypothesis?


  5. 5. Ian Charles Stewart Says:

    The statistics are fun (though Clemens is right to qualify general statements and question unsupported detail) and the title is appropriately cynical, but what does it say about the art world as a whole? That few people make any money at it? That most are in it for the passion or the fun? That occasionally a showman like Hirst makes a fortune with flair, talent and a little cheek? So what else is new? I too have the book on my summer reading list and will look forward to the anecdotes and gossip. But it doesn’t sound like the book I really want to read about the Art world.

    That book would take a look at the chutzpah and see where it crosses the line into misrepresentation. It would take a detailed look at the evolution of a successful artist’s value and report all transactions and deals along the way. Real investigative journalism into the top end of the Art world is overdue. At the prices people are now being asked to pay, a little clarity and transparency would be more than welcome.


  6. 6. The Transom Says:

    From Franklin Boyd

    The call for more transparency to the figures, diligent research and well defined terminology is well illustrated by comparing some of Thompson’s figures to those found in The Art Economy, a recent book by Clare McAndrew (another economist). According to McAndrew, the “global art economy amounted to over 50 billion euros in total sales in 2006″ – which is only 500% higher than the figure given by Thompson. Obviously there is going to be a margin for error when so many assumptions must be made, but surely we can get closer than +/- 500%. (And of course there are several other significant discrepancies between figures cited by the two.)


  7. 7. Steven Kaplan Says:

    Addendum: Should galleries fold, it is not just a function of the art market, but can also be due to changing real estate concerns. As Chelsea and other neighborhoods throughout the world with large concentrations of art galleries become trendier and potentially more valuable, they can attract larger investors, to the point where many dealers will be unable to pay the tariff. A recent item in Artnet indicates that three contiguous buildings in Chelsea have just been purchased by a large multinational firm, and that all galleries renting space in 511, 521 and 541 West 25th Street will have to decide whether to purchase their spaces once their leases expire — at a reported $1000 per square foot! The same multinational also purchased the vacant lot under the High Line just east of Bortolami. Details can be found here.


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