Today brings two very different stories that, when combined, suggest the Contemporary art market will slow down for reasons outside of the economy. Bloomberg discusses guarantees in a story about Sotheby’s raising cash. Josh Baer writes a piece for The Art Newspaper that discusses the end of a certain kind of career-making speculation in lesser-known artists.
Guarantees have been used at both the top and emerging ends of the art market. But their biggest effect is at the top. As part of a defensive measure announced much earlier in the year, Sotheby’s has been reducing its guarantees and shifting them to third party deals. Here’s Bloomberg with the details:
The largest publicly traded auction house said it reduced guarantees to $306.1 million on Oct. 10 from $458.5 million a year ago. Sotheby’s didn’t put up all the money itself. It increased guarantees from undisclosed third parties by almost 10-fold to $63.3 million this month from $6.8 million a year ago, according to filings.
Oddly, fewer guarantees seem to mean less profitability for the auction houses. Sotheby’s recent quarterly conference calls have discussed the retreat from guarantees has had a negative impact on profit. That’s because when the auction houses get the guarantees right on the biggest lots, they generate more revenue than a simple commission. But the risk of getting them wrong has been enough to put Sotheby’s on the defensive.
At the name-making end of the market, guarantees that supported speculation have also been useful but, as Baer says in his essay for The Art Newspaper, it has finally run its course: “When several guaranteed Rudolf Stingel works failed to sell at auction last winter, it signalled the end of a certain kind of buying of art. [ . . .] the auction houses seem awake to this change and the evening sales have, and will have, fewer and fewer hot young artists, and especially few guaranteed deals in the $1m-and-under range for artists like Anselm Reyle.”
Primary dealers were never happy about fast-flipping. “Traditionally that was avoided by selecting buyers who never sold—but now galleries have a new tactic,” Baer says. “If you raise the primary prices to the level of the secondary market there is no room for speculation. So, game over.”
All of which is healthy and necessary. But it does raise one question about the changes in the art business over the last few years. The growth of the secondary market–through dealers and auction houses–and the importance of art fairs has made the art market much more visible and accommodating to a larger number of collectors. The kind of visibility created by heated auction sales may have been inherently unstable for the artist and dealer but it did allow the market to communicate to a larger group in a more efficient manner than the slow accumulation of prestige.
To steal an adjective from Damien Hirst, the frenzy of the market is more “democratic” than the gate-keeping function of the art world elite. And democracy has been central to the growth of the art market, even if it is only one element of the creation of cultural value.
Baer seems to celebrate a return of what one might want to call adult supervision. “What is the silver lining in all this cloudiness?’ he asks. “Perhaps a return to the importance of museums, critics and alternative spaces for validation and the introduction of new art.” Or, perhaps he’s saying that the art market’s best defense against the coming economic retreat is a return to an art world based on an economy of sense (more accurately sensibility) over one of mere dollars.