How Big Is the Art Market?

Paddy at asked a fairly straight-forward question on her site the other day: “Does anyone know how much money the 2008 art market pulled in? A few AFC readers have asked us this question recently, and while we wonder how accurate any number answering such a query might be, we defer to the experts on this matter.”

Screen shot 2009-10-01 at 10.58.50 AMThere’s a long answer to this question and a short answer. The short one is that the best guess at the size of the art market in 2008 would be $40 billion. In 2007, the peak year in art market activity we’ve seen estimates as high as $50 billion.

Just to give you a sense of the size of that number, think of a cool new fast growing industry that seems to be everywhere all the time. I pick internet advertising. Huge, right? Well, the internet advertising industry was about $30 billion in the last 12 months. That’s the combined revenues of Google and Yahoo. So at it’s peak, the art market was bigger than the internet. Cool, huh?

Okay. Now that we’ve gotten that out of our systems, let’s talk thrugh what these numbers really mean because Paddy’s caveat about accuracy is a good one. After all, no one records all of the hundreds of thousands of art market transactions that take place. Galleries and private dealers don’t release their figures; and they certainly don’t share the prices they sell art works for. The art world is one big opaque mystery.

What we do know is the annual turnover of goods at the major auction houses. made that nifty little chart above representing the last decade of auction sales around the world.

A few years ago when we were trying to answer this very same question for someone else, a smart guy at Artnet, which also gathers auction data, gave us this rule of thumb: Auction sales represent 20-25% of all sales.

That means you can take the annual auction turnover and multiply it–by 4 if you’re being somewhat aggressive or 5 if you’re being aggressive–to come up with the overall size of the art market. (There’s obviously a lot of room for error in this method.)

If you do the simple math, the solution is that for 2008 we’d estimate $32-$40b vs. $36-$45b in 2007, the peak of the art market.

That’s great but we’re still not done. Both 2007 and 2008 were abnormal years for the art market. The problem with using 2008 is the very odd nature of that year. One half of it was record breaking, the other half was a huge drop.

Since then, we’ve seen sales activity slow even more. That lends credence to the idea that you pay for art with last year’s money. Many buyers were still flush in the 12 months following last Summer when financial markets really started to contract. Now that buyers are paying with money acquired since the Lehman failure, we see much lower auction volumes. Obviously, we’re also seeing much less offered.

So where does that leave us? Artprice conveniently breaks their numbers down into first half and second half numbers. For 2009, we know that Christie’s and Sotheby’s sold $2.5 billion worth of art in the first half of the year. That’s somewhere in between 2005 and 2006 when the size of the art market could be around $16-20 billion or $25-32 billion.

Anecdotally, we see prices at levels closer to 2004. If we revert to that year’s auction volume, the worldwide art market is $14-$17.5b. And even that year was quite strong compared to either the 2001-2003 art recession or even 1998 when the current art boom began. So the long answer is to Paddy’s question–which we take to be “what’s a healthy level for the art market, especially in these difficult times?”–is probably around $15 billion worldwide.