James Tarmy digs into Magnus Resch’s startling look at the economics of running an art gallery. The result isn’t pretty. After reading the book, Tarmy says, “It turns out that the upbeat world of biennials and art fairs and parties is in fact a cutthroat, antiquated, deeply flawed industry hampered by an obsession with keeping up appearances and an often misguided aversion to making money.”

Here are some more of the startling things Tarmy discovered in Rensch’s book:

• Fifty-five percent of the galleries in Resch’s survey stated that their revenue was less than $200,000 per year; 30 percent of the respondents actually lost money; and the average profit margin of galleries surveyed was just 6.5 percent.

• In the U.S. and Germany, the physical cost of an exhibition space was listed as galleries’ greatest expense (in the U.K. it was second), and Resch writes that “the almost unanimous, and unquestioned, conviction that central premises in a major city are essential simply cannot be justified with an economic rationale.” In other words, collectors will go wherever the art is, and everyone else—the inevitable crowds at openings, the passersby who pop in to see whatever’s on view—has no bearing on the gallery’s bottom line.

• Galleries generally split the sale of a work 50/50 with the artist. Resch argues that—given that galleries often have to cover marketing, production, shipping, and insurance costs—it should be closer to 70/30. Cue artist outrage.

Why Do So Many Art Galleries Lose Money? (Bloomberg Business)