Artsy’s Anny Shaw has a funny piece stirring the pot on the issue of flipping. Ostensibly, the article is a follow-up to the attention Thaddaeus Ropac received in his Talking Galleries (above) presentation and discussion where he made a comment about blacklisting some buyers who were too quick to flip works. (The comments start around 42:00.) Somehow this got blown out of proportion into a call for a “new” blacklist. Ropac explains what his pressures are and admits that he doesn’t know the right answers.
Shaw responds by speaking to art advisor Todd Levin and dealer Ed Winkelman who both put the concept of flipping into a slightly different context. A select few artists with strong demand and highly controlled markets have seen their work perform extraordinarily well at auction recently. But the overall trend toward flipping new works has largely dried up.
A look at the upcoming auctions suggests the public market is moving toward ‘quality’ expressed in works by artists with lasting reputations. That doesn’t mean art collectors no longer flip. They’re just doing it privately. Which they have always done.
Here’s what Shaw got out of Winkelman and Levin:
“If you read the way that some collector-dealers work […] it does seem there is still a fair bit of what one could call ‘flipping’ happening privately,” says the New York dealer Ed Winkleman. […]
“The velocity and ferocity of flipping increased exponentially between 2010 and 2015 and created instability in the market, particularly for younger artists,” Levin says. “Many younger artists’ careers were severely damaged.” […]
“In some cases major collectors have enough power in the market so that galleries can’t afford to blacklist them—for instance, if a collector is a significant trustee at an important museum,” he says.
This is all fine and good. Winkleman points out that dealers are agents for the artists and must work in the best interests. It might take a dissertation to define what that means in terms of balancing a young artist’s financial and reputational/career interests, however. But there’s another layer to this that Shaw hints at by speaking to Stefan Simchowitz who points out that the so-called speculators are a gallery’s best customers.
What this raises is a matter that goes beyond Simchowitz. The ranks of collectors who buy and sell a great deal of art is one of the central transformations of the art market over the last 15 years. (The rest of this analysis is for AMMpro subscribers.)
These buyers cannot be easily pegged as good guys or bad. The art market is populated by an essential and influential group of early buyers who both assume the risk of a young artists career prospects and provide a multi-dimensional form of liquidity to the market.
In the first place, their cash is what sustains the gallery and the artist. All gallerists want to have a sold-out show. They need to pay the artist and cover their overhead. They also need to demonstrate the success of the artist and of the particular body of work featured in the show.
Interested collectors are more attracted to artists who appear to have found an audience. This is part of the social nature of art. Few buyers want work that is disdained by the market. If no one else snapped it up, why would the buyer want it? So early buyers play that role.
Many galleries will use those early buyers as a form of inventory. This is the second kind of liquidity that an early buyer will provide. The art dealer is a market maker. If they have sold a work to someone they know is happy to resell it for a profit within the first year or two, that helps the dealer out. He or she has a buyer; has some cash to pay the artist and the rent; but still has access to the painting should a buyer come along. Since the work has sold once, the new buyer who walks into the gallery may be more interested. The dealer makes a commission on the sale; the early buyer makes a profit; and the new buyer gets a ‘validated’ work.
The artist doesn’t see a fee from that sale but his or her overall market is improved. His or her dealer has also identified a new collector for the artist who might become another early buyer. The process is part of the way the art market functions.
We can see a version of this in the court case between Gagosian Gallery and Ronald Perelman over a Cy Twombly painting that was sold to the Mugrabi family. But the method isn’t confined to the multi-million dollar works. It actually works better, is more defensible and more necessary for the work of artists earlier in their career.
Dealers would never complain about this kind of flipping because it serves their interests as managers of their artists’ careers. But one can see how a dealer who engages in this kind of practice could easily lose control of the network. If a young artist’s market moves to fast, the collectors holding works for future resale may have too much incentive to sell to another collector-dealer or give into the auction house specialist pleading for the work or dangling a guarantee.
The point here is that conditions that allow for flipping are unavoidable with art. Whether the early buyer flips publicly or privately is far less important than that they have possession of the works in the first place. If dealers—or artists, for that matter—merely stockpiled their works waiting for demand to rise so they could maximize profits or distribute works directly to museums, they would have to wait a very long time indeed.
If you don’t believe that, look at the experience of Clyfford Still whose market is severely truncated and whose reputation has lagged because of the vast majority of his work remains unseen.
Art gains value through circulation, exhibition and social interaction. To enable these processes, dealers must expose their artists to the possibility of flipping that gets uncontrollable and becomes speculation.