Market Monday: Economy Class

This week, packing the fuselage with art economics lessons from the macro to the micro... 

Two years after contractors began bidding on the Guggenheim Abu Dhabi, Emirati officials announced this week that construction on the headline-making museum project has been delayed indefinitely. The halt comes as part of a larger austerity initiative triggered by the ongoing death-spiral of crude oil prices, which reached $30 per barrel in January after peaking at $125 in 2012. Other luxury and cultural attractions on the city's ambitious Saadiyat Island development, including the Louvre Abu Dhabi, will continue––but only by virtue of being too far along to order a "go-slow," according to one high-ranking source. Just like the commencement of Abu Dhabi's brand-name museum binge in the mid-aughts, the Gulf Guggenheim's banishment to purgatory in 2016 serves as another example of the art market mirroring back the wider economy. And whether we're considering spending patterns in emerging markets, the consolidation of resources at the high end, or so many other recent themes in this particular industry, one of the most vital takeaways is that they're often only effects of broader socioeconomic trends. [Bloomberg]

Brazilian arts patron Luiz Augusto Teixera de Freitas gave a thoughtful interview about his evolution as a collector, particularly vis-à-vis his efforts to counteract the hyper-commoditization of contemporary art this century. To support de Freitas's lament of the current climate, interviewer Stefano Pirovano includes the following comment from recent market darling and alphabet arsonist Wade Guyton: "Art and art market are precisely two separate matters, and artists should start saying no." Here's the problem with both de Freitas and Guyton's stance, though: Given ever-worsening income inequality worldwide, as well as the resultant starvation of the art industry's midlevel, most artists now see hyper-commoditization as the only way to build a sustainable career out of their passion. They recognize that, aside from aligning them with a disastrous Nancy Reagan policy, just saying "no" likely means accepting a life of constant financial struggle, if not outright poverty. So as much as I, like de Freitas, would love to see creators in all fields and all age groups continually pushing the boundaries, I think we also have to acknowledge that so many of them try to please the market because, especially in the US, the alternative looks as bleak as Christmas Eve on Skid Row. And until or unless collectors, institutions, and entrepreneurs radically rethink traditional patronage models, artists' options––and thus their incentives––will keep pushing them away from innovation and toward Koons Incorporated. [Conceptual Fine Arts]

In a move guaranteed to get MBA fists a-pumping, Phillips, the auction sector's long-spinning third wheel, raised the price thresholds at which its various buyers' premium rates descend, meaning more revenue for the same amount of effort. Effective last Monday, winning bidders at the house are now congratulated with surcharges of 25 percent for hammer prices up to and including $200,00 (previous limit: $100,00), 20 percent for hammer prices up to and including $3M (previous limit: $2M), and 12 percent for hammer prices thereafter. Not coincidentally, Phillips' new fee structure exactly matches that of Sotheby's. Which is doubly savvy in an art market where high cost is viewed, however perversely, as an indicator of high quality and high prestige. Through its freshly elevated premiums, Phillips isn't just maximizing its revenue. It's also strengthening the perception that its sales and services are just as valuable as those offered by its next-nearest rival––an especially wise strategy for a company in the midst of a major expansion effort. With its two closest competitors now charging the same higher rates, the next question becomes how long it will take for Christie's to hike its own buyers' premiums, partially to prevent itself from looking like a bargain-basement option in comparison. [artnet News]

To offer a perspective from both the buy and sell sides of the auction sector, Robin Pogrebin spent part of last gigaweek with collector and dealer Adam Lindemann, the founder of Venus Over Manhattan/Los Angeles. Among other insights into the thinking of high-end art-industry players, the piece includes a tossed-off quote that, to me, reveals the entire foundation of the current market. In response to Sotheby's $490,000 sale of Elaine Sturtevant’s "Warhol Marilyn"––which Pogrebin describes as a "close but inexact version" of Warhol's painting of the same subject––Lindemann calls the work "a cheap way to buy something you can’t afford." You know what else is a cheap way to buy an artwork you can't afford? A poster. Or a book. A JPEG is actually free! But the art market is not about aesthetics. It's about the mythology of the creator, the cult of the original work, and––particularly in today's climate––the brand equity of select artists and the galleries that represent them. In other words, content is cheap. Capital-A "Art" is expensive. Act accordingly. [The New York Times]

And finally, a dramatization of both the "content vs. Art" clash and the insanely thin line separating the two categories. After a judge dismissed their respective lawsuits against one another last week, rising Ghanaian artist Ibrahim Mahama and international dealer tag-team Stefan Simchowitz and Jonathan Ellis King settled their nearly nine month-long legal cage match. Not surprisingly, terms of the settlement remain sealed. Since full details on the triggering events and the two parties' claims about them are so labyrinthine that an actual minotaur may be lurking somewhere inside, here's my best summary: The litigation started flying when Mahama publicly disavowed 309 paintings/assemblages that he had originally sold to Simco-King as four (of a total six) large "lots"... but which the dealers subsequently chopped up, re-stretched, and began reselling at $16,700 per piece once Mahama signed 294 of the smaller units in Dublin. After having second thoughts about splitting his babies, Mahama later announced to the world that, signed or unsigned, the 309 pieces were NOT, in fact, his authentic artworks but rather, in the words of Simco-King's complaint, "simply jute coal sacks mounted to wooden frames, which impacts"––see: utterly destroys––"their commercial value." And that magic trick illustrates the fundamental absurdity of treating contemporary art as an investment vehicle. In one simple statement, the creator took these "assets"––ostensibly worth thousands of dollars each––and rendered them worthless to the market. So the next time you hear a silver-tongued broker explaining the wisdom of adding living artists' works to your portfolio, ask him how he'd feel about investing in Facebook if Mark Zuckerberg could suddenly "de-authenticate" a few thousand shares any time Goldman Sachs pissed him off : ) [The Art Newspaper]

That's all for this edition. Til next time, remember: No matter how uncomfortable your current seat may be, one in the air still equals two on the ground.