Creating value in the art market

Since the 1990s conceptual, relational and time-based art practises have grown considerably, also in the art market. Director of VIP Art Fair and the author of Art of the Deal: Contemporary Art in a Global Financial Market, Noah Horowitz, demystifies the art deal and explains what you really buy when you purchase a work of contemporary art.

Noah Horowitz (1979) is the Director of the world’s first online art fair, the VIP Art Fair.1 The fair which opened on 22nd January this year was founded by James Cohan and his wife Jane. Cohan, who runs a gallery in New York City, joined forces with Jonas Almgren, a Swedish internet entrepreneur in Silicon Valley who is also an art collector.

It all started out as an informal conversation about how Cohan was using internet to promote his gallery online. Slowly and surely this conversation evolved into the idea of using the internet as a medium to create an online fair.

– Cohan was very much aware of the fact that several of the other fairs were historically founded by dealers. Mathew Marks and a couple of other galleries started the Armory in the mid-90’s; Hein Stünke and Rudolf Zwirner started Art Cologne in the 60’s so fairs have always been started by dealers for dealers essentially. It’s a way to meet and collaborate to create a kind of context with outlets for creating events, Horowitz explains.

The VIP system
As the fair developed into a business venture and they were ready to approach galleries, Horowitz was contacted by Cohan about being the fair’s director.

– My principle job is to work with the galleries, and to figure out who we want to work with, and then find out how best to approach them and ultimately how to position them within the fair, he informs.

The way that the fair is run is similar to a physical art fair.

– The galleries present a certain amount of work publicly, and hold a certain amount privately. The largest booth size that we offer is a hundred art works in total, twenty of those are public and eighty are held in the backroom.

The participating galleries can rotate their works as they wish and the general public can log on for free, and view artworks shown in public. The visitors can also take different kinds of tours, and create favourite lists which they can share with their friends.

– What the general public doesn’t see are the prices. To get this information you either have to pay the entrance fee or get an invitation from a gallery or an art institution. The public cannot make use of the interactive messaging system that we have developed. The idea is that if you want to speak with a dealer you have to be accepted, or you have to pay a small fee. The idea is to make sure that the person coming to the dealer has been accepted.

Meeting clients
He emphasizes that they see the fair as a complementary vehicle and not in any way as competitive with the existing art fairs;

– Seeing, viewing and purchasing potential works online will never replace the experience of seeing work in the flesh and coming to an event like Art Basel and meeting people and interacting with people on site. That being said, we know as professionals in the business how many works are presold and resold by jpeg, by email. There’s an educated group of collectors and they are growing by the minute, collectors that are further and further and further away from each other, and I think one of the unspoken truths of the trade is that dealers sell more works unseen nowadays than they like to admit.

With VIP Art Fair they are trying to create a more formalized and intelligent structure for doing the «work» that is already done online.

– We see it both as a sales opportunity for dealers and also a relationship-building tool. For the price of a few advertisements you can have this presence online with an exclusive group of galleries. This might be a talking point the next time a collector comes to Oslo, New York or Berlin to visit your gallery, or when you are at Basel or in Miami. The collectors have seen some of the works that you’re presenting and have a conversation point. Perhaps they also have read about the artist online and done some further research. Now they want to sit down with you in person and see the work in the flesh. So it’s about balancing those two things.

Horowitz is content with the sales numbers of the first fair. Several galleries sold works, and the prices ranged from a few thousand dollars to high six figures.

– Some of them were existing clients and some of them where totally new clients, and that’s one of the really interesting things about this, it’s a relatively cost effective way for dealers to meet new clients in an increasingly globalized world. That’s sort of what it’s all about.

Back and forth
Horowitz, who is a fairly young art fair director, has extensive knowledge of both art history and economics. Born in New Jersey in 1979 he started studying economics at the University of Virginia, two hours west of Washington DC, in 1998, and finished his bachelor in 2002.

– I studied economics there formally, and I really was going in a more finance kind of banking trajectory, but I was in an interesting programme there that allowed me to ultimately also take a more interdisciplinary second major.

By that time he had taken a lot of classes in art history as well, and got interested in what he calls «this back and forth between art and finance».

– For my senior thesis I looked at the auction market over the last half century and got interested in how economists approach the art market. And I really tried to put together a very introductory survey of the literature on how art has performed as a financial asset.

That thesis sparked an interest in maybe not going into the world of finance, he explains. And it left him wanting to do something with the art outside the economic side of the art world.

– I applied to the Courtauld Institute of Art in the UK and I was accepted to do a master’s degree there, which strictly speaking was on contemporary British art, so my master’s didn’t have anything to do with economics.

He began his studies at Courtauld in 2002 and immersed himself in critical theory and postmodern discourses. The master’s degree was the basis for sketching out a study for a PHD.

Dark matter
At the time he thought the PHD would be a study of art investment related issues exclusively, but the more he looked at it the more limiting that perspective became. He realized that if he did a PHD exclusively on art investment at an art historical faculty, his resources would be limited. For a PHD with investment as perspective he would need to have an econometric or statistical or more of a mathematical angle, Horowitz explains.

– I quickly became interested in how other parts of the art market worked and the one question that really made me curious was how art practices that appeared to exist outside the art market might not exist outside the market.

Eventually his PHD would be exploring video art, conceptual art and relational aesthetics;

– In the end my PHD looked at what could be called dark matter art, art which is entirely outside the fine art market.

But he would also look into street artists and popular artists. Among them were street artist Banksy, who at the time was less known then he is today, and self-taught Scottish painter Jack Vettriano, a figurative painter who had experienced great popularity in the UK.

– These artists may have a substantial commercial value in some weird ways, but they are never ever really embraced by the institutions and museums and the major collectors.

After the fact
The PHD was finished in 2008, the very year of the financial crises. It would affect the art market. Of course no one could predict a financial crisis when he was writing his thesis, but in the art world there were discussions whether the «artbubble» would burst.

– A lot of people said it wasn’t a bubble. When you are in a boom you always believe that there are other exceptional factors. Even when it was apparent that we had a financial crises, it became obvious in 2007 – 2008 that something was brewing in the housing market and inequities, it was still a pervasive viewpoint that the globalization of the art market during the last decade, that a number of collectors and new institutions outside the Euro-American access would somehow support the art market in the event that collectors in the west disappeared. And we certainly found out that this was not the case.

Horowitz describes how during the last quarter of 2008 collectors weren’t buying work, liquidity diminished entirely and the auction houses laid off a better part of their staff in early 2009. But by 2010 it had started to recover.

– I’ve been surprised by how quickly it’s rebounded. And you wonder at some level how sustainable that rebound is. Now people talk about a double-dip recession and whether the art market flattens out somewhere.

Demystifying the art deal
Earlier this year Horowitz finished the book Art of the Deal: Contemporary Art in a Global Financial Market2 that was released on Princeton University Press. In the book he analyses the recent development in the contemporary art market. His focus is on conceptualism, video art and what he calls «experiential» art practices.

– The book grew out of my PHD which was written in very scientific language, so I had to really overhaul it. The real challenge was to take the academic jargon and trying to open it up to an educated but more generalized public.

The book aims at opening up the understanding of the contemporary art market and show that there are dynamics in the conceptual, relational and video art market that relate to a bigger picture of art investment. But also to show what really goes on:

– It’s about how the deal gets done behind closed doors. The book in many ways is about demystifying things. I think a lot of people pretend to understand them but it’s about putting them together in a way without being overly critical or overly cynical and to really reveal what goes on.

Art of the Spectacle
The book begins with a description of Damien Hirst’s Beautiful Inside My Head Forever-show, a two-day auction at Sotheby’s in London in September 2008. Here Hirst bypassed his galleries and went straight to auction. The auction included over 200 new works at a presale estimate of $122 to $176 million, but exceeded those expectations with three quarters and finished at $201 million. By coincidence the auction happened the exact same day as the American investment bank Lehman Brothers declared its bankruptcy3;

– I found an entry point through Damian Hirst. I wanted to write something that would grab people’s attention quickly and set a framework for what was to follow, and of course the final chapter, it looks on the whole financial crises and the bubble of the last decade or so, which is also written after the fact.

The way you describe Damian Hirst’s Sotheby’s auction in the book, it seemed to me that Hirst was staging a whole event that could be a reflection on the market from an artistic viewpoint as well…

– That’s correct. The most interesting about Hirst’s auction is not the works. Actually it is not about the works, it is about the performance, and as a performance the Hirst auction is unrivalled. It is where the staging of art meets commercialism, meets celebrity and commodity epiphany.

He remembers that he went to see the show the weekend before the big sale.

– It was open until midnight at an auction house on Bond Street in London. It became this weird, cool thing to do for that week, and they poured millions of dollars into promoting it and creating all this hype. The auction wasn’t about selling art works, it was this whole carnival-like performance that Hirst and Sotheby’s set in motion. As an artwork I think that that whole thing is really interesting, how to create a spectacle around art and around the sale.

Art without an object
The spectacle of Hirst’s Sotheby’s auction frames the backdrop for a thorough discussion of the contemporary art market, on how value is generated in the market and how art practices like video art, conceptual art and experiential art are increasingly collected by institutions and art collectors. One of the important questions the book tries to answer is «what exactly does money buy»?

Against this backdrop it may seem strange to focus on art practices that in many ways seem to elude the art market and often is intentionally anti-commercial.

Why did you decide to research what may be seen as a small-scale niche market that have little or no importance within the fine art market?

– That decision was very purposeful, there have been so many books that have focused on the Damian Hirsts and on the Andy Warhols, every bit of writing you read on the economics of art is about painting basically, a little bit about sculptures and occasional studies are written on photographs and prints. For me it was really about looking at time-based media, conceptualism and these art practices that are increasingly important in the art schools and the art history faculties today.

He feels that there has not been any comprehensive study of the market mechanics of these art practices.

– I think dealers implicitly understand how a market like that is constructed, but collectors are often in many ways left in the dark and collectors need to learn how it works. One of the salient points of the book is to show how the market for these art practices relates to other parts of the trade.

And the important thing to get across, he stresses, is that with most of conceptual, time-based and experiential art practices you’re not dealing in objects, you’re dealing in ideas.

– What I really try to convey is the fact that what you are getting is an idea, and the idea can be materialized, or not.

Rirkrit Tiravanija: Performance/ installasjon på Art Basel. Foto: André Gali

Collecting ideas
Horowitz mentions the New York-based artist Rirkrit Tiravanija (1961), who recently had a solo show at Art Basel, as a good example of an experiential artist whose work belongs to this part of the market.

– His gallery in Thailand commissioned him to create a space at Art Basel where he was cooking meals and where his students continuously were painting protest paintings on the wall.

After the fair closed, the work ceased to exists in its original form, but it may still be sold;

– What a collector buys, if he buys a piece like his, is the right to recreate some aspects of that performance or that experience in a private context. And what the artist and dealer convey are the rights around what you are allowed to exhibit. You’re not buying an outright object that can be transported from one place to the next, but you’re buying the rights to an idea and a set of objects that can be created or that can be set in motion.

The Berlin-based artist Tino Sehgal (1976) is kind of the extreme version of that, he continues. Sehgal creates performances that are acted out by actors according to a script that he sets in motion. Last February Sehgal showed a piece called This Progress at Kunstnernes Hus in Oslo. The gallery was empty but for a number of instructed actors that approached the visitors and asked them what progress is.

– There’s no written aspect to his works, he does not allow documentation, which is important, and when you purchase a work by Sehgal it is orally translated to you and you then interpret that translation and communicate that to a set of actors that executes the work, and if you decide to trade that work or sell it, ultimately you and the artist as long as he is alive will communicate those terms to the next purchaser.

What Horowitz tries to convey in the book is that even though a work is not materialized, that is not to say that there is no financial value around it.

– You or I could theoretically get a bunch of actors and do the exact same thing that Sehgal is doing, but what we can’t do is exhibit that as a Tino Sehgal work. And what makes that work valuable in the «market place» is really that association with the artist’s brand, what he or she stands for and the value of that currency within the art world.

A new paradigm
In the book Horowitz examines the contemporary art market as far back as the 1960’s. He emphasizes on what he calls the post-1990 context, which is when relational aesthetics, video art and conceptual art really started to enter the fine art market.

– From the earliest moments in the 60s you have practices like video, performance, film, and a lot of artists that are working outside the studio, that in some cases were explicitly anti-commercial, and there wasn’t that much of a market for many of these things. But as those practices have grown and expanded, and as curators and the institutions have taken an interest in the work, collectors have followed suit and there is some dynamic there that are definitely related to the bigger picture of art investment.

Horowitz shows that the contemporary art market has grown notably in the last decade, reaching extreme heights in 2007 and 2008. He describes an increase in contemporary art sold at auctions from 1998 to 2008 as a rise from 1.8 percent to 15.9 percent of the global fine art trade, or from $48 million to $1.3 billion4.

Why in your opinion has the contemporary art market been expanding so much over the last ten to twenty years?

– I think it’s driven by several factors. One, which is sort of structural, is that there’s limited supply of other top quality works from earlier periods as museum collections and other collectors are acquiring those works, they come out of circulation.

However, that historical art works gets taken out of the marked and there’s fewer and fewer in circulation is nothing new, such cycles can be seen in the market historically. But Horowitz goes on to say that there are some new conditions to the fine art market;

– I do think that there’s a paradigm shift in the post-war market starting a little bit in the early 20th century, but really notably with the rise of the New York market in the 50s and 60s with AbEx-painters and Pop Art and ultimately Conceptual Art. That there is this kind of growing aspect of the contemporary trade, the contemporary production that starts then and globalizes a bit more with Harald Szeemann and Documenta and the birth of the art fairs in the 70’s.And with the fall of the Berlin Wall and the falling out of the Impressionist market in the 80’s. I think a lot of that sets the base for more and more focus on contemporary art in the 90’s.

Power of publicity
In the1990’s globalization gained momentum with the fall of the Berlin Wall and the dissolution of the Soviet Union. Horowitz is cautious in applying the term globalization to the art economy. However, in the book he describes a profound impact of «the post-Cold War world order» on «the art economy’s structure, drawing new artists, collectors, and institutions to the market at an unprecedented extent».5

Two notable consequences of this expansion of the contemporary art world into non-Western cultures is a boom of biennials in the 1990’s and «a prolific post-2000 expansion» of contemporary art fairs.6

As it has been said that biennials have changed how art is produced and perceived, allowing for relational aesthetics, time-based media and experiential art practices to flourish, it feels timely to ask Horowitz if he thinks the art fairs have changed the nature of art?

– Not totally, but I think the rapidity of production has changed. I think that some time not too long ago artists didn’t want to have anything to do with art fairs, art fairs really were trade fairs and artists were opposed at some mental level of having a direct commercial association with that.

The last ten years art fairs like Art Basel have made room for exhibitions that presents installations, time-based work and works that does not fit the format or scale of the normal art fair booth;

– Now you have Art Unlimited that have artists that get a one off commission to do things, that is certainly a new change. But I think more generally – I mean I talk to galleries all the time and obviously I’m the director of a different kind of art fair now, and artists want to be exhibited there. They want their work to be presented in an art fair because of the power of publicity and the power of getting the word out.

He continues;

– Art fairs in the earlier sense and auction houses until a few decades ago where really wholesale market for the insider trade. As popularity around the fairs have grown, and they have really grown, from the Art Basel and Art Cologne of the 60’s to these global machines of becoming points of access for collectors and curators and critics – this is publicity and artists want to be associated with that. To ask how art fairs have changed the nature of art production – artists wants an art fair presentation now in the same way that they want a solo show at a gallery.

He points out that today artists want to create a new body of work and have that presented in a considered context at a fair.

– So I think that’s a very direct way that fairs have changed things. It’s another exhibiting mechanism and it is one more way for people to find out about your work and get more people to talk about it. And at the level of creating value in the market, people talking about it and people seeing it and people buying it, that’s what it’s all about.

2 Noah Horowitz: Art of the Deal: Contemporary Art in a Global Financial Market, Princeton University Press, 2011
3 Ibid. S. xiii-xiv
4 Ibid. S. 8
5 Ibid. S. 13
6 Ibid. S. 128-139

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