When Financial Products Shape Cultural Content Report: the Ethics
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Subject: Art Market Project: Report Date: July 2018 When Financial Products Shape Cultural Content (Title) Report: The Ethics of the Art Market (Document Type) Sébastien Montabonel & Diana Vives (Author / Co-written by) Published by Art Institutions of the 21st Century for Alaska Editions THE ETHICS OF THE ART MARKET: JULY 2018 WHEN FINANCIAL PRODUCTS SHAPE CULTURAL CONTENT 02 03 Foreword 06 CONTENTS Introduction 10 I. Primary and Secondary Markets 14 II. Value, Price and Brand 22 III. The Squeezed Middle 30 IV. From Cultural Artefacts to Financial Products 38 Conclusion 50 The Foundation 56 Trustees and Advisory Board 58 04 05 There seem to be a lot of myths around the modern art market, FOREWORD which is understandable, as we are historically inclined to seek, and at times to invent, explanations of powerful phenomena. Interestingly, though the reports and articles are well-crafted and researched, many are penned by writers who haven’t set foot at senior management level, or as participants with skin in the game. The narrative is often spun from someone relating what they heard that someone else thought about what someone else knew from a sure source. It makes for good fiction and the sheer volume of it drowns out the real questions and astute backstage glimpses. So, we keep reading the most incredible stories about the global reach, financial muscle and many intrigues of a world that evolved over a few decades from an insular, relationship-based and largely unregulated cultural domain, to a fast-moving global industry. This content has been widely distributed and shapes our understanding and beliefs about the art market. We rarely read ‘insider’ reports about top players by executives in today’s triumvirate of auction houses, major galleries or big international museums. Not that they don’t share their experiences, yet these are mostly about the magic - anecdotes about inspiring artists, discerning collectors and how incredible their own life has been as a result - and rarely about the real business of art. The glow of these tales, fanned by the winds of media and the digital age, attracts new players to spend money at the glamorous high table of art where there’s allegedly nothing to lose and the gains are so big that even billionaires want in. But the real winners are rarely the ones described in those stories. I have often been struck by the confidence of individuals who, as highly successful players in their own field, enter the art market believing they can ‘win big’ in a multi-billion pounds industry, competing against those who do it for a living. Without doing the research, or going solely on the advice of consultants who may have vested interests, what could be an entertaining 06 07 way of diversifying one’s assets becomes something of a gamble. Pushing works that are both mediocre and overpriced is a classic ‘street sale’ technique. The price tag, the allure of the environment that the art world colludes to project outwards and the residual goodwill towards art all validate this elegant folly. If art was once a reflection through which to view broad sweeps of history, today’s art market has agency and influence, both at the apex of financial power and as a media-driven disseminator of visuals and ideas that define our time. Much like other industries, its regulations spawn loopholes and its growth potential attracts investment and speculation. Its mass appeal in the new millennium has revealed its proven potential as a tourism magnet, invigorator of urban settings, invaluable mine of structured data and as an asset class which operates within singular parameters. The changes outlined in this report are real, and evident. They may not be new, but they have certainly become more obvious. Marketing and branding ‘driving’ cultural value, with monetary value conflating (and confusing) cultural value are a fact; art as financial asset is another. Is financial interest shaping content? We can ask the same question of the media environment, television and cinema to begin with. And yes, they all do, but in a society driven by a consumerism that is denounced by its artists and intellectuals, we should have higher expectations for the way we engage with art. This report does not intend to tarnish the lustre of art, as we ourselves believe in its magic and know that extraordinary things happen inside this ecosystem. But we also believe that it is our responsibility to address the popular myths and contribute to developing a more realistic perspective, based on experiences acquired over the years of dealing across those different institutions, that will serve to protect the independence that art and artists should be granted in order to thrive sustainably. As a departure from the previous publications of AI21C, this report complements its referenced research with my personal perspective formed over decades of working in the art world. Sébastien Montabonel Chair of Trustees 08 09 [1] Evan Beard, National Art Services Exec- The principal purpose of this report zon that has proven to be the stra- utive. U.S. Trust, Bank of America Private is to investigate the impact of art tegic giant. INTRODUCTION Wealth Management. Merrill Lynch, Pierce, Fenner & Smith, Inc. Phone interview, June markets on museum collecting and Apart from the rising tide of 2018 contemporary curatorial practices. digital innovation that has yet to re- Increasingly, sponsorship veal how technology will transform [2] https://www2.deloitte.com/content/dam/ deals and commercial interests are st Deloitte/at/Documents/finance/art-and-fi- the way institutions of the 21 Cen- nance-report-2017.pdf. p.16 determining the global footprint of tury operate and interact, one of big museum ‘brands’ by shaping the more significant changes in the [2a] https://www.artbasel.com/news/econo- their exhibition budgets and con- art world in recent years has been mist-dr-clare-mcandrew-explains-why-the-art- market-is-rebounding tent. the market’s personality shift from This raises a host of ethi- considered purchases of cultural cal questions around the independ- symbols, to the fast-moving trade ence of public art institutions and of high value works now deemed their social responsibilities. At what not just an investment but an as- cost have state funding cutbacks set class, employed as collateral made public museums overly reli- against loans and even as instru- ant on external financial support? ments of securitization. While art To what extent do museum exhi- has operated between culture and bitions mirror the market activities business for decades, the introduc- of auction houses and private gal- tion of this financial dimension will leries and how does this impact likely have a lasting impact on the on institutional diversity and the trade and perception of art, espe- career prospects of individual art- cially once driven by the digital di- ists? Are privately-owned spaces mension. and commercial venues supplant- Indeed, Deloitte’s 2017 ing state-funded museums? Has Art & Finance Report highlighted a mounting public interest in the steady growth in private bankers, spectacle of the art market shifted wealth managers and family offic- expectations about the kind of ex- es entering the arena of art invest- periences that a museum should ment.2 As we shall see, this change promote? And what happens to the in mindset from collecting to invest- value perception of art when, after ing has trained art’s aura on works real estate holdings, it becomes the with the highest visibility and price 4th popular asset against which to tags, with significant consequenc- leverage large loans, as confirmed es for the market in general and the by a senior private wealth manager middle-market in particular. 10 11 at Merrill Lynch.1 The cluster of interest for Though the effects may not the top end of the market, over always be immediately apparent, all emerging artists or mid-career commerce is invariably altered by practitioners, threatens to homog- the advent of new key players. For enise current collecting practice, a instance, few would argue that at view supported, among others, by its inception, Amazon was mere- economist Clare McAndrew, author ly viewed as an attempt to change of Art Basel and UBS Global Art the way we purchase goods, while Market Report 2018: Facebook, Twitter and Instagram were considered the game-chang- There is a narrow focus on a ers that had broadened and accel- small number of artists and the erated individual communication at people who are selling their a global level. And yet, as a mech- work, and this has had a big ef- anism for user data collection, in its fect on sales.2a slow but inexorable rise, it is Ama- Seeking to minimize risk, of interest in the current art world [3] https://www.artbasel.com/news/economist- buyers look at ‘what everybody practice: In the first chapter, we look dr-clare-mcandrew-explains-why-the-art-mar- ket-is-rebounding else is doing and consume what at the mechanisms, often misunder- everybody else is consuming’3. As stood, within the primary market of [4] https://www.ubs.com/global/en/about_ubs/ a result, big names and perceived galleries and dealers, contrasted art/2018/contemporary.html quality are becoming progressively with those of the secondary mar- [5] https://news.artnet.com/market/25-art- aligned, with prices following suit. ket mostly represented by auction ists-account-nearly-50-percent-postwar-con- Confidence in this sector of the art houses. The second chapter dis- temporary-auction-sales-1077026 market remains high, with global cusses how branding has replaced sales up by some 12% in 2017, to- knowledge in shaping the value taling $63.7 billion.4 The majority of perception of artworks, artists and gains are concentrated at the top galleries, which influences price tol- end of the market, with notorious erance and leads to a concentration sales such as Leonardo da Vinci’s of power in collecting, curating and Salvator Mundi and contemporary media coverage.