Why the art world must not be the same after COVID-19

July 3, 2020

In the run-up to last month’s virtual version of Art Basel’s most important annual fair, the one that usually takes place in Basel, Switzerland, every June, Marc Spiegler, Art Basel’s CEO, wrote this trite and self-serving op-ed piece which finally prompted me to write down two main observations about the art industry:

Observation #1

Given the present configuration of the art industry, the vast majority of art galleries operating in the world’s major art capitals are financially unviable. For those of you who have never delved into the economics of an art gallery or been privy to a gallery P&L, the explanation is straightforward:

A large proportion of gallery sales takes place at art fairs (~40% in 2019);
Renting a booth at an art fair is very expensive;
Only art galleries operating brick and mortar retail exhibition spaces are eligible to apply to art fairs;
Commercial art gallery spaces are financial sinkholes.

These are the indispensable elements of operating a gallery at the most prestigious and lucrative echelon of the industry. (I’m able to speak from first-hand experience because I was an art dealer in Hong Kong ten years ago and am still active in the industry but no longer as a commercial gallerist.)

Art fairs are essentially dressed up B2C trade fairs providing one-stop-shop convenience for industry stakeholders on both sides of the supply and demand equation. Over the years, they have become major sociocultural happenings attended by celebrities, curiosity-seekers and social gadflies besides. The nut of the circus is a troupe of HNW and UHNW collectors traveling from one top-tier art fair to the next in order to patronize a very elite supplier base of less than 200 major galleries. Outer rings of this universe are populated by second-tier galleries which also participate in art fairs, but less exalted ones. (I won’t go into a recitation of the top fairs but they include all the Art Basel fairs, Frieze and Masterpiece.) In the wake of each circus-like fair is a phalanx of high-end suppliers, alcohol sponsors, F&B outlets, art consultants and event organizers throwing exclusive soirees to entertain the jaded, extremely rich art collectors and their hangers-on. The reasons for ignoring the carbon footprint and sheer wastefulness of these events is twofold. First, the fairs, despite their flaws, are a comparatively efficient means of doing business. Second, why make art collectors and their retinue feel guilty about their outsize carbon footprints and self-indulgence when, in the main, they are liberal, progressive types who generally support the dispossessed, marginalized and alienated, i.e., artists. The fact that the contemporary art world is staunchly left-leaning (due to the fact that artists draw on their own torment to create art and the crucibles of their identities tend to be various forms of adversity stemming from their race/ethnicity/gender or failure to conform to conventional society), helps enormously with white-washing the unforgivable waste and decadence of the industry. (Read Anand Ghiradaradas excellent book, Winner Takes All, on how plutocrats assuage their guilt by “giving back” — but always on their own terms. Jeff Bezos’ recent pledge to spend $10B on climate change mitigation is a great example of this syndrome.)

But let’s get back to the shocking economics: The cost of a medium-size booth (70 square meters) at Art Basel is ~US$60k. That excludes the cost of sending the artwork to and from the fair, flying in the gallery staff, hotels, food, entertainment, etc. All told, the average cost for an established gallery (not a major one) to participate in an overseas art fair is ~US$100k. For a young gallery starting out, it costs less but is still a major outlay. ~US$35k is the bare minimum, provided the latter qualifies for the cheaper section of the fair dedicated to young galleries and is based in the same city as the art fair, so that no one from the gallery needs to be flown in.

Most articles about the art industry’s lack of sustainability focus on the cost of participating in international art fairs but the problem is the double-whammy of art fair requirements, not just paying for a booth but having to operate a “real” gallery. Based on your own experience, you can probably guess that only a handful of people A WEEK may walk into a gallery space and virtually NONE of them buys an artwork. Nevertheless, galleries must still stage exhibitions open to the public. The cost of putting on an art exhibition is much more expensive than it looks. To the average gallery visitor, there’s nothing complicated or remarkable: usually less than 20 paintings hanging on white walls. But those paintings have to be insured and flown in, in custom-built crates. Moreover, the artist typically flies in to kick off the show and the gallery hosts a dinner for him or her with potential collectors on the night before the exhibition’s opening to the public. Virtually all the sales in a show take place within the first few days of an exhibition’s opening based on high-touch individual solicitation of known collectors and are almost NEVER the product of walk-ins to the art gallery. Adding to the cost of a show, featured artworks are professionally photographed and printed in a catalogue, prefaced with an introductory essay written by an authoritative curator or art professional. Therefore, the cost of a simple exhibition of conventional paintings, is ~$20k and goes up from there depending on the type of artworks shown. Considering that a gallery puts on ~6 shows a year and that the costs just mentioned exclude rent and permanent staff, you can see how expensive it is to run an art gallery, at least $300k per year (based on permanent staff and rent of US$15k per month) EXCLUDING participation in art fairs.

It’s worth repeating: since sales result, not from the traffic afforded by a street-front location in an exclusive retail quarter but from the one-on-one relationships of art dealers with their clients, a retail art gallery is more like a stage set than a cash register. Expensive charades, namely public art exhibitions, are performed inside art galleries in order to fulfill the expectations of artists and meet the requirements of art fairs. (I failed to mention that galleries customarily mark up artworks by two times, aiming for gross margins of 50% but more often than not, collectors negotiate discounts of at least 10% if not more. It’s therefore more accurate to state a gross margin of 40%.) Assuming a gallery does one local art fair and one international art fair, costing a total of $150k (a low estimate), the annual cost of doing business is $450k, which means it needs to sell $1.125M of artworks before breaking even. $1.125M divided by $35k per artwork is 32 artworks per year. That’s 4 artworks per gallery show plus 4 artworks sold at each art fair. (New original artworks generally make their debut at art galleries before being resold at a premium on the secondary market, explaining the comparatively low price tag of $35k I’ve used. But even at that price point, galleries need some objective validation of their taste and judgment, and there is no better Good Housekeeping Seal of Approval than a gallery’s participation in the world of big art fairs. Galleries’ fair applications are judged by a panel of industry experts.) It doesn’t sound THAT difficult. But if you’re NOT Gagosian or Hauser & Wirth but competing with a hundred other small-medium size art galleries in the same city, breaking even is a 50/50 proposition, even in good times. (Just to be clear, there are lots of mom-and-pop-style galleries operating on a shoestring but their economics are just as precarious because the prices they’re able to command without the validation afforded from participation in the world of blue-chip art fairs is correspondingly less, MUCH less. These galleries tend to traffic in artists whose CVs are devoid of institutional recognition resulting in prices akin to home decoration rather than investable assets with the potential to appreciate in value. The fact remains, walk-in traffic to art galleries is scant to non-existent save for the initial burst of activity around the time of an exhibition’s opening.)

Not surprisingly, most art world insiders are predicting a mass extinction of galleries in the wake of COVID-19. Moreover, the art world can no longer ignore the untenable gearing of the gallery business model, a model which requires art galleries to operate in a manner which is gravely inefficient. The ROI of commercial art gallery spaces is DEFINITELY less than 1.0 once the sales resulting from gallerists’ strenuous, personal sales efforts are stripped out. (Those sales could be made elsewhere or by other means and don’t require a public retail location to take place.)

The solutions to this problem are pretty obvious:

The inefficiency of a commercial art gallery space is no different than most retail space. The actual footfall and number of days or even hours of commercially fruitful utilization of the space are a fraction of what is needed but the gallerist must sign a two or three year lease and hire permanent staff nonetheless. Gallerists, like almost all retailers these days, need a slice and dice solution for exhibition and sales, for example, short-term, modular commercial retail leases in pre-fitted gallery spaces which can be rented out from one day to two weeks to accommodate exhibitions of between two to 25 artworks, the sort presently conducted in conventional art galleries. This white cube arrangement would be backed up by a full-time staff of art professionals who know how to handle and talk about art and, ideally, robot-powered (vertical) art storage enabling the fast and convenient retrieval of (non-fragile, pre-assembled) artworks at the swipe of a few keystrokes. This way, galleries could follow up with clients who were unable to attend the initial exhibition by meeting with them after the show, in individual viewing rooms rentable by the hour, to show them specific artworks of interest. Such meetings could be ad hoc, rather than contingent on public exhibition dates. (Modular arrangements like this are the future of consumer retail generally, not just art galleries…)
This isn’t the only solution of course. The Condo art fair, launched in 2017, uses the concept of a loose international cooperative of galleries to share space and pool resources between cities. However, this exchange is an “event,” not a permanent or institutionalized commercial system.

The art industry urgently needs both modular AND cooperative commercial arrangements if the gallery system is to survive. Think of these as the WeWork and Airbnb of art gallery space.

Observation #2

Spiegler makes the point that no digital technology can replace the experience of viewing art in person. No one can disagree with that of course: Seeing a painting through a computer-simulated walk-through of an art gallery is not the same as walking right up to a painting and marveling at its texture and materiality up close. Most traditional art is best appreciated in the direct presence of the five senses because art itself is eminently human. Scale and positioning vis à vis our own body; the defects and compensatory fudging of our own eyesight, the kinetic movement of our own body around and along the surface of an artwork; the atmosphere of the room in which the artwork is displayed, create effects which are both visceral and ineffable. This is the essence of viewing art in person.

However, Spiegler is right only because he refers to conventional, traditional art – painting, sculpture, with a little bit of photography and video thrown in — the sort which is the stock in trade of art fairs.

The fact is, there is a lot of art which can be appreciated and enjoyed without standing in front of it in person. However, the art industry has largely ignored this category of art because it cannot be commercialized. This is MEDIA ART, which thrives at the intersection of visual art, engineering, robotics, science, biotech and other fields of knowledge. It exists in a digital form but this substrate neither limits nor unifies its content. Compared to traditional art, media art is kaleidoscopic and open-ended because it invites collaboration and experimentation, e.g., video art based on the non-repeating dynamics of natural processes (like the weather or erosion), jellyfish animated through robotic respiration, mirrors which reflect back an “image” of the beholder based on infrared heat rather than light, sculptures moving in concert with brainwaves, etc. I delved into this topic two years ago because I was fed up with the repetition and venality of the commercial art world, specifically, its never-ending focus on painting and sculpture. Considering the giant palette of technologies, materials and effects available to today’s artists and how our daily lives are awash in digital imagery and experiences, painting and sculpture feel quaint at best, exhausted and threadbare as a means of exploring the boundaries of sensation, aestheticism and human existence at worst. It is perfectly understandable to cherish painting and sculpture because they are the output of the human hand. But ask any student at a top art school these days: these techniques are anachronistic, like knitting a sweater or cutting a diamond by hand. Sure, I understand that you don’t want a tankful of roboticized jellyfish in your living room but I, for one, have never regarded art as something to collect. Rather, art, by inhabiting unspoken, liminal spaces, coaxes, provokes and invites the viewer to examine his senses and beliefs.

I don’t believe that people are uninterested in media art — not at all. Rather, most people have never been exposed to it because it’s not present in art galleries, museums or mainstream art fairs. That’s unfortunate because it is a mind-bending carpet ride to undiscovered realms of thought and experience. Watch this video of my visit to Ars Electronica, the grand-daddy of media art fairs founded more than twenty years ago in Linz, Austria, filmed at the end of last year. Even hard-core devotees of traditional art will be drawn into this fascinating world and understand the potential of media art to pose new questions about human existence and civilization — even if they don’t want to hang it in their living room.

Media art hasn’t penetrated mainstream art consciousness because it is still difficult to buy and sell and, therefore, hasn’t been invited into the big-money tent of the commercial art world. That tent includes museums, which are not nearly as free or independent as the public believes. Curators, art gallerists and major art collectors enjoy a symbiotic relationship. Gallerists hire curators to curate and write for their exhibitions. Museums, especially contemporary art museums, are heavily influenced by what is de rigueur in the commercial art world. In some cases, a museum is a showcase for a single collector’s artworks — all purchased in the commercial market. (The Broad Museum in LA, which I visited in January, is a case in point, for example.) Gallerists lobby museums to put on shows for their artists because they greatly boost the perceived value of their oeuvres. Major collectors are usually big museum donors. The list of intertwined back scratching goes on and on. Unbeknownst to the general public, there is no Chinese wall or strict separation of Church and State between museums and the commercial art world. Therefore, besides playing an outsize role in setting price cues for the art market, museums assist in perpetuating a definition of art which is based on its saleability. Whether they admit it or not is another question. But to believe that museums are dissociated or immune from the commercial art world is naive in the extreme. Without us being fully aware of it, art has become increasingly and insidiously shaped by commercial interests. The failure of media art to penetrate the public art world is a symptom of that phenomenon because it is undoubtedly the genre most capable of fascinating the public, reinvigorating interest in museums and making the case that art can be relevant and democratic.

If art is defined by its potential to be bought and sold, that seems like a very impoverished and limiting definition of the word. For me personally, COVID-19 has highlighted the shallowness and irrelevancy of most of the art world and its abandonment of art’s true mission — to enable the viewer to see the world through the eyes of another.

COVID-19 has taught us that:

Traditional art cannot be enjoyed from a distance, yet it is the centerpiece of the art industry.
Along with art fairs, the traditional museum-going experience has been thrown into question. Do you really want to queue or pay US$20 to stand in front of a painting thronged by ten other people?
Like other industries seeking to overcome the challenges of COVID-19, the art world should welcome technological innovations which can futureproof it against the problems experienced just now. It is crucial to create new platforms and tools which can present art in a decentralized and asynchronous manner — just like the rest of consumer retail and entertainment culture.
That said, NOW is a good time to welcome, introduce and promote new forms of art and art appreciation. Many, if not all, forms of media art sidestep the requirements of in-person viewing associated with traditional art while providing a rich and enjoyable art experience.

Technological solutions are at hand, including many based on blockchain. (My article here describes some of them.) But it will require a brave and influential industry stakeholder to embrace new technology if the art world is ever to undergo the reconfiguration it so badly needs. Right now, the industry continues to look backwards instead of forward, a perverse and contradictory stance for an industry which prides itself on championing newness and progressivism.

(I have co-produced an exhibition of media art, accompanied by a series of talks, named “Art Unchained” and sponsored by Swire Properties, that will take place in Hong Kong in November 2020. The centerpiece will be a media art installation by French artist, Patrick Tresset — robots sketching human sitters in 20 minute sessions over the span of two weeks. While I did not write today’s newsletter with a view to promoting this project, this upcoming project does show you where my heart and mind are.)