The Mid-Level Gallery Squeeze
WHAT HAS CHANGED?
Success in many businesses relies a great deal on the impression other people have of how well you’re doing. This is particularly true in the gallery business. Collectors and artists alike will gravitate toward the galleries they believe are moving up in the world and shy away from those viewed as being in trouble. This impact of perceptions explains perhaps why many mid-level dealers who were still struggling by 2014–2015 didn’t want to admit that, even though 2013 annual sales estimates suggested that they were collectively having difficulty. Making it all the harder to admit any difficulty was the fact that top-level galleries and emerging galleries were reportedly doing as well as they had been in 2007, if not better. Even though something seemed to have gone particularly wrong in the middle of the contemporary art market in 2014, having word get out and confirm such problems would only exacerbate them for mid-level galleries. And so many mid-level galleries continued to project an aura of success, even when those closer to their realities knew that was not true.
But what do we mean by a mid-level gallery? Definitions of gallery levels are not easily agreed upon in the industry. Few of the directors of mega-galleries that I’ve talked with would agree they were part of a mega-gallery, perhaps because it has negative corporate connotations. Likewise, quite a number of dealers I would classify as mid-level would argue they are top-level because they honestly view themselves that way, or they believe in the “fake it until you make it” method of reaching your goals.
The following definitions are based on a conversation with Josh Baer (New York publisher and art advisor, as well as former gallery owner) and Elizabeth Dee (New York gallerist and co-founder of the Independent art fairs) that I had in preparation for a panel discussion we participated in at Art Basel in 2013 titled “The Place of Mid-level Galleries in the Age of the Mega-gallery” (watch here: https://www.youtube.com/watch?v=ZstP0Tzl8gY). I have enhanced these definitions a bit since that panel, based on research for this book:
• Mega-gallery: an influential gallery with multiple international locations, deep pockets, a roster of at least forty artists, and a public perception that they’re continuing to expand their enterprise (see Chapter 2).
• Top-level gallery: an internationally influential gallery, possibly with more than one location, a varying numbers of artists on their roster, and yet a public perception that expanding their enterprise is not their top priority.
• Mid-level gallery: [see below].
• Emerging gallery: a gallery that is less than ten years old; initially (at least) having less international influence and a varying number of artists or perceived ambitions; defined predominantly by how new the gallery is, but also generally by having a roster of emerging artists and usually being the owner’s first gallery.
These definitions are still likely to be disputed, but none will stir as much debate as how to define a mid-level gallery. I am holding off on providing my working definition of that level for just a moment to first discuss the range of perceptions that play into this categorization and why it’s often one dealers cringe to have applied to them.
A gallery might be considered mid-level because:
• They are no longer considered an emerging gallery (because they are older than ten years), but are not yet considered top-level, but are viewed as on their way.
• They are older than ten years, have failed to gain enough influence or power to enter into the top level, and are viewed as not likely ever to achieve that.
• They choose to focus on emerging and mid-career artists because of the dealer’s personal curatorial preferences or aversion to competition, and becoming a top-level gallery is not high among their goals.
• They are older than ten years and operate in relative obscurity (meaning they do not participate in any/many art fairs or get much press), but continue to stay in business nonetheless.
Many of the leaders in the contemporary art world will acknowledge the importance of a healthy mid-level gallery system. Their reasoning will run from believing in the artist support network mid-level galleries provide to understanding that as older top-level dealers pass away and their galleries close, a younger generation needs to be ready to step in (and hence pay for the larger booths at the major art fairs or become the members of the senior gallery associations). Others will note, perhaps nostalgically, that they remember how the mid-level phase of running a gallery—when the press often turns its attention to younger galleries and many mid-level dealers are not yet influential enough to amass significant power—can be the toughest in which to stay focused and motivated. There is an even more romantic take on what makes mid-level galleries important, which includes the belief that they are an essential part of the gallery ecosystem, where artists who have passed their “emerging” phase, but not yet entered their “blue chip” phase, can continue to have the opportunity to experiment and develop their work while receiving commercial gallery support. This view informs much of my definition and personal admiration for mid-level galleries.
All romance aside, though, one important distinction between mid-level galleries and top-level galleries that often keeps mid-level galleries from reaching the higher tier is reliable access to the two resources most critical in achieving that goal: money and, perhaps the most important resource money can buy, time. Through the many conversations I have had with dealers in researching this book, I have come to the conclusion that the most common factor that separates mid-level galleries who stay at that level from those who begin to appear as if they’re becoming top-level galleries is how much money and time they can spend to keep their two sets of clients (artists and collectors) happy and still confident in the gallery’s potential to meet their wants and needs going forward.
Another factor that determines which galleries are viewed as mid-level versus top-level is to a large degree beyond any dealer’s control. How consistently they can secure a place in the world’s top art fairs and where they’re located within those fairs is the most public measure of a gallery’s influence. Getting into Art Basel’s sectors designed for new participants, for example, can indeed help a gallery move up the ladder, but unless they eventually gain acceptance into the main section of the fair, the perception will be they are still in their mid-level phase. Some galleries who do continuously get into bigger fairs’ main sections may still be viewed as mid-level because of their placement in the less desirable sections of those fairs’ floor plans. The politics that come into play among the selection committees of those fairs, comprised mostly of the mid-level dealers’ direct competitors, can therefore contribute to the perception that a gallery is still mid-level even when there are not any other discernible differences between their operations and those of the top-level galleries.
Pulling all those factors together then, the working definition of a “mid-level gallery” we will use in this chapter is
A gallery older than ten years; which generally has about eight to twenty-four artists on their roster who mostly fall within the “emerging” to “mid-career” range; which is still usually struggling to secure good placement in the major art fairs; and which often has limited resources to take the steps that could change their position.
The Reality of “the Squeeze”
The notion that there is a “squeeze,” or significant and particular pressure, on the entire sector of mid-level galleries is one that some will dismiss by pointing to the number of them still in business. Why would anyone think there’s anything new about some of them closing and some of them continuing? Isn’t this simply business as usual?
There are some indications that it’s not. First, of course, are those 2013 sales estimates, which have been published widely in the arts press and beyond. As noted above, the perception that mid-level galleries are struggling can become a self-fulfilling issue for dealers at that level. Furthermore, among the New York galleries who were open in 2008 but have since closed (as recorded on the “R.I.P.” section of the blog How’s My Dealing?1), the vast majority of those closing would have qualified as mid-level. Of course, this may be normal in any period, given that top-tier galleries are more stable than those with less influence. But a large number of emerging galleries have opened up since then and plenty of them seem to be doing just fine, which suggests the market overall is not the problem.
It may be helpful here also to consider two factors unique to the mid-level gallery that affect nearly all their business options. The first is related to expectations surrounding the price points for much of the artwork in the mid-level market. Not only do mid-career artists expect to charge more for their artwork than the standard prices for emerging artists’ work, but collectors also expect dealers to work continually to raise the prices for the artists whose work they have purchased. Unlike other businesses where your first step in “moving product” that doesn’t sell quickly is to lower its price, dealers can lose the trust of collectors who learn that someone else got a similar artwork for significantly less than they paid for it, or that artwork they had hoped would steadily appreciate has gone down in value instead.
The second factor transcends the kind of concerns that would apply to most other businesses. As the market evolved, a growing number of dealers who felt happy or at least comfortable in the art world before the recession, and who were by all accounts still doing financially OK in 2013–2014, cited significant changes in what is now required to continue to be a successful dealer as their main reasons for choosing to close their spaces. One might suspect this was merely a “sour grapes” explanation if their rationales were not so consistent and their financial situations were not widely considered to be fairly secure. Themes of how the evolving market was impacting the quality of their relationship with their artists or even the quality of contemporary art in general were common among their explanations for the closures. The following are excerpts from how four emerging-to-mid-level galleries, which most insiders felt were commercially sound, explained their surprising decisions to close around this time.
Galerie VidalCuglietta in Brussels noted in the August 2013 email announcement they sent out that “After many strong exhibitions projects and participations to the best international art fairs, and above all, after building solid relationships with amazing people such as, artists, collectors, galleries, curators, institutions and art lovers . . . we have decided to close the gallery. . . . There are many reasons for this radical and unexpected decision and they all converge to this specific moment where fundamental choices and decisions have to be made to continue to exist as we want to.”
In an interview that Kristen Dodge of New York’s DODGE gallery gave shortly after announcing the closing of her Lower East Side space, she said, “The job of an art dealer is to sell art, and to place that art with meaningful collections whenever possible. The job of an art dealer is to grow the careers of artists, build dialogue around their practice, and solidify their longevity both practically and historically. The job of an art dealer is to bridge the enormous gaps between artists being unknown, artists being known and artists staying known.” 2 Even with this matter-of-fact grasp of the business, and sharing that her gallery was in “good health,” Kristen noted how the changes in what it took to succeed were behind her decision: “I’m not interested in chasing the business to art fairs all year long, handling secondary market works, and growing the gallery to a place where we are forced to make decisions that contradict my reasons for being in it in the first place.” She went one step further to indicate how little room the current system seems to leave for concerns other than money: “However, there came a point when we were looking at The Next Level and from where I was standing, it looked pretty clear to me that the motivation of money (whether out of necessity or ambition) is trumping the integrity of art.”
Among the most successful of the gallerists to share similar sentiments was Nicole Klagsbrun, who after thirty years in the business sent ripples through the New York gallery world with her declaration that “I’m not sick and I’m not broke. I just don’t want the gallery system anymore. The old school way was to be close to the artists and to the studios. Nowadays, it’s run like a corporation. After 30 years, this is not what I aspire to do. It is uninteresting.”3 She went on to note that the current “structure of the system is overwhelming.” Citing an “endless sea” of event-based obligations like fairs and biennials that leave no time to reflect or think about quality, let alone how best to help one’s artists build their careers, she concluded that the result is, “The standard of the art goes down, but there are always buyers and, if you don’t take part, you’re not successful.”
Finally, as of this writing, the latest high-profile mid-level gallery to announce they were closing seemingly had the type of career that would have guaranteed a top-level future, having served on the Art Basel selection committee for many years and co-founded the Art Berlin Contemporary art fair. Described by Artnet as “shocking,” Joanna Kamm’s decision to close the Berlin-based Galerie Kamm echoed those of other dealers who began galleries for reasons that went beyond simply making money. Artnet reported, “Last year, Kamm announced that she would suspend her participation in all art fairs internationally in order to place renewed focus back on the gallery program itself. She subsequently expressed a frustration with being torn between her passion—working with the artists themselves—and the financial pressures of running an international gallery today.”4
Once more, the themes of not enough time and too much focus on money run through their explanations for why the gallery business was no longer right for them. Of course, not every mid-level dealer has chosen to close, and in 2015 there are both a number of reasons to be optimistic about the future and, correspondingly, a renewed determination among many mid-level dealers to find ways to overcome the particular challenges prevalent in their sector of the contemporary art market. Still, the “mid-level gallery squeeze” has loomed large in the art press5, 6, 7, many mid-level galleries have indeed closed, and many mid-level dealers I have talked with have said off the record that things remain challenging. Below we will examine more closely some specific challenges for mid-level galleries, and look at how some dealers are strategizing within or around them. Some of these were indeed challenges for all galleries during this time, but several of them have additional twists for the particular circumstance of mid-level galleries.
STRATEGIES FOR NAVIGATING THESE CHANGES
In addition to listing these challenges in the words dealers would typically use to discuss them, below I attempt to identify the core traditional business issues in play for each (in parentheses), so as to later discuss strategies for them in such terms. The challenges facing mid-level galleries in 2014–2015 included:
• Relatively slower sales and the loss of a key consumer sector
(cash flow)
• Rising rents in gallery districts
(overhead)
• Threat of poaching by bigger galleries and new questions about loyalty
(long-term planning, possibly cash flow)
• Perception of speculation vs. connoisseurship fueling many collectors’ decisions
(sales techniques, programming choices)
• Art fairs vs. gallery spaces where collectors increasingly make purchases
(overhead, sales techniques)
• Internet challenging dealers as source for exclusive information
(promotion techniques, long-term planning)
Relatively Sluggish Sales and the Loss of a Key Consumer Sector (Cash Flow)
As discussed before, the TEFAF Art Market Report survey is controversial because its methodology is not viewed as clearly articulated (and therefore it is presumed to be potentially less rigorous than it should be), and yet its results were reported widely in the arts press and beyond, which helped form the perception that mid-level galleries were seeing relatively sluggish sales compared with the top-level and emerging galleries. As noted above, such a perception itself can present a challenge to mid-level galleries. Specifically, the TEFAF 2014 Art Market Report survey of galleries “indicated that . . . in 2013, the mid market showed lower growth than the lowest and highest ends.” The conventional read on why this was the case in 2013 has been that blue chip contemporary artists were selling very well, presumably because their markets were seen as sound and the wealthy saw art as a stable place to put their money, while at the lowest end there was a great deal of speculative buying, because the price points (generally under $5,000) made it easier to buy with little more than a hope that the work would one day appreciate, but not really worry too much if it didn’t. In the middle, though, where an artist’s prices range from $5,000 to about $70,000 but their place in art history was still relatively questionable, collectors seemed to be taking a more cautious approach.
Here are the TEFAF numbers that helped create this perception of the contemporary art market:
In 2013 . . . the top end of the market, where dealers generated sales of over €10 million, reported an average increase of 11 percent. . . . The share of sales in the lowest end (less than €3,000) was 11 percent higher in share than 2012, while the segment from €3,000 to €50,000 saw the largest fall year-on-year (of -16 percent).8
These statistics are based on a survey of 5,500 dealers from the US, Europe, Asia, Africa, and South America. As the report’s notes on data sources revealed, “Response rates varied between countries and sectors, but on aggregate came to approximately 12 percent.” These lower-than-average survey response rates likely reflect that dedication to opacity that art dealers are infamous for. Still, the general percentages seem to accurately reflect both anecdotal evidence and highly public indications of how well any given gallery is doing (such as building out a new location, opening an additional location, hiring more staff, or other things it takes money to do).
The TEFAF numbers also indicated that in 2013 the overall art market had rebounded to nearly its highest peak ever (in 2007) and that contemporary and Modern art were doing exceptionally well in this rebound. The report noted that contemporary mega-, top-level, and emerging galleries reported increases in sales of about 12 percent over 2012. Assuming a rising tide raises all boats, however, it was surprising that artwork priced at the level sold in most mid-level galleries ($5,000 to $70,000) reportedly saw a year-on-year decrease in sales (of 16 percent).
Among the dealers and art fair organizers I’ve spoken with about this, speculation on why the mid-level galleries might still be struggling when galleries in higher or lower levels were not in 2013 frequently came back to the notion of the loss of a mid-level consumer sector. In short, the theory goes that part of what helped expand the mid-level market leading up to its peak in 2007 was that upper-middle to lower-upper class professionals had begun to buy contemporary art in large numbers. Often referred to as “the doctors and lawyers,” these professionals had invested in the stock market, done well there like most other people, purchased their second or third home and their third or fourth car, and were increasingly drawn to the glamorous, event-driven culture of collecting contemporary art. Of course the doctors and lawyers would also purchase plenty of emerging art, like most other collectors, because it was a relatively impulse buy, but they had added an extra boost to the middle market through their sheer numbers. Generally priced out of the blue chip artworks, they were nonetheless quite competitive within the mid-level segment.
Then the recession came in 2008, and purchases of luxury items like art were the first extravagances to go while everyone was trying to assess their financial futures. While many in the financial sectors, technology industries, or real estate began to feel more secure as the recovery took hold, and so began to buy art again, the doctors and lawyers remained uncertain about their finances and didn’t return to collecting. Indeed, professionals in both industries were still struggling in 2014, as these quotes confirm:
Doctors
“At the same time, salaries haven’t kept pace with doctors’ expectations. In 1970, the average inflation-adjusted income of general practitioners was $185,000. In 2010, it was $161,000, despite a near doubling of the number of patients that doctors see a day.”
–Wall Street Journal, August 29, 2014
Lawyers
“Nationally, 11.2 percent of [law school] graduates from the class of 2013 were unemployed and seeking work as of Feb. 15, up from 10.6 percent in 2012. Only 57 percent of graduates were working in long-term, full-time positions where bar admission is required, which is an increase of almost a full percentage point over 2012.”
–American Bar Association, 2014
Again, many mid-level galleries are still in business despite the dual challenges of a key consumer sector not buying during this time and the perceptions created by reports of their relatively sluggish sales. The fact so many remain in business suggests we have not encountered a truly existential threat to the entire middle market, but these dual challenges do contribute to a significant business problem for this sector, which is unreliable cash flow. Specifically, a hard-working dealer can often still make ends meet and keep the doors open despite sluggish sales, but it’s difficult at this level to take advantage of the key opportunities that come along, when they do, if cash flow is a continuous problem. And so the following strategies for the challenge of “relatively sluggish sales and the loss of a key consumer sector” focus predominantly on improving cash flow.
Cash Flow Strategies for Mid-Level Galleries
Consider the following case example as an illustration of how insufficient cash flow can be a particular problem for mid-level galleries struggling to become top-tier galleries or simply to improve their fortunes.
Case Example 1: It’s mid-August.
Your gallery finally got off the waiting list and accepted into Art Basel in Miami Beach (ABMB), which takes place in December. But the participation fee is due immediately. Because you had been on the waiting list several times before, but never before invited to participate, you weren’t really expecting to get into ABMB this time either, and so you hadn’t set aside the considerable amount of money it costs to do the fair.
But this is a “can’t-miss” opportunity to raise the profile of the gallery. If you can be seen to be moving up in the art world, the resulting confidence among your collectors and artists will help you reach that next level.
So you call your gallery angel, a doctor, and ask her to help, by buying something from one of the artists she supports. But she tells you that her practice is suffering at the moment, and so she’s scaling back on her art patronage. She passes on the opportunity to make a purchase and help you out.
You then turn to the collector you sold a major artwork to at some art fair over the summer, but who still hasn’t sent you a check. Their assistant tells you they’re on holiday in Ibiza when you call. Apparently they lost their mobile phone on the beach.
It’s the slowest part of the sales year for your gallery. But your overhead has not gone on holiday.
The ABMB participation fee is due.
Below are several strategies for improving cash flow to be able to take advantage of art fair opportunities as they come along, followed later by strategies for improving cash flow for mid-level galleries in general.
Art Fair Opportunity Cash Flow Strategies
Factoring
Factoring is the practice of selling your accounts receivable (that is, your invoices) to a third party (called a factor) at a discount. Essentially, they give you the money now, minus their commission, and then they follow up with the collector for payment on the art. This can be helpful with collectors who notoriously take a long time to pay, but it also adds a middle man into the dealer-collector relationship.
The Frankfurt-based company, Foundation, specializes in art world factoring. On their website (www.foundationtm.net) they describe themselves as a “supporting partner” particularly for emerging and mid-level galleries. To be eligible to use their services, a gallery must first apply for membership (which includes a US$200 fee) and pay annual membership fees ($150). Each invoice a Foundation member wishes to sell becomes a “ticket,” and upon approval of the ticket, the member receives 100 percent (for small tickets, defined as invoices totaling between $1,500 and $3,499) or 90 percent (for large tickets, defined as invoices totaling between $3,500 and $20,000) of the invoice (minus a “handling fee” of $150 for small tickets and 3.8 percent of the total invoice for large tickets) within forty-eight hours. For large tickets, the balance comes after thirty-five days.
Using a $10,000 sale as an example, then, a mid-level gallery wishing to use this service will need to pay $350 to apply and become a member and then pay 3.8 percent of the sale (or another $380), for a total of $730. Of course the application fee is only paid once, and the membership fee is annual, but in this example, a first-time member would lose 14.6 percent of their commission in order to receive $4,270 within two days. (Remember, most consignment arrangements with contemporary artists are 50 percent of the sale price, and so the gallery would get to keep only $4,270 from this sale after factoring fees [$10,000 – 50 percent to artist = $5,000 - $730 factoring fees = $4,270 to gallery.) That percentage would drop the next time they used the service, of course, presuming they did so before the annual membership fee was due, but unless the artist was willing to split the 3.8 percent handling fee, the gallery’s still losing a significant percent from their half on each such ticket.
The business reality here, of course, must be considered in terms of how much good getting that money quickly could do for the gallery. If another opportunity, such as being accepted into a major art fair, would need to slip through their fingers because a collector takes too long to pay an invoice, factoring could indeed be very valuable. According to a recent report on Foundation in The Art Newspaper, the company has “more enquiries than [they] have been able to process.”9 But in an industry known to be resistant to contracts, factoring still seems to have some convincing to do. In the same article in The Art Newspaper, Heather Hubbs, the director of the New Art Dealers Alliance, said, “I have not heard of anyone using this specific service, nor others like it.” She went on to voice what many in the industry feel, though, saying “any support a small gallery can get is extremely helpful and useful.”
One-Time Backer for an Art Fair Opportunity
Many art galleries have financial backers who invest in the business and either remain silent partners or participate in its operations. The number of gallery backers who are silent is, of course, nearly impossible to gauge, but there are enough cautionary tales about epic—even business-ending—disagreements between dealers and their active or silent backers to make most young gallerists quite skeptical of such arrangements. As noted in my first book, How to Start and Run a Commercial Art Gallery, the key to any such arrangement working well is a clear, solid exit strategy in a signed contract.
Special one-time backing arrangements, however, can resolve immediate cash flow problems and help dealers seize opportunities that they may otherwise have had to pass on. In this context, a backer agrees to front the money needed to participate in a fair, for example, with the terms for repayment carefully spelled out in detail. Assuming sales will be made at the fair, the repayment arrangements might vary from the full gallery commission from each sale going to the backer until the debt is repaid to, perhaps, half the gallery commission from each sale goes to the backer until the debt is repaid, or some other similar agreement.
Of course, getting the backer to agree is the first step. As the case example above indicated, even those inclined to support the gallery may not always be in a position to do so or be willing to share the risk. But one approach here that I have seen work well is to offer the prospective backer a chance to be personally involved in the fair. Certain collectors are curious enough about the operations of the “glamorous” contexts of art fairs that, given an opportunity to be a “dealer for a day,” they will take it. Consulting them on installation designs, involving them in the planning meetings, or having them actually work the booth often provides an intriguing enough “peek behind the curtain” for them to sign on. Many dealers reading this may at this point think, “No way. It’s tough enough already at fairs without having to mix in the complex situation of selling while entertaining a valued collector to support the gallery.” To that, I would suggest most collectors who agree will quickly recognize just how much work it is and not wish to spend too much time being a dealer, so this pitch may still be worth trying.
Booth Collaborations
Currently many art fairs are accepting proposals from two galleries for a joint booth idea, often one presenting an interesting curatorial perspective (perhaps with a rising emerging artist juxtaposed with one more historically recognized, or a thematic installation). Not only do such booths gain media attention, but they obviously cut the costs for both galleries considerably. The advantages here extend to include that with such proposals being popular with many fair’s selection committees (at the moment anyway), such collaboration can improves a gallery’s chances of getting into the fair. It can be a win all the way around.
Talk with the Fair Organizers
I presented some of these ideas at a Talking Galleries symposium in Barcelona in late September 2014, including the case example above. In the audience just happened to be Annette Schönholzer, former director of New Initiatives for Art Basel, and during the talk she noted that such cash flow issues are indeed something many fairs are willing to work around for the galleries they wish to have participate. Telling the fair that invited you from their waiting list that it may take you some time to raise the participation fee is something they have heard before and are often able to be patient about. In other words, rather than pass on the opportunity, explain your situation to the fair and learn what might be possible for payment arrangements.
Overall Cash Flow Strategies for Mid-Level Galleries
During my research, many dealers (of various levels) reported that for six months of the year they do not sell enough art in their physical gallery to even cover their monthly “brick-and-mortar” space expenses. What had seemed to be a more spread-out selling season in years past has now been consolidated, in large part because of the increase in art fairs, auctions, gallery weekends, and other such events. In New York, the better months for selling out of the actual gallery tend to be mid-September through mid-December and then March through June. The other six months, sales drop off, and the galleries exist off the money they made during the better months. This has led to an increased interest in ways to increase cash flow during the slower sales months (overhead continues even if the sales don’t) or in general. Below are some of the strategies mid-level contemporary art galleries in particular are using or at least considering to order to improve their overall cash flow.
Secondary Market Sales
Developing a niche in the secondary art market can be the best long-term cash flow solution for mid-level galleries dedicated to a program that doesn’t always keep them solvent. Doing so requires expertise and can require investment capital, but all the dealers I consider mentors, whose programs are challenging to sell and who yet continue to promote the artists they believe in, report that they can only afford to do so because they are also active in the secondary market.
Magnus Resch, founder of the collector database Larryslist.com and author of the book Management von Kunstgalerien (which is slated to come out in English in 2015) noted in an article in Artnet that: “[For new galleries] to be viable in the long term, it requires the revenue potential of more high-end dealing. Successful galleries cannily use secondary art market income to cross-finance the capital and time invested in building up young artists. And they do this right from the start. Growing with the artists is a nice idea. But if they don’t grow you die. So better diversify.”10
The catch here, of course, is again time and money. Any secondary market niche that is easy to develop will likely involve plenty of competition, and the dealer with the deepest pockets can often secure the best inventory. Even working entirely via consignments to build an overlooked (i.e., obscure) genius’s market basically from scratch (and hence with less competition) can take years of significant work. Then again, recognizing that no matter how hard you work on your primary market sales they are just not likely to happen for six months of the year can free you up to spend that downtime developing the connections and knowledge needed to compete more effectively in a niche secondary market that can eventually turn quite lucrative and support the primary market program.
Complementary Businesses
Knowing that their “brick-and-mortar” expenses are only technically paid for via the sales in those physical spaces six months of the year, some galleries have begun exploring other means of making income through those spaces to help increase cash flow during the slower sales seasons. Not each of these following examples was necessarily started specifically to increase cash flow (that is, they may have been simply part of the gallery’s overarching vision), but they each illustrate a side business that complements the standard primary market gallery model run out of the same space.
My favorite complementary business in a gallery space is the art bookstore in STAMPA gallery in Basel, Switzerland. Not only does STAMPA participate in some of the best art fairs in the world, including Art Basel, but their bookstore is also considered the finest in their city. Definitely part of the gallery’s initial vision, the bookstore specializes in “publications on art, photography, architecture and design as well as videos, artists’ books and editions.” The genius of this complementary business in my opinion is how it helps slow gallery visitors down, which is a growing concern among dealers whose clients increasingly just pop in and out while gallery hopping, which is particularly problematic for programs that benefit from longer viewings or more in-depth discussion about what’s on exhibition.
Another popular gallery complementary business (albeit one that no longer exists) was Passerby, the full-fledged bar at the front of the space where New York dealer Gavin Brown was previously located in the Chelsea district of Manhattan. Not only an easy destination for entertaining collectors and artists, the bar continued operating long past regular gallery hours, but served as a constant promotional tool for their current exhibitions. While not as integrated into the genteel gallery model as a bookstore, perhaps, Passerby did help establish Gavin Brown’s gallery as an alternative context, which lent credibility to some of the less traditional exhibitions he has since became world-famous for presenting.
Interstate Projects is a younger gallery in Brooklyn that executive director Tom Weinrich has supported, in part, through subleasing sections of his overall space out as artist studios. Located in the relatively less expensive district of Bushwick, where many artists already have studios and a strong artist community has developed, Interstate is a good example of perhaps the most direct complementary business a primary market gallery can run: one serving the needs of contemporary artists. I should note that in mid-January 2015, though, Interstate Projects announced that it was switching from a for-profit to a not-for-profit exhibition space.
Another complementary business dealers are increasingly starting (and one we will examine in much more depth in Chapter 8) is a new art fair. Although they are run by large corporations now, many of the world’s top art fairs, including Art Basel and the Armory Show, were initially founded by art dealers who saw a need for the networking and sales opportunities that art fairs can provide. As discussed in Chapters 3 and 9, setting a fair up is a relatively straightforward process, but as a business it can take a few years to turn profitable. My partner Murat Orozobekov and I (initially together with Wendy Olsoff and Penny Pilkington of New York’s PPOW gallery), launched the Moving Image art fair in 2011. Organized out of the same space as the gallery, the fair has since evolved to where it helps pay a significant amount of the collective overhead expenses.
Time-and-Place-Specific Solutions
When the recession hit in 2008, and it felt as if someone had cranked closed the faucets of our gallery’s cash flow, we made a conscious decision to turn them back on by launching an editions/multiples collaboration with another gallery, using the hypothesis that while few people were confident enough about their futures at that point to buy much art at typical mid-market prices, artworks in large editions, ranging from $100 to $600 each, should continue to sell well. Of course, any such venture would depend on the quality of the editions, but I can report that our editions sold very well indeed (many selling out entire editions of 100), and the effort resulted in exactly what we needed at that time: it kept money continually coming into the gallery, even if only in smaller amounts.
The time-and-place-specific thinking that led to the editions collaboration was also the realization that we knew plenty of collectors who liked to acquire new works on nearly a monthly basis, but their accountants were warning them against any large purchases. We deduced that works that would fall within the range of their normal monthly expenses wouldn’t raise the accountants’ eyebrows. Also key to our decision was that we didn’t want to undo the hard work we’d done to build the markets of our artists by lowering their prices. Considering the responses we were getting from collectors, it was clear that little of our artists’ usual work was likely to sell for the time being, so we offered them lower-priced work in editions that were obviously a bit outside the artists’ usual practice. This kept the artists’ names out there, gave them and the gallery some (versus no) cash flow, and kept us busy and more optimistic during a time when many other galleries were closing. The satisfaction for me in that episode was analyzing the realities of our collectors’ situations and then matching that with our goals for our artists’ careers and the gallery’s needs.
Rising Rents in Gallery Districts (Overhead)
Every time a gallery moves, whether because they want to or they have to, they see a huge outflow of cash for moving costs, build-out costs, new business cards and stationery, advertising the move, and so on. When a gallery is thriving and wants to move to a bigger space or better location, the psychological impact of shelling out the moving expenses is usually overshadowed by excitement and the potential increase in sales that being seen “moving up” can bring with it. When a gallery is forced to move, because their current location becomes unaffordable, all those expenses can be somewhat emotionally defeating, especially if they are forced into a less-desirable space or neighborhood. Moreover, for mid-level galleries already selling less than their higher- or lower-level colleagues, being forced into an inferior gallery space can dissolve that “successful” aura they are working hard to project.
Rents in the traditional gallery districts of a large number of major cities went through the roof between 2012 and 2014. In London, rising rents in the East End forced a number of galleries to relocate11 or to close.12 San Francisco’s tech boom caused a real estate feeding frenzy that displaced or closed an entire generation of mid-level galleries.7,13 Mid-level dealers I’ve spoken with from Berlin to Barcelona have cited quick-paced gentrification and the resulting sky-high rents as forcing them to seek out new locations. And in New York, Chelsea district galleries saw rents double when many of their leases expired in 2013,14 while even in the more-affordable Lower East Side, rents still increased by as much as 33 percent.15 As The Art Newspaper reported, the mid-level galleries (again, older than ten years, the average length of many New York commercial real estate leases) were hit particularly hard by rising rents:
Rents are rising everywhere. Prices have more than doubled in Chelsea and have risen by around 30 percent to 35 percent in the Lower East Side, dealers say. Middle-level dealers have been hit hardest. Larissa Goldston moved from an upper- to a ground-floor space in Chelsea last year, but is now without a home because the building was torn down to make way for a new residential tower. “Can I afford a gallery space in this landscape and this market? It’s complicated to be in the middle ground,” she says.15
What further distinguished the impact of rising rents for mid-level versus top-level or mega-galleries, in New York at least, was how many older galleries had learned their lesson during the gentrification-influenced migration out of SoHo a decade before and bought their buildings or spaces outright in Chelsea, when it was a grimy warehouse district and buildings were affordable. Now, not only are top-level galleries not being forced to move again, but the increased capital their owned spaces represents further enables them to make choices or offers to clients that many mid-level galleries cannot hope to match.
Strategies for Addressing Rising Rents
Perhaps the most attractive strategy for many mid-level galleries facing undesired moves because of increases in their rent is one of the complementary business ideas noted above. While it may be impossible to incorporate a bookstore, bar, or studio space into their current location, being forced to move does open up the latitude to choose the next space with one of these sideline businesses in mind. Even if another business does not make sense, however, a forced move remains an opportunity to re-imagine what the gallery can be and how it can operate. Below are two strategies (one more concrete than the other) that being forced to relocate often spur dealers to consider, as well as a vision many have talked about for years approaching possible realization in San Francisco.
“Post-Brick-and-Mortar” Gallery Models
While no clearly superior example of a “post-brick-and-mortar” gallery model has emerged that addresses all the disadvantages of not having a permanent exhibition space, there has been a great deal of discussion, particularly among mid-level galleries facing rising overhead and shorter in-house selling seasons, about what that might look like. The thought process here essentially focuses on unfortunate realities like a big decrease in foot traffic in the gallery, sales increasingly happening more via art fairs or online channels, and the six-month period when the physical space is often literally not paying for itself. “If the majority of my sales are at fairs, why am I paying all this overhead for a space fewer and fewer people bother to visit?” is a common refrain.
In Chapter 7, we will examine more closely some of the post-brick-and-mortar models that various dealers are trying out, but among the more cynical responses to the concept of a “post-brick-and-mortar gallery” is that it boils down to former dealers now operating as consultants but still wishing to participate in art fairs. And that may eventually emerge as a viable model. While the major art fairs still require participants to maintain a program in a physical location, the directors of some of the satellite fairs I’ve spoken with indicate they’re softening up their position on that requirement. In short, we may be entering a period in which it is not having a physical space alone that determines whether a dealer can participate in an art fair, and so as a strategy to rising rents, this option may deserve more experimentation. Again, we will explore such models in more depth in Chapter 7.
Relocating to Another Region
The histories of the contemporary gallery districts in major art centers like New York or London have included regular cycles in which dealers were forced to migrate out of a neighborhood that they had paradoxically played a major role in gentrifying. (A great analysis of the factors that force gallery migrations, at least in New York, is found in Ann Fensterstock’s book Art on the Block: Tracking the New York Art World from SoHo to the Bowery, Bushwick and Beyond [Palgrave Macmillan Trade, 2013].) In New York, the current real estate climate has left very little in affordable undeveloped neighborhoods in Manhattan, and even Williamsburg and Bushwick in Brooklyn or the Lower East Side and Upper East Side neighborhoods in Manhattan are becoming or are already too expensive to encourage much more migration beyond the galleries already located there.
So one strategy we are seeing more dealers try recently has been to relocate a mid-level gallery to an entirely new region of the country. Examples of locations that dealers previously located in Chelsea opted for instead include Los Angeles (which is a growing art center but perhaps still not yet a top one, and certainly less expensive), Hudson (in upstate New York), Kansas City, and Miami. Reports from dealers who have relocated to each indicate they’re doing well in their new locations and indeed enjoying the lower expenses. Moreover, there can be some strategic advantages beyond lower overhead to such a move. In more out-of-the-way places, where there is less—if any—competition, dealers can work with more high-profile artists than they can in the highly competitive major art centers. Building your dream program, because the artists you wish to work with have no other representation for miles, can make a big difference in how happy you are as a dealer, as well as which collectors you can attract at the international art fairs. Furthermore, because many major fairs seek geographic diversity in their exhibitors list, being the best gallery from a smaller art region can make it easier to get accepted into the fairs than being just one of several good galleries in a major art center.
The “Minnesota Street Project” Model
From the beginning of the recession in 2008, many generously minded people from other industries advised struggling art dealers to collaborate on a new destination location, so as to lower their collective overhead and benefit from sharing their collective audiences. Even when it was suggested that a patron might lend financial support to such an effort, generally the response from dealers was to note how individualistic galleries are, let alone how competitive. In short, they were not interested. Having watched this discussion for a while now, I’m convinced things simply haven’t gotten bad enough in most art centers for galleries to give this model a try.
Things have gotten bad enough in San Francisco, though. Rising rents have all but wiped out a generation of mid-level galleries in that city. And so it is not surprising perhaps that the first major attempt to implement such a collaborative model is currently underway there. Called “The Minnesota Street Project” (minnesotastreetproject.com), it is the brainchild of collectors Deborah and Andy Rappaport (a respected social entrepreneur and retired tech-industry veteran, respectively). Set to open in early 2016, the Minnesota Street Project’s goal is to provide “affordable spaces and compelling programs to encourage the creation and appreciation of contemporary visual art in the city of San Francisco.” The vision for their 35,000-square-foot warehouse is to house art studios, art galleries, nonprofit arts education entities, and other exhibition spaces, as well as a café and retail spaces. Their longer-term plans include the development of another nearby facility to house additional studios, art storage facilities, and artistic workshop spaces.
Threat of Poaching by Bigger Galleries and New Questions about Loyalty (Long-Term Planning, Possibly Cash Flow)
It is often the case that a mid-level gallery has a balance in their program of some artists who sell very well and others for whom they are still developing a market, or even some artists who will likely never sell well, but who are important to the curatorial context the gallery is building. It is understood by dealers that the artists who sell well are crucial to the ability of the mid-level gallery to invest in the efforts that can help them reach the next level: efforts like more expensive art fairs, higher-quality promotional materials, paying production costs for artworks, hiring more staff, etc. When mid-level galleries lose even one of their better-selling artists (and the income for their business that artist would bring), it can have a huge impact on their plans, if not their ability to remain in business altogether. Even when it doesn’t involve a huge financial impact for mid-level galleries, having their top artists poached still involves a potential loss of prestige. The hole it can leave in their often carefully built curatorial context can also present a major new challenge in rebuilding.
Most dealers at any level are quite matter-of-fact about poaching, at least publicly. “It’s a normal part of the business” they will say when asked, even as they otherwise note how personal their relationships with their artists tend to be. In a context of sluggish sales in the middle sector of the market, combined with upper-level galleries very obviously growing their empires by adding new highly bankable artists to their rosters from other galleries’ rosters in order to afford their expansions (see Chapter 2), a number of high-profile artists who moved from their mid-level to a top-level or mega-gallery in New York in 2013–2014 helped generate the perception that poaching had reached a new, rampant level and posed a serious, if not existential, threat to mid-level galleries. Why this threat might be viewed as “existential” relates to the core concept of the Leo Castelli model, and how it is based on the premise that all strategic and many financial choices in marketing an artist’s work feed into the intention of both artist and dealer to grow successful and old together. This is, of course, a somewhat romantic notion, but the degree to which the artist and dealer believe in it also influences the risk a dealer is willing to take on in promoting new, unknown artists. In short, it explains why many dealers will make business decisions that only make sense in a very long-term view.
For example, a dealer who believes his relationship with an artist will last for many years may agree to finance an exhibition that is less likely to sell very much, but highly likely to grab a good deal of press for the artist, thereby increasing her name recognition in ways a more salable exhibition may not have accomplished. These kinds of exhibitions (sometimes referred to as “statement shows”) are often very popular with the press. Make no mistake, though; statement shows often represent a lost opportunity for gallery and artist to earn money during that exhibition. The dealer is willing to postpone the opportunity to see a return on what it costs to present that body of work because the hope is that getting great press will profit both artist and dealer much more down the road when the artist is more well known. However, should this artist take her press and run to a larger gallery before those later opportunities to profit come along, the first dealer is simply out of that money. Multiply that risk across a roster of artists, and the nature of what types of exhibitions galleries are willing to present begins to change unless there’s more reason to expect the working relationship to last.
More than that, if galleries lose the motivation to experiment with ways to get attention for their mid-career artists who have not necessarily benefited from an initial buzz, because doing so only leads the bigger galleries to then come along and poach them, the entire mid-level model becomes unattractive. Dealers previously willing to do the hard work of nurturing artists during their post-emerging/pre-blue-chip phase, because of faith that one day it would all be worth it, no longer have any motivation to play this role in the gallery system if their artists will systemically get poached after they finally build a solid market for them. Enough of this, and the mid-level gallery ceases to exist . . . or so the theory goes.
In the spirit of full disclosure, I should note that I had perhaps helped generate the perception that this new flurry of poaching presented an existential threat to mid-level galleries with a number of posts on my blog (that were subsequently cited more than a few times) in which I was responding to artists moving from mid-level galleries, that I knew depended on sales from their artwork, to bigger galleries. I happened to know the impact of those moves on those mid-level dealers was significant, but the semi-apocalyptic narrative I derived from these anecdotes and conversations with some of those dealers eventually began to tug at the back of my consciousness. How rampant, really, was poaching among galleries between 2008 and 2014? More importantly, did it really represent the existential threat to mid-level galleries that it seemed to?
To find out, I researched the movement of artists in and out of the rosters of thirty-two high-profile New York galleries. By “high-profile” I mean galleries who would normally participate in one of the major fairs that take place in New York or have high-profile artists currently worth poaching (or worth it to the press to write about a poaching). There are an estimated 600 galleries in New York, but the kind of poaching that has been sending shockwaves through the entire gallery system has typically happened more among these high-profile galleries (that many galleries aspire to become) than the lower-profile ones. Taking as a baseline number then, and in lieu of any more concrete metric, that roughly sixty New York galleries take part in any one of the major international fairs held in New York City, the thirty-two galleries included in the research represent a sample size of 50 percent of the total population in question. (Clarification on methodology: My reasoning for focusing on this subset of “high-profile” galleries is that even if a mid-level gallery is not currently part of this subset, a new culture of rampant poaching from larger galleries would still pose the same threat to their eventually reaching the next level.)
Of the thirty-two galleries I researched fourteen were mid-level galleries, fourteen were top-level galleries, and four were mega-galleries. For each gallery I created a spreadsheet comparing their 2014 rosters (as presented on their current websites) with their 2008 rosters (as presented on the archived 2008 version of their websites viewable in the “Way Back Machine” [https://archive.org/web/]). I then researched each artist who had either left or joined each roster, thoroughly reviewing their CVs on their personal artist websites and all their other galleries’ websites (including those outside New York), researching any press about their movement, and reading the archived news sections on the websites for both New York galleries for articles on newly represented artists or any promotion of the artists assumed to still be part of the roster when published. It took quite a few months. In the end, the data suggested a number of very interesting trends, not all of them reflecting well on the mid-level dealers I had sought to champion. I chose New York obviously because of personal access to more insider information here. Much of what these galleries’ websites did not reveal I have been able to learn through direct conversations or through the grapevine.
Here it behooves me to clarify my findings with particular care. Even where I have firsthand knowledge from dealers or artists that artist X was indeed poached by gallery Y, I recognize that humans have all manner of reasons for exaggerating or leaving key information out of their accounts of such circumstances. Therefore, I will note that the following information only assuredly represents the movements of artists from one gallery to another, and even where it would appear obvious that the artist strategically moved from a smaller gallery to a larger one, I am not definitely asserting that “poaching,” per se, was involved. Mind you, I go to this length in making this disclaimer because, despite how many dealers will insist that poaching is just another normal part of the business, few of them seem comfortable discussing it in the same way they would discuss shipping costs or preferred insurance companies, let alone admit they had poached an artist from a gallery they knew depended on his or her sales. Moreover, my goal here is not to point fingers, but rather to identify patterns and eventually to discuss strategies for handling poaching.
Therefore, no names of artists or galleries will be used, only an anonymous ID indicating the level I assigned to each gallery (using all the criteria outlined in the gallery level definitions above) and an arbitrary number. Before presenting the data that would indicate poaching trends, however, let’s first look at movement of artists in and out of these galleries’ rosters more generally. In the tables below, MG = mega-gallery; T = top-level gallery; and M = mid-level gallery.
Increase in size of roster and retention of artists among 32 high-profile New York mid-level, top-level, and mega-galleries from 2008 to 2014
Breaking things down by gallery level here, between 2008 and 2014 the increase in the number of artists on the gallery roster among the sampled mid-level galleries averaged 18 percent; for top-level galleries, the increase averaged 10 percent; and for mega-galleries it averaged 39 percent, which is consistent with the distinction made above between how top-level versus mega-galleries prioritize the rapid expansion of their empires. Breaking down by level the percentage of retention (that is, the artists each gallery had represented in 2008 that they still represented six years later), the mid-level galleries averaged a 54 percent retention rate; the top-level galleries averaged 69 percent; and mega-galleries averaged 68 percent. Again, none of these particular results can be interpreted to reflect anything significant about poaching. There can be any number of reasons for artists leaving a gallery, including death, a career change, personality clashes, and so on. Rather, these averages represent merely the overall context in which artists switched or left galleries during this time, whether via poaching or not.
However, when mapping which artists left one gallery to work with another, especially when it would seem from their CVs and press that the gallery being left would feel a significant impact from that decision (mostly financial, but also perhaps prestige-related), a general impression of how many such movements would strike one of the dealers involved as “poaching” or close enough begins to emerge. Here again, though, I feel it is important to choose my words with care. The table below should not be interpreted as evidence of poaching, but rather my interpretation of the months of research and analysis into when the move of each artist was likely to have had a significant negative impact (or not) on the gallery being left. Again, though, clearly there is only so much I can tell even from the materials I reviewed or the conversations I have had.
Percent of change in gallery rosters likely having a negative (or no negative) impact on 32 high-profile New York mid-level, top-level, and mega-galleries from 2008 to 2014
The most surprising result here for me was how the totals suggested that, on average, only 33 percent of all moves by artists between these galleries likely had a negative impact on one or the other involved gallery, as opposed to the remaining 67 percent of moves that would appear to have only had a negative impact on the involved artists (we’ll examine that notion in more detail below). Then again, 33 percent is still negative enough to warrant discussing strategies for how to minimize the impact of such moves when they happen, which we will do below.
Breaking down these numbers by gallery level, we see that the average percent of change in each gallery’s roster that was likely to have a negative impact on that gallery was 13 percent for mid-level galleries; 16 percent for top-level galleries; and 6 percent for mega-galleries. In this context alone, mid-level galleries would seem to have less reason to complain than top-level galleries about losing artists. Of course, these numbers tell us nothing about the percentage of total sales the artists leaving the respective rosters brought in for each gallery. As noted above, many mid-level galleries have some artists who sell well and often many others who they are still just building a market for, meaning they can less afford to lose their best-selling artists than arguably can a top-level gallery, which generally has many more artists selling well. Finally, as expected, when a mega-gallery signs any artist, the likelihood of them moving would appear to drop considerably.
Let’s return to the negative impact these findings suggest were felt only by artists. To help understand the landscape here, I looked at the data in two contexts. First was a comparison of the percentage of artists who seemed to have just been dropped with the percentage of artists from each gallery who were likely poached or somehow otherwise ended up with another New York gallery, to get a sense of whether galleries were dropping more or fewer artists than they were having poached. Second was to calculate what percentage of all the artists on each gallery’s 2008 roster were presumably just dropped by that gallery, to determine across levels which gallery sector was dropping artists the most or least. I will expand on what I assume each context means below, but first the numbers:
Percent of artists presumed just dropped vs. percent of artists with another gallery by 2014 (including those presumed to have been poached)
Looking at these numbers by gallery level, the average percentage of artists represented by mid-level galleries in 2008 who were dropped and still had no other New York gallery by 2014 was 66 percent. The average for top-level galleries was 56 percent, and for mega-galleries it was 62 percent. For each level, the percentage is more than 50, suggesting that artists who are dropped by New York galleries have a tough time finding new ones. Again, there can be any number of reasons galleries drop an artist, but I feel safe in assuming the number one reason among younger and mid-level galleries is that the gallery had been unable to find enough buyers for their artwork.
As these results became apparent during my research, I began to wonder whether the loyalty it takes to maintain the Leo Castelli model, which I had assumed was waning predominantly among a new generation of ambitious artists, had not instead first or correspondingly dissipated among a new generation of ambitious art dealers. To help shine some light on that, I looked at the findings solely from the point of view of how many artists were dropped from each gallery’s 2008 roster. In other words, rather than retention, what was the dismissal rate among galleries in each level, and what role might that also play in the evolution of the contemporary art market? The phrasing in the table below might sound a bit harsher than each individual decision these galleries made would warrant, but remember one central idea behind the Castelli model had been that galleries would support their represented artists, though thick and thin, for the long haul.
Percentage of artists on each gallery’s 2008 roster who appear to have been just dropped
Now here I must admit that I have been as guilty, if not more so, of dropping artists as any other New York mid-level dealer I know. At the time, each such decision seemed essential to meet our goals for the remaining artists on the gallery roster, but in hindsight it is clear that I had simply rushed into representation with some of them, which is a topic we will discuss more below. Ultimately, though, seeing the numbers above suggested to me that if the Leo Castelli model has indeed given way to recent developments in the overall marketplace, some of the blame can be laid squarely at the feet of dealers themselves.
Breaking the numbers down by level, the percentage of artists on 2008 rosters just dropped by mid-level galleries averaged 25 percent; for top-level galleries it averaged 14 percent; and for mega-galleries a mere 4 percent. There are other considerations here, including that mid-level galleries are often still actively taking on emerging artists with little to no existing market, whereas top-level and mega-galleries tend to only sign up highly bankable artists. But the “throw them all against the wall and see which ones stick” method of representing artists is not consistent with the romantic notion of “we are in this together, for the long run” that many dealers will insist defines their gallery.
It should also be noted here that of the high-profile poachings in 2013–2014 that originally led me to view this as a serious threat to the mid-level gallery ecosystem, each dealer who had been left had done a truly phenomenal job in promoting those emerging artists. They were the first dealers in New York to exhibit them, often with early-on head-scratching among the culturati and less-than-stellar sales, and yet they stuck to their guns and kept promoting these artists into the limelight, until larger galleries took notice and eventually wooed them away. In other words, they did what we applaud the best dealers for doing: discovering important artists and convincing the world to take notice.
I know these decisions are often difficult for artists, and the top-level and mega-galleries often have the resources to make it appear a no-brainer that such moves are wise, but whether it began with the new generation of dealers or the new generation of artists, the concept of loyalty at the heart of the Leo Castelli model seemed increasingly quaint and antiquated by 2014. Here again, I began to suspect my objectivity was being influenced by my admiration for the galleries and dealers who had been left. So I conducted an online survey, promoted via Facebook, Twitter, and my blog, which resulted in 1,380 self-declared artists responding from over 31 countries across North and South America, Europe, Asia, Australia, New Zealand, and the Middle East.
One of the questions in the survey sought to gauge whether “loyalty” to their galleries still mattered to artists. Each of the artists responding was first separated by whether they had current gallery representation or not. Of the respondents, 60 percent (or 835) of the artists had no current gallery representation, while 40 percent (or 545) of them had representation with at least one gallery. The loyalty question was framed slightly differently for the two groups. For artists with gallery representation, the question was “In general, how important is the concept of ‘loyalty to the gallery’ to you in your relationship/s with your gallery/galleries?” Their responses were
| RESPONSE | Number | Percentage |
| Extremely important | 86 | 25.1% |
| Very important | 150 | 43.9% |
| Moderately important | 83 | 24.3% |
| Only somewhat important | 15 | 4.4% |
| Not at all important | 8 | 2.3% |
For artists without gallery representation, the question was phrased “In general, how important is the concept of ‘loyalty to the gallery’ to you in a relationship with a gallery?” Their responses were
| RESPONSE | Number | Percentage |
| Extremely important | 79 | 17.3% |
| Very important | 202 | 44.2% |
| Moderately important | 107 | 23.4% |
| Only somewhat important | 43 | 9.4% |
| Not at all important | 26 | 5.7% |
Of the artists with current representation, then, 93.3 percent of them considered “loyalty to the gallery” moderately to extremely important, whereas among artists without representation only 84.9 percent did, which is understandable perhaps; why would artists who don’t have galleries feel any loyalty to them in general? Overall, though, these responses suggest that artists still consider loyalty an important part of the artist-gallery relationship. How many of these same artists had perhaps been “disloyal” by permitting themselves to be poached by another gallery is not something I asked, but the disparity in the percentages of artists who viewed loyalty as “important” versus the percentage of galleries that had “just dropped artists” between 2008 and 2014 in New York suggests again that the Leo Castelli model had been abandoned more by dealers than by artists, and in particular by mid-level dealers scrambling to survive the Great Recession.
On the other hand, the impact on mid-level galleries when their best-selling artists are poached can be much more significant than it is on larger galleries. Mid-level dealers I’ve spoken with have shared that even one best-selling artist deciding to leave their roster had greatly changed how they viewed their relationships with all their artists. Moreover, even the threat of poaching can make mid-level dealers spend resources on defensive measures that they might have otherwise spent growing the gallery. Below are strategies for addressing poaching from both the notion of what role loyalty plays here and how to minimize the impact when poaching does occur.
Strategies for Approaching Loyalty and Poaching Issues
Loyalty Strategies: Encourage More Loyalty Among Young Gallerists
Because of the amount of money in it at the moment and the total number of dealers seriously seeking a chunk of that money, the contemporary art market has become hyper-competitive at the same time that all of life, and the way information moves around in it, has quickened to historic speeds. I view this new competitive and complex landscape as contributing to how many younger and mid-level dealers have repeatedly lost patience with their curatorial visions. The highly visible success of a few galleries at those levels, combined perhaps with the ego it requires to open a commercial art gallery in the first place, has made it difficult for less-successful dealers not to conclude it is their program’s fault that they are not also successful in this climate. This has led to what appears to be an accelerated cycle of trying on new artists and then letting them go if sales do not follow quickly enough.
Letting artists go was certainly more the case for Leo Castelli than his myth now would suggest, but as the survey above indicates, artists still value loyalty, seemingly more than many dealers do. Therefore, perhaps one defense against poaching is for dealers to more consistently demonstrate that the loyalty they wish to enjoy is a two-way street. If an artist sees their dealer just dropping other artists from the gallery roster, it will occur to them that they could be next. This contributes to the increased resolution among artists that if a good opportunity to jump ship comes along, they should take it. If the current model is to survive, dealers who have been in the business longer, and who frequently mentor younger dealers, might need to make a bigger point of encouraging more loyalty to the artists younger dealers sign up, explaining that the long-term benefits of such relationships, for both the gallery and the contemporary art scene at large, depend upon this kind of commitment.
Loyalty Strategies: Reconsider How “Representation” Is Discussed and Offered
My point in the paragraph above is not that a gallery should continue to represent every artist it ever signs up even if the relationship is obviously not working out, but rather that perhaps the rush to offer artists “representation” needs to be reconsidered. Younger galleries are often quick to offer artists representation as a means of protecting their initial investments in promoting their work. What if I take their work to a fair, we sell out the booth, and other, bigger galleries come along and snap them up, because I haven’t offered them official representation? Another concern is that by not offering the security of representation, the artist will view the gallery’s commitment as halfhearted and feel it’s wise to explore other opportunities. Both those concerns rise from the unrealistic expectation that when the partnership is “right,” the artist and dealer will know it because they essentially “fall in love” at first sight and that any less fantastic start is a warning sign the partnership is not “the one.” This rather romantic notion comes both from the Leo Castelli model myth and the desire on many artists’ part to find a dealer who is completely devoted to them and their art.
What seems to be needed as a measure against dealers signing up so many artists they will simply drop later is perhaps a middle phase, where it is clearly stated how much the gallery is going to invest in the artist and it is clear the gallery expects to make that money back (by making money for both of them), but that official representation should only be entered into when both parties are confident the partnership is sound. Yes, the risk remains that an artist will agree to representation with a different gallery during this “trial” period, but with a clear dialogue about how much the gallery is behind or ahead in a return on its investment, the conversation about any such defections can be less destructive for the gallery being left.
This would require, of course, more detailed bookkeeping about expenditures in promoting each artist than many galleries currently do. What percentage of the gallery website is rightly considered an investment cost in promoting that artist, for example? If an artist decides to sign up with a different gallery, knowing the total amount invested in the artist can facilitate a more productive conversation on what can be done to help the initial gallery recoup its investment (more on that below). Yes, this approach would sap some of the romance from the artist-dealer relationship, but it is having romantic notions like those smack headlong into reality that ultimately makes artists more skeptical of the gallery system, and ultimately creates even more problems around trust and loyalty.
Loyalty Strategies: Forget Loyalty
It should also be considered, as the art market grows increasingly complex, that perhaps things have changed forever, and the more romantic elements of the Leo Castelli model are no longer viable. I discussed the loyalty issue during my presentation at the Talking Galleries symposium in Barcelona in October 2014. During the Q&A, a collector in the audience said, “I have been collecting for 30 years. I think that very bluntly, we speak of the ‘art market’ . . . it’s a market of art, and you should not forget that if it’s a market there are a number of rules which are common to all types of markets . . . and I don’t think that ‘loyalty’ exists in any type of market.”
I would counter now (at the time, the presentation was winding down and I wanted to be sure the collector had time to express his opinions, so I didn’t disagree) that the question of loyalty is between an artist and his or her agent, the dealer, and that many of the issues they work out in that relationship transcend the selling of the art on the market. Often they are curatorial in nature, or even personal. And so it is not entirely within the realm of the art market, per se, that such questions emerge. But I do acknowledge that perhaps ideas around loyalty need to evolve as the market becomes more complex and competitive. I titled this subheading “Forget Loyalty,” but knowing how much value artists place on it, I’m not sure entirely forgetting it makes dealers effective agents for artists.
Still, the future of the artist-dealer relationship would seem to be one that includes more formalized agreements (that is, more contracts), which if used correctly will enhance, but not entirely replace, the way loyalty makes the partnership more effective. Part III of this book delves more deeply into how contracts are being reconceived to address evolutions in the art market and in particular the artist-dealer relationship.
Poaching Strategies: Discuss This Upfront
Like any issue that frequently leads to discord in the dealer-artist relationship, establishing a dialogue with your artists about poaching early on is a good strategy for avoiding it or making the most of it if it does happen. In particular, establish that you are always open to discussing any dissatisfaction that may develop to keep lack of communication from generating suspicion or resentment where none was warranted. Even more specifically, discuss up front how you would prefer to handle things if the artist should later decide to leave to work with another gallery. Having an agreed-upon process will enable a much more productive parting of ways.
Here I should clarify that by “productive” I generally mean for the dealer, not the leaving artist, who by this point has a new agent looking out for their best interests. The dealer being left has other artists and collectors to explain the departure to, as well as a financial interest in the leaving artist’s market: to make the most of it that they can. In short, the dealer being left often needs to wrap up sales in progress and sort through how to recoup money spent on production or framing or other such investments that they deserve to receive back. A “productive” departure is one in which all that is seen to, and the gallery being left retains some level of access to the artwork by this artist desirable enough to have been poached.
Poaching Strategies: Stay on Friendly Terms
Staying on friendly terms with an artist leaving the gallery is smart strategy, as well as professional courtesy. To help close pending sales or even arrange ongoing access to their work in the future if you can secure it, keeping your eye on the long-term goals of the gallery requires putting aside any hurt feelings and not saying or doing anything that might give the leaving artist good cause to cease all contact.
To people in other industries, this may seem rather obvious. Indeed, on the public front of it, most dealers are quite good at issuing press releases or telling reporters how the artist and gallery remain on good terms, but because of the very intellectually intimate and personal relationships that develop between dealers and artists, behind-the-scenes emotions can run high when a long-supported artist agrees to sign up with another dealer. Not letting those emotions get the best of you is important to remember. There will be many details to work out in such situations, and keeping everything on friendly terms will be worth it in the long run.
Poaching Strategies: Alain Servais’s FIFA Idea
Brussels-based collector Alain Servais, whose published ideas on the evolution of the art market we discussed in Chapter 2 and who has lectured on “an ecosystem of resistance” within the art world, has proposed one of the most intriguing and possibly most productive of ideas for handling poaching between galleries. The New York Times summarized this idea in a 2013 article on this “time of turbulence” for dealers:
To prevent gallery behemoths from enticing successful artists away from smaller colleagues, the Belgian collector Alain Servais has proposed a system inspired by the way FIFA, the governing body of soccer, regulates the trade of players, with clubs paying compensation and transfer fees.16
The idea here in more detail is that a gallery who poaches an artist would reimburse the gallery who had invested in developing the artist’s market to the point that another gallery would want to poach them. This could be in a cash amount or in an agreement to let the first gallery retain some access to the artist’s work. For example, the first gallery could be consigned one major work and a few minor works from the studio each year for a number of years, to help them recoup their investment and keep face with their collectors who had been counting on their carefully built relationship with the first gallery to secure them an acquisition.
Many of the dealers that I have discussed this idea with initially insist it is unworkable, because there is nothing motivating the galleries able to poach an artist to agree to it. Even should gallery associations add such a practice to their ethical standards, there would be nothing that forces a leaving artist to comply, short of a contract. There is nothing stopping individual galleries from establishing this idea as a “best practice,” however. A mid-level gallery I know who had had a number of artists poached from their roster (and felt a significant impact from it) noted that they were planning to poach an artist from another gallery of somewhat lesser stature. In talking through how someone has to start somewhere with implementing such a standard in the industry, this gallery agreed to offer the gallery they were poaching the artist from access to a certain number of works over a number of years to aid in the transition. If more galleries do this, it can become the norm.
Poaching Strategies: Defensive Partnerships
As noted in Chapter 2 on mega-galleries, even some larger galleries have had to make defensive moves to protect their relationships with their artists from the ambitions of mega-dealers expanding their empires in part by poaching well-selling artists from them. Emmanuel Perrotin explained his decision to open a third space in New York (as reported by The Art Newspaper) as defensive:
New York dealers poach other galleries’ artists so aggressively it may as well be a blood sport, and Perrotin feels the pressure. “My dream is to be able to keep my artists and to not feel so much the shadows of someone who wants to take what you have. It’s not an egomaniac situation. I don’t want to be the biggest; I just don’t want to lose. So I need to make a move.”17
For mid-level galleries just able perhaps to maintain one location, defensive strategies might include partnering with like-minded dealers in a different art center, to provide each other cover from the larger spaces. Paris-based dealer Jocelyn Wolff, who self-identifies his space as a mid-level gallery, discussed his partnering with Berlin-based gallery KOW in such terms during his lecture at the Talking Galleries symposium in Barcelona in 2013: 18
I co-founded a gallery in Berlin, somewhat as a protective shield to avoid seeing my most successful artists being stolen by other galleries. It was my response to the success of some of my artists, to build the project in a partnership with friends.
In his presentation, Wolff also shared that he frequently collaborates with other galleries at art fairs, which is perhaps a simpler way to test how well a partnership might work than a full-fledged gallery collaboration.
Poaching Strategies: Buy Their Work
If all that seems too warm and fuzzy for a commercial industry or your preference in conducting business, the best strategy for handling other galleries poaching your artists is to buy as much of your successful artists’ work as you can. Not only can “putting your money where your mouth is” convince collectors how important you think the artist’s work is, but as the saying goes, “dealers make money from the art they sell; they make fortunes from the art they keep.” If you own a significant amount of the work, when mega-gallery X comes along, poaches your artist, and adds a bunch of zeros to their price points, you won’t feel quite so bad about it.
Perception of Speculation vs. Connoisseurship Fueling Many Collectors’ Decisions (Sales Techniques, Programming Choices)
“You sell the inventory from an emerging artist’s first solo exhibition to your top collectors during that artist’s second solo exhibition,” a Chelsea dealer had told me back in 2000, before I first opened my gallery. He explained that it was common to have ample inventory left over from an emerging artist’s first show, because it was often only the second show that convinced seasoned collectors both that this artist was on his way toward a solid career and that this gallery was going to stand behind him and keep investing in his market. Mind you, this was before the boom (which arguably started in earnest in 2003 or so), when emerging artists’ first solo exhibitions selling out became more common in New York. Up through the leaner market of the 1990s, the notion among top collectors had been that it was smart to take one’s time, research the work, ask plenty of questions, and wait to see if the work “stayed with you” before making a purchase. For this Chelsea dealer, this slow-paced process was fine. After all, his top collectors were connoisseurs, who could be counted on to eventually see the importance of the artists he believed in, if given enough space and information.
Fast forward to 2007, when the contemporary art market was again red-hot, and it was not unheard of for an emerging artist’s first solo exhibition to sell out even before it opened. A bit of pre-show buzz via an introduction at a popular art fair, matched with perhaps news of an upcoming museum group show, and all it might take to sell the entire show before the private reception was emailing out JPEGs and the price list. Many of these eager buyers were not the more contemplative connoisseurs the Chelsea dealer had counted on, but rather speculative collectors, who often planned to resell quickly (or “flip”) the art at auction (where the profit they made would be part of a highly reported-on public record).
Then, of course, 2008 brought the Great Recession, but the selling practices and the metrics for what it meant to be “an artist to watch” (that is, an artist to cash in on) had been firmly established and widely documented online for any interested party to research on their own. When the market crept back to life a few short years later, an accelerated method, if not significant volume (more on that later), of making a lot of money by buying and then flipping emerging art seemingly began to change the culture of collecting contemporary art itself. In a nutshell, the perception became that connoisseurship had given way to speculation for this new generation of contemporary art collectors. The press picked up on this growing perception, matched it with some statistics, and before you knew it everyone was talking about the new plague of art flippers. “Lund Painting Sold for 1,500% Gain as Art Flippers Return” proclaimed a headline in Bloomberg in May 2014, whose article went on to explain, “Fueled by a flood of new collectors, flipping art has intensified recently as works by untested artists resell for escalating prices.”19
If indeed the culture of collecting contemporary art was shifting away from an emphasis on connoisseurship toward one on speculation, this represented an additional burden for the already beleaguered galleries in the middle of the market, and particularly for sales of works by their mid-level artists. Blue chip artists are essentially assumed to be well on their way to the canon, and so the lasting value of their artwork is taken for granted. In other words, when buying work by a top-level artist, the main connoisseurship questions are assumed to have already been answered. The importance of those artists’ work is considered well vetted and clearly established. As such, wealthy people view it as a safe place to put their money. For emerging artists, connoisseurship issues are also considered less important, because emerging artists’ price points are low enough that both speculators and connoisseurs can buy it without much worry. For mid-level artists, with higher prices than emerging artists, but fewer guarantees that they are headed for the canon than blue chip artists, speculative buying is much less common, and so appealing to connoisseurship becomes a dealer’s only real option for selling the work. When connoisseurship largely gives way to speculation in the way new collectors are approaching their buying decisions, then mid-level galleries are at a distinct disadvantage.
This alone could explain the evidence that while top-level and emerging galleries saw increased sales in 2013, mid-level galleries saw a decrease, but there is more to this complex situation than the early 2014 headlines revealed. Later in the year, two studies came out that suggested this new age of flipping was a bit overstated. In August 2014, the New York Times published the article “Barbarians at the Art Auction Gates? Not to Worry” in which they revealed the findings of two studies they had commissioned, which splashed a bit of cold water on the rampant flipping narrative:
[T]he data indicate that contemporary works appearing at auction within three years of their creation are not coming to auction faster than in the past, and that such flipping remains very much the exception, not the rule. Though more works come up for sale each year, the percentage of these works was essentially the same last year, less than 2 percent, as in 2007.20
Follow-up articles in the arts press did not add much clarity to the situation, unfortunately, simply republishing these studies’ findings with dismissive, even obvious, headlines (such as “Flipping Art Is Not a New Phenomenon” [Artnet News, August 18, 2014]) but without contributing any significant analysis to the either the Times report or the timing of the earlier headlines and their influence. Indeed, here again, perception had already begun to affect the reality of business for mid-level galleries. As a mentor of mine used to remind me, the plural of “anecdote” is not “data,” but I’ll share two true stories all the same as an indication of how the perception that speculation was the lucrative way to collect in 2014, as promulgated by the year’s earlier headlines, had already begun to be a self-fulfilling prophecy.
The First Story
A mid-level dealer told me of a conversation with a long-known collector she could count on for two to four purchases every year. This is a dealer with a strong mid-level artist roster and a selling style that relies a good deal on appealing to connoisseurship to place the work. The same was true in her approach with this long-known collector. When reaching out to the collector in 2014, however, the dealer was told that the collector was holding off making his usual purchases of mid-level-priced work to save up to buy one of the “hot” artists (not in her gallery) who were doing so well at auctions these days. He said he would be a fool not to get in on this game, given how much money there appeared to be in it. This signified to me that the problem now wasn’t only getting new collectors to understand the value of connoisseurship in building an important collection, which was becoming challenging enough, but that even the collectors who had once understood that were now being seduced by the sirens of speculation. If this became more widespread, mid-level dealers wouldn’t stand a chance.
In my first book, I interviewed Joel and Zoë Dictrow, New York-based collectors who have been visiting galleries on a very regular basis for over thirty years and who rank among the Top 200 Collectors in the world according to Artnet News in 2015. They kindly discussed a number of issues with me for this follow-up book, including what impact they see this recent surge in speculative buying having on galleries and collectors alike:
Compared to the high number of aspiring and actual artists, there are very few galleries with notable reputations. This new speculative environment will, no doubt, hurt many people. Artists will be exploited. They will see their careers go from hot to cold in the space of a few years because this speculative market is fundamentally a youth culture. Acolyte collectors of the buzz-hounds who market art this way will be hurt because they will spend money without knowing or caring about the art, and will be stuck with the art that can’t be sold at any price. They acquire art only with their ears, thinking only of art’s investment potential. When the art market inevitably falls as all markets do, galleries that bought into the premise that art will keep going up in value will suffer and the hot artists’ work will be un-salable. Once there is a shake-out and investment-type collectors no longer are acquiring art, the market will normalize. Unfortunately, we saw that happen in the late 1980s.
The Second Story
New York-based collector Glenn Fuhrman, who with his wife Amanda are also ranked among the world’s top 200 collectors, shared a story with me in an interview for this book as well. Working in finance, Glenn said he is frequently approached by colleagues in the industry who are interested in becoming involved in collecting contemporary art as he is well known to be. In three such cases he introduced inquiring colleagues to one of New York’s best art consultants and explained how it’s good to begin collecting with some expert advice on how one should go about it. Later on, that consultant told Glenn that those three introductions had each explained within a few minutes of their first meetings that they wanted to collect the kind of work that was likely to increase substantially in price over the next year. No amount of discussing the other rewards of collecting seemed to sway them from this position. The consultant also reported that she told the three referred colleagues that she was not the right consultant for them. Glenn tells this story not just as an example of how speculative goals are driving wealthy people toward collecting, but how formerly successful appeals to their interest in connoisseurship currently don’t seem to resonate like they used to, at least with these specific examples if not many others.
Whether the rate of flipping has reached a historic high or not, the impact of the perception that it has was already at work in changing things for mid-level dealers. Perhaps only anecdotally, sure, but still enough to consider what strategies can be used should you encounter a similar situation in your business. Below we will consider a couple of ways to respond to the perception that speculation is the best way to collect contemporary art now.
Strategies for Responding to Speculative Versus Connoisseurship-Based Collecting
I only have two strategies to discuss here, and whichever appeals to you the most more or less cancels out how effective the other one may be in your case. Personally, I would love to see more dealers work with the first strategy, even as I appreciate that it’s more difficult and less likely to succeed. My reason for preferring the first, though, is that the more galleries embrace the second strategy, the less room there will be in the commercial art system for the kind of work that is not easy to flip. As noted above, mid-level galleries only survive if they can balance out well-selling artists in their roster with those they are perhaps supporting for more personal and less business-minded reasons. There is no glory, or sense, in going out of business by standing on some sort of paradoxically anti-commercial principle. Then again, many of my favorite galleries manage to get that balance just right and over time are even able to nudge their collectors toward the less obvious choices. This is where dealers contribute to the cultural legacy of this generation, much more so than moving currently fashionable product around. Not that contributing as such has to be part of every dealer’s mission, but it can be, if they choose to make it so.
Share the Facts
One of the two studies commissioned by the New York Times discussed above was titled “Flipping Art at Auction: Business as Usual.” It was authored by Fabian Bocart, PhD, Quantitative Research Director of the Belgium-based company Tutela Capital, and by art historians Alexandra Labeyrie and Ohana N’Kulufa, who concluded that flipping is not currently at unusual, let alone historic highs. In their report, however, they also named four of the top emerging artists who were bringing the highest prices at auction in 2008. Only one of those artists had not seen dramatic decreases in their auction estimates by 2014. In other words, the long-known collector discussed above who felt he “would be a fool” not to get into the speculative contemporary art game might consider instead how statistically, and hence financially, foolish it can be to get into that game the way he was hoping to do (that is, by saving up to buy one of the buzz-heavy artists). The odds are certainly not in the majority of players’ long-term favor, regardless of how they play that game, but single purchases at that level of the market are extremely risky.
Whether sharing such information would lead that collector to continue supporting that mid-level gallery or not is of course anybody’s guess, but one of the services many collectors count on art dealers for is sharing what they know about how the art market truly works. Moreover, having such information to share gives mid-level dealers a better response to such feedback than merely surrendering their sales pitch to such goals. Personally, I would walk a collector through such information very gingerly, knowing it might hint of sour grapes, but competing in this evolving market means not letting the mega-galleries or the auction houses own the narrative.
Get In the Game
A very good mid-level gallery I know, which is admired for its strong conceptual program, shared their conscious choice a few years back to begin representing some young painters, very specifically to help with their cash flow. They felt it would be imprudent not to recognize what was selling well at the moment and what was not. They didn’t make a dramatic change to their roster, but simply supplemented it with some artists making work in the same general genre as those being snapped up so quickly at the moment, and by all accounts that strategy has worked out very well for them.
As much as I note above that I advocate the first of the strategies in this section more, I have criticized other galleries at other times for not anticipating a coming sea change in the art market quickly enough to adjust and survive. There is no doubt in my mind that the gallery here who supplemented their roster did so with exquisite timing. Moreover, they continue to promote their full roster and remain among the galleries I respect the most. The only downside to this strategy, as mentioned above, is how it essentially cancels out one’s ability to use the other strategy as well. I imagine there could be a way to split the difference and employ both, and again, the second strategy has proven more productive in the short-term for more galleries than the first one, but there are other factors entering the arena that make the first strategy seem more prudent in the long run to my mind. We’ll discuss more of those in Chapter 6 on online selling channels.
Art Fairs vs. Gallery Spaces Where Collectors Increasingly Make Purchases (Overhead, Sales Techniques)
In an online survey I posted to which 108 anonymous collectors from North America, Europe, Japan, and South Africa responded (at least a few of which I know from their emailing me behind the scenes are regularly listed among the world’s top 200 art collectors), the following responses were given for the question, “What percentage of the art that you collect now do you find in a traditional art gallery visit (as opposed to online or at a fair)?”
| HOW MUCH OF THE ART YOU COLLECT DO YOU BUY IN GALLERIES? | |
| Less than 10% | 14.8% |
| 10-25% | 15.7% |
| 25-50% | 13.9% |
| 50-75% | 22.2% |
| 75-90% | 25.9% |
| All of it | 7.4% |
Even as statistically insignificant as these findings may be, they stand as an indication that very few contemporary art galleries who eschew fairs and/or online channels entirely are reaching their full potential market. As noted in Chapter 3, there are more than 220 art fairs around the world each year that cater to dealers of contemporary art.
Not to pick on them, but because they were kind enough to archive which art fairs they have participated in over the past nine years on their website, let’s consider the trend in the number of art fairs mega-gallery David Zwirner has done each year since 2006:
| Year | Number of art fairs |
| 2006 | 5 |
| 2007 | 5 |
| 2008 | 7 |
| 2009 | 3 |
| 2010 | 7 |
| 2011 | 9 |
| 2012 | 15 |
| 2013 | 15 |
| 2014 | 20 |
This steady increase in the number of fairs (save the obvious dip when the market nosedived in 2008, the year many decisions had to be made about which fairs to do in 2009) is perhaps the strongest indication of their growing importance in reaching this gallery’s goals. More to the point, perhaps, mega-dealer Larry Gagosian once explained (to CBS News journalist Morley Safer) that he participates in art fairs because, “For me it’s a place to sell art. It’s a place to make money. The art fair has become a huge part of our business.”21 Of course, the behemoth mega-galleries are engaged in an epic global battle for market share, which may partly explain this spike in fairs for them, but while twenty fairs a year is more than most mid-level galleries can afford, they still feel great pressure to increase how many fairs they do each year and, if they are trying to get to the next level, how many international fairs they do in particular.
The cost for mid-level galleries trying to compete in this arena is not limited to the obvious additional expenses, like booth fees, travel, artwork shipping, and accommodations. What playing this game costs mid-level galleries includes additional staff (and the better they know your gallery and program, the better they will perform for you, either at the fair or back in the gallery when you’re gone, so temporary help is not necessarily the best solution here); additional pressure on their relatively smaller roster of artists to produce enough work for the increased number of fairs; and additional time on the road, away from their gallery, their artists, and their families. Still, as we discussed above, in addition to the money that can be made at the fairs, which fair a gallery gets into and where they are located within that fair signals to the market’s insiders how well they’re doing in the gallery hierarchy game. Stay at the same level too long and your best-selling artists and most supportive collectors may begin to get antsy or bored.
But here is where desperation can lead the mid-level dealers to a particularly tricky paradox. Despite the obvious costs (both professional and personal), many mid-level dealers believe that to succeed they need to do whatever it takes to get into the better fairs. They’ve seen it happen for other galleries and so are convinced that their fortunes will change if they can just get their foot in that door. The logistics and politics of this goal can lead to a vicious and very costly circle, one that has led a few high-profile mid-level galleries to close:
Driving the circle is the fact that more fairs, and in particular the major fairs, are very costly. Therefore, a mid-level gallery needs to raise extra money to pay for the more expensive fairs, and the most obvious place to turn for more sales is some other additional fair. In other words, to participate in a high-profile fair, they take on the expense and risk of another lower-profile fair. That is not as straightforward as it might seem. As noted in Chapter 3, Heather Hubbs, the director of the very popular New Art Dealers Alliance (NADA) fairs that have taken place in Miami, Cologne and New York, explained that despite the widely acknowledged quality of galleries they assemble for each of their fairs, collectors seem not to buy artwork over a certain price point at any of the NADA fairs. There seems to be a cap in collectors’ minds for how much they will spend on any given work outside the major art fairs. The final twist in this circle is that to get the attention of the major fairs’ selection committees, a mid-level gallery often needs to propose a presentation that stands out, which can often mean presenting work that isn’t as easy to sell. In the end, then, for the opportunity to get one’s foot in the door of a major fair, a mid-level gallery may need to take on the added risk and expense of doing still more other fairs, where they cannot sell more expensive work, just so they can present work that stands a smaller chance of selling in this higher-profile context. All in all, it can be a huge financial risk.
And so there is a paradox: not doing the major art fairs is a risky proposition, especially for a mid-level gallery that wants to get to the next level, and yet doing the major fairs is a risky proposition, because of what it takes to get in and actually participate in them. How to strategize around this paradox is perhaps most helped by considering the three factors below:
Resist Pressure to Do Major Fairs Until You’re Ready
This pressure will come from your artists and collectors, but it will also come from the major fairs themselves if you’re making the kind of inroads that grab their attention. This pressure from the major fairs is understandable, in addition to being flattering. The major fairs are businesses and need to cultivate their future clients the same way galleries do. None of them will say on record what allowances they make for younger or mid-level galleries they really want in their fairs, but favored dealers who have been approached will, sharing that up to and including free booths have been offered to them.
But as noted above, some very good mid-level galleries have closed because of the pressure it takes to run a “successful” international gallery by maintaining a strong presence at the major fairs. Other mid-level galleries spend a fortune to participate in a major fair, only to not get back in again. The point of any fair should be to network and to see a reasonable return on your investment. Do the fairs that make that possible for you, even if that means holding off on “doing whatever it takes” to get into the major fairs.
Choose Fairs Based on Long-Term Goals, Interests, and Capabilities
Many of the international fairs considered “major” or important (because they’ve been around longer, include a large number of galleries, or receive large numbers of visitors) tend to have more regional audiences. These may include many important and active collectors, but in these contexts it often requires an investment of three to eight years for unknown galleries to earn enough trust among enough collectors in that audience to begin to see profits from these fairs.
This or that fair may eventually become a great event for your gallery, but how realistic is it for you to invest that much time? Moreover, once you have a strong collector base in that international location, how realistic is it for you to travel and visit those collectors outside the fair week? The top collectors anywhere expect personalized service, and the dealers who can afford to visit them will have the advantage. Experimentation is unavoidable when learning which combination of fairs provides you the best return on your investment (ROI), but building a market for your artists in a region far from home takes long-term commitment. Consider your interest in such a commitment for each location before spending too much money merely to show your face there.
Peak Fair Strategy
While experimenting, many mid-level galleries will ramp up to as many as eight fairs a year, only to eventually scale back on average to the five or six that work best for them, according to Heather Hubbs, director of the NADA art fairs (see Chapter 3). And it’s not just sorting out the ideal level of ROI at the individual fairs themselves that brings them back to this number, but also learning that for many of them, given the resources they have, five to six fairs seems to permit the right balance between time spent at fairs and time spent focusing on gallery exhibitions. Knowing that five or six is the “peak fair” number for most mid-level galleries, one strategy is to experiment within that range to start off with, rather than taking on the expense and stress of eight fairs and possibly confusing the results with the corresponding logistical challenges. In other words, if a gallery does eight fairs, which is two more than they can reasonably balance with their physical space’s program, how do they attribute any poor performance to one of those fairs rather than to the possibility that they were simply stretched too thin to do it well?
Internet Challenging Dealers as Source for Exclusive Information (Promotion Techniques, Long-Term Planning)
There is no way to sugarcoat this: contemporary art dealers are intermediaries, middlemen (or women) between the supplier (the artist) and the consumer (the collector). Intermediaries are only considered essential in any business if the service they provide is viewed as valuable enough by the supplier or consumer to justify their commission or fee. There are many services beyond simply discovering and promoting important artists that art dealers provide for both sets of their clients, and heavily involved collectors as well as very busy artists generally understand that, but one of the tools for increasing the efficiency and profit margin of any business system is disintermediation, or cutting out as many middlemen as possible. For some business-minded artists, then, selling directly to collectors can be the most profitable way to operate their studios, if they can manage it in between meeting all their other goals. Indeed, the complexity of maintaining the relationships needed to keep an artist’s market strong, plus the hours spent keeping up to date on who is buying what or which way the secondary market winds are blowing, has provided contemporary art dealers a cushion of intermediary comfort for many decades. That is changing in bits and pieces, mostly due to how the exchange of market information that dealers used to ensure they were the locus of, and thereby control, is more readily available to more people via the Internet.
Indeed, perhaps the most valuable service art dealers have provided traditionally has been to put their knowledge of the market and their hard-earned relationships with powerful players in the art world to work in promoting their artists. They have also traditionally worked to protect their artists’ markets, as well as the investments of their collectors in those artists, by being actively involved in their secondary markets. Offering to resell work through the gallery or, failing that, staying well informed of their auction results and secondary buyers, art dealers have proven their value as intermediaries by lending their connections and knowledge to the interests of their artists and collectors who traditionally may not have had much in way of means to influence the secondary market. The Internet has begun to change that too.
In May 2014, artist Wade Guyton made headlines by printing multiple copies of a previously unique digital work right before it was due to be resold at a carefully organized auction of contemporary art at Christie’s in New York. In an article titled “Wade Guyton May Be Trying to Torpedo His Own Sales,” art critic Jerry Saltz thought out loud about what was behind this move by the artist:
Wade Guyton’s smallish but beautiful black, blue, and red Untitled is estimated to sell for between $2.5 and $3.5 million tonight, and rumor has it that there’s a guarantee of $4 million. Guyton makes his art on inkjet printers and photocopiers, and last week, he began printing scores of new paintings from the same 2005 file that produced this one, perhaps an attempt to erase the singularity of this painting and torpedo its price. He took pictures of this process and posted them on Instagram. You can go to his account (@burningbridges38) and see copies of the painting rolling out of his printer and spread out all over his studio floor. These images have gone viral. Suddenly the piece at Christie’s is identical to dozens of others. The uniqueness has gone away.22
If indeed Guyton had widely publicized his ability to take away the uniqueness of any his works that were being resold at auction as an effort to torpedo that sale, it wasn’t clear how well it worked. The lot went for more than its high estimate, selling at $3,525,000. Might the Guyton have sold for even more had he not raised so many questions via his Instagram posts? Who knows for sure? All we know is that the sale itself was extremely successful (fourteen new records for contemporary art were set at that sale), but as Saltz noted, the Guyton was rumored to be guaranteed at $4 million. Still, the message was loud and clear. Artists now have more means to have their voices heard, and even perhaps influence prices in the context of the secondary market, than ever before.
But pricing is not the only information contemporary art dealers have historically traded in. What work is available or what even exists has long been something interested buyers could only learn through the gallery system. That too is changing. In an article titled “Why the World’s Most Talked-About New Art Dealer is Instagram,” Vogue magazine summed up the challenge for galleries of all levels here:
Now able to sell works themselves, artists are nudging the dealer out of the way while promising to demystify fine art and increase accessibility; challenging what has long been seen as an industry shrouded in pretense and exclusivity.23
Of course, as noted above, not all artists can balance the creation and promotion/sales of their work as well as some may, and so the usefulness of the art dealer intermediary remains valued widely enough that there are still far more artists hoping to work with a gallery than there are galleries to represent them. But even within that more traditional artist-dealer relationship, the Internet is bringing about some tricky new challenges for contemporary art dealers. Consider the case example below:
Case Example 2: One of your artists, who has sold well through the gallery, recently opened an Instagram account that connects with his Twitter and Facebook accounts. He loves to post images of new work or even “works in progress” from his studio.
Increasingly you’re getting calls from people you don’t know who want to buy works that you have not even seen yet yourself. Nice problem to have, except you have agreements with this artist’s main collectors (who support not only this artist but others in your program) that you will show them all new work before anyone else sees it.
These new online collectors are “friends” with your artist, which tells you very little about how close they are to your artist. Still, they sometimes know more about the new artwork from online discussions than you do, including that the work is still in the studio and hence not already “sold.” But you don’t know anything about them, including how solid a placement their collection might be for your artist. When you ask them about their collections, they get a bit offended and you’ve heard back from your artist that his “friends” are now upset, which he’s also upset about because he felt he was doing the right thing by directing them through the gallery.
In short, the Internet is contesting the authority that every art dealer has enjoyed up until this time. The specific challenge here is how to manage this flow of information completely outside your control, or in classic business terms: how to influence without authority. The strategies below assume this will become a bigger and bigger issue.
Discuss Social Media Promotions with Your Artists
Dealers are likely not getting back exclusive control over the online information about their artists’ work. Whether this needs to happen (and therefore argues for more detailed contractual solutions or not) may still need to be determined, but the agreement most dealers now have with artists about selling work through the gallery should still inform how artists promote their work through online channels. An easy way to have this conversation is to ask your artists to “hashtag the gallery” or, in perhaps less jargony language, “link back to the gallery’s online channels” (such as the gallery’s website, Facebook page, Twitter account, Instagram page, etc.) for all images of work that the gallery has or will have on consignment. Explain that what begins as a set of questions from one of their online “friends” can lead to difficult situations if the online collectors don’t know up front that the artist only sells through the gallery and has long-standing, supportive collectors with certain expectations. Linking online images to the gallery consistently helps eliminate such problems for the artist and dealer. In addition, because most information used to flow through the gallery, but now much of it doesn’t, certain practices you might never have felt compelled to share with your artists (such as the fact that you sold some of their work in the past on the condition that you would share new work with that collector before anyone else saw it) might now need to be shared. You can’t blame an artist for not complying with an agreement they knew nothing about.
Follow Your Artists Online
When someone calls the gallery and inquires about the price of your artist’s new “blue painting,” the last thing you want to have to admit is that you had no idea there was a new blue painting. If you followed your artist on Instagram, though, you would have known—at least as much as the caller knew. The fact is that even as the sharing of information online presents certain new challenges to art dealers, it also offers new advantages. Keeping up to date on what’s going on in your artists’ studios can be much easier, for example, particularly for those who live in other locations. If your busy schedule does not afford you the time to be on the Internet that much, perhaps have someone in the gallery monitor the artists’ accounts and summarize for you any key information you might benefit from knowing. The bottom line is that the information is increasingly out there. There’s really no excuse for not knowing it.
Get Yourself Online and Maintain Your Accounts
It does your artists no good to “hashtag the gallery” if, once interested parties click on the link, the information is out of date or insufficient. Social media may be a fad, but it is currently how many people (including collectors) spend a good deal of their time. Here again, busy dealers can have someone else in the gallery keep their accounts active and up to date; younger staff members tend to do so quite efficiently. Also, the potential here extends beyond the advantages for the artist the interested party follows back to your online channels. Managed well, each such opportunity can increase awareness for your entire program.
SUMMARY
Many of the challenges discussed in this chapter affect galleries at every level, but they often present specific challenges for mid-level galleries and contribute to the current perception that galleries in the middle sector of the market are struggling more than those in the high and low sectors of the market. This is potentially a problem for the entire market, as the middle sector performs some of the most un-rewarded tasks in keeping the overall market healthy. From supporting good artists who may be struggling to get their practice back on track to the services they provide in building a stronger cultural community in their locations, mid-level galleries form an essential part of the overall market’s ecosystem, and it behooves all market players to collaborate on ways to re-strengthen this sector. The strategies discussed in this chapter are things mid-level dealers themselves can do, and there have been high-profile measures taken by gallery association and major art fair leaders to raise awareness of these challenges, but until the people buying art can be persuaded to support this sector of the market, it remains at risk. The middle being squeezed is a theme through all markets, however, so the solutions here may actually come from outside the art world. Dealers working in this sector would be wise to keep an eye out for such innovations in other industries.
