How do you price art, anyway?

In my recent trip to Art Basel Miami, I was part of a discussion with art collectors and advisors, learning and contributing to topics shaping the industry, including NFTs, pricing transparency, and adaptations during the pandemic. And most importantly, how do you price art after all?

Art Market Discovering E-Advertising During the Pandemic

As the pandemic unfolded, galleries adapted to the pandemic, making previously unavailable inventory accessible online. This was new for the art market, and increased online sales and engagement with new collectors were noted as positive outcomes during the lockdown

Art collectors became more active, with a surge in online sales and a notable influx of new collectors entering the market. Galleries and collectors strategically explored online channels during the lockdown period.

And lo and behold, marketing came to the art world. Email marketing, SMS marketing, paid search, paid social, and so much more, with more than just driving foot traffic to the art galleries.

Which brings about the role of art collectors, who are primarily motivated by a genuine love for art, with considerations for potential appreciation more prevalent among younger buyers.

The easy way to look at it is this: artists are akin to brands or retailers, making art. The art buyer or collector, is the agency, that facilitates the marketing of the art. And the market has both a B2C component - whereby consumers buy art, or a B2B component, wherein establishments like hotels, real estate firms, and retail store, buy the art. When looked at in this way, it becomes a simpler model that lends itself well to marketing... should the artist so desire.

Transparency and Pricing in the Art World

Unlike consumer or luxury products, pricing of art is still cloudy. The importance of pricing transparency is critical, though, and still a bit ambiguous. There are still ongoing efforts to convince galleries to adopt transparent pricing. Technology platforms like Artsy can help in reshaping traditional views on transparency. There is still a need for industry-wide support and data validation for transparency initiatives.

Here are the factors that influence art pricing:

1. Artist's Reputation: Established artists with a proven track record command higher prices. The challenge here is, what factors establishment? This is why it is important for artists to be present on, for example, social media, a notion that is opposite to creativity.
2. Artistic Merit: The quality, creativity, innovation, and conceptual depth of the artwork contribute to its value.
3. Art Market Demand: Current demand, influenced by trends, collector preferences, art fairs, exhibitions, and media coverage, impacts prices. While controversial, since it does harp into the social media world of "what's trending", it is the nature of how art is interpreted.
4. Medium and Size: The medium's production costs and the size of the artwork affect pricing. It is, after all, to be used in some sort of real estate property, broadly speaking.
5. Previous Sales Records: Past auction results and private sales establish benchmarks for pricing, with record-breaking sales influencing market value.

As previously mentioned, there is then the dynamic of the art collector and art dealer, alongside the artist. This is how that model works, based on commission:

1. Art Dealer's Commission: Typically falls within 50% to 60% of the sale price, covering marketing, promotion, storage, exhibition costs, and expertise.
2. Artist's Share: Ranges from 50% to 40% after deducting the dealer's commission. Influenced by the artist's reputation, negotiating power, and contractual agreement specifics.
3. Negotiation Possibility: Commission structures are not fixed; negotiation is possible, especially for established artists with a strong market presence. Which again brings forward the idea that artists can use traditional marketing methods, like social media, to amplify their voice and establish a presence better.
4. Direct Sales by Artists: Some artists choose to sell directly, bypassing dealers, to retain the full sale price but taking on marketing responsibilities. This surged in the pandemic, when artists acquired autonomy and could self-market.

NFTs in the Art Market

While not a personal favorite topic, NFTs are considered a significant factor in the art market, requiring validation akin to traditional art forms. Pricing complexities arise with NFT transactions often occurring in cryptocurrency, posing challenges in determining actual costs. For the sake of simplicity, I'll exclude this discussion momentarily and save it for a later time.

In Conclusion

There is a high complexity of pricing in the art market, with a known understanding that there's no one-size-fits-all solution. This sheds light on the ever-evolving nature of the art market, with the impact of technology, challenges of pricing transparency, and the resilience of the industry amid global uncertainties, and ultimately, the power of marketing and social media in the ability to make a difference.