Updated: Jan 16
How the art industry generates billions of dollars per year, and is STILL UNDERPERFORMING
By Cameron John Robbins
You’re going to think I’m a crackpot with delusions of grandeur, but I have a vision for bringing the current fine art business model, as it’s usually applied, up to par with the rest of the luxury industry.
According to a 2017 survey by the National Assembly of State Arts Agencies, the value of arts and cultural production in the United States was more than $875 billion dollars, representing nearly 5% of the Gross Domestic Product. More than that, between 1998 and 2016 the economic contribution of the arts and culture industry to the GDP grew by over 69%. In 2017, the art industry also represented more than $72 billion in exports, and $42 billion in import business. [Source: U.S. Department of Commerce, Bureau of Economic Analysis, National Data for 1998-2017].
Yet, in the opinion of this writer, the fine art industry is performing far below its potential. The reasons for this underperformance are varied. One is perception, or misperception on the part of the public and the industry itself about what it actually delivers. Another is the overwhelming naiveté within the industry in terms of effective business models.
Few people understand what the real value proposition of art is, and how much embodied wealth it represents. In the minds of most people, art is an incomprehensible thing, the production process an esoteric mystery, and it’s an industry which stands well outside the bounds of rational business norms. The art industry seems more apt to ask for philanthropic contributions than to seek capital investment.
People just don’t seem to know what art is good for. Art is profoundly magnetic. Everyone loves some form of artistic expression. Our lives are literally filled with art. It can be seen everywhere we turn. But it’s not obviously useful like food, clothing, shelter, or a means of transportation are useful. So, it must be useless, right? Oscar Wilde thought so.
Seriously, what is it good for? What does it do? Most artists can’t seem to answer this question. Few seem able to articulate why their work has value, or what benefits it provides to individuals and society at large. Many try. But according to the average artist, after sifting through their wordy and pseudo-intellectual artist statements, their work is art because they say it is, and it has value because they want it to. They may be right, but that’s not what I’d call a persuasive argument.
Part of the problem is that many people, including most artists, think a work of art is the final product. After all, the drawing or painting or sculpture is the object which the artist creates and offers up for sale. Thus, the object must be the product, right?
Works of art are only the delivery vehicles for the true products being sold – feelings and experiences. And as any provider of luxury products and services can tell you, attending to a client’s feelings and experiences are where the real money is.
Every year, many millions of people from all over the world and from all socioeconomic groups tour Europe, specifically because of the abundance of beautiful art there. A huge percentage of them visit a well-established roster of cities and museums. In fact, tourists drawn to viewing the art makes a massive contribution to the GDP of most European countries. For instance, the Louvre alone now generates more than $143 million dollars per year, [Source: Farah Naveri (20 January 2009), Banks compete to manage Louvre’s endowment International Herald Tribune]. This comes from ticket sales to special exhibitions, large gifts from wealthy donors, down to the few Euros popped into a donation box by each of the millions of average visitors as they enter the museum.
In other words, each work of art in the Louvre’s collection, which was created only once and does nothing but hang on a wall or stand on a pedestal, is still generating vast sums of money year after year. Why? How do they do that when the objects themselves haven’t been sold for decades, if not for centuries? It’s because people are paying for the experience they have when they stand before them, and the feelings they feel in their presence.
Obviously, art is a big business, capable of generating billions of dollars per year. Unfortunately, most artists have all the business acumen of a child running a roadside lemonade stand. One reason for that is a general lack of attention given to business principles in the curriculum of art education. Either the schools don’t think it’s important, or you can’t teach what you don’t know. Another factor may come down to dominant personality traits. Those who are creative and those who do well in business tend to be quite different in some key temperamental respects.
There is a small cadre of brokers who like it that way. They act as gatekeepers to industry success, and reap huge rewards for themselves by capitalizing on the ignorance of the artists. Behind them is a small army of influencer/collectors who have the means and network to allow them to ‘discover’ the next great artist. This group likes the social credit that comes from doing this. And they have the social stature to remain unquestioned in relation to their discoveries. But because of this blinkered outlook on the industry, it tends to remain economically stifled and self-serving. I believe there are many billions of dollars being left on the table.
Imagine the following contrast. First, picture in your mind the lobby of a roadside hotel. The floor and top of the reception counter are covered with dirty, peeling linoleum tiles. A dusty fake plant is sitting on a rickety table between two well-worn plastic lawn chairs. In a thin frame on the wall behind reception hangs a sun-faded print on paper of a landscape painting. You can still barely see where a grandiloquent aphorism once appeared on the lower border.
Now picture the lobby of another roadside hotel. This one has polished floors, and the reception counter is a stately looking piece of furniture. There is another fake plant, but this one is clean and sits atop a handsome table between two modest but comfortable upholstered chairs. In a substantial frame on the wall behind reception hangs a vibrant giclée reproduction of a beautiful landscape painting.
Finally, visualize the lobby of a luxury hotel. The floors are polished granite. The reception counter is grand, and flanked by large bronze statues. The plants are real and healthy. The furniture is splendid and plush. Velvet-enrobed chesterfield sofas face leather wing-back chairs across carved mahogany tables. And on the walls hang large original landscape paintings in broad gold frames.
As businesses, all of these examples serve the same basic functions. They all provide a place of shelter and rest during a journey. But ask yourself how you might feel in each of these places. How would you rate your current level of success in each place? While standing in them, what would you think was possible for you to achieve in your life? Lastly, in terms of how much you would be willing to pay, how would you value the experience you are likely to have in each place? Your answers are likely to rise dramatically with each example. A big component of how much a business can charge, what customers will consider reasonable, comes down to the decoration. Or to paraphrase an old saying, the dollars are in the details.
Art is only one part of deliberate environmental design. But it is the finishing touch, the final layer and the pinnacle. However nicely appointed, a space without art looks and feels unfinished. It doesn’t matter if it’s a $10 poster, a $1,000 reproduction or a $10,000 original. We miss the art if it isn’t there. You may live in a $10 million penthouse flat in Manhattan. But without art in that space, visitors are likely to ask if you’ve just moved in.
Art elevates every space it occupies, transforming it into a place where people can feel lifted and inspired. In terms of human achievement and wealth creation, is there anything more valuable and productive than people feeling elevated and inspired? This is what makes art useful. That is what it is good for. And that is why it is profitable to have, and worth investing in.
Instead of thinking of the fine art business as some incomprehensible whatsit, what if it was handled like every other business in the luxury industry? What if artists took themselves, their work and their brand seriously in the same ways that Rolls Royce, Vacheron Constantin, and Montblanc take themselves seriously? In terms of market demographics, the audience for original art is the same as the audience for other luxury products and services.
What if investors began to look for artists who take themselves this seriously in the way one might look for an undiscovered diamond mine? I liken artists to diamond mines very deliberately, since the mass perception of diamonds as rare and valuable was largely created by clever marketing. With a shift in how they are viewed and presented, artists and the art market in general could become as rational a luxury business enterprise as bespoke tailoring or custom yachts. And a savvy investor with the right network of influence can make the right artist’s work more valuable than diamonds.
For instance, what if there were an artist who had the ambition and a plan for shattering by orders of magnitude the record for the most expensive chess set ever sold? For a savvy investor, what might it be worth to finance such a project in exchange for a large equity share? How might such an investment be leveraged to cast a favorable light on the investor’s own business, not to mention personal social prestige? And what might the financial returns be like when the right investor can essentially create the market value of the artist’s work?
Incidentally, the record for the most expensive chess set ever sold is currently $1.3 million, (the Jewel Royale Chess Set by Boodles, and Jewel Royale).
As a final creative exercise, imagine the following scenarios. You are a prospective client for an artist or a potential investor, or both. You have found an artist whose work you love and you are going to meet with them to discuss a commission.
Scenario 1 – They invite you to meet them where they work, which happens to be a garage in their parents’ home. When they greet you, they are cordial and well-spoken; but they are dressed in their work clothes, which are stained with the evidence of their creative process. After touring their studio, which is a corner of the garage that they share with their parents’ things, you sit with them in the living room to discuss your commission.
Scenario 2 – You meet them at their studio, which is a portion of a repurposed factory in an industrial part of town. They greet you cordially and are well-spoken, in spite of looking like the kind of eccentric ragamuffin most artists are assumed to be. Their clothes are an eclectic combination of trendy fashions and thrift-store finds. You sit with them on furniture that was either found at a thrift-store or salvaged from a curb while you discuss your commission. After everything has been agreed, as the work progresses, you get sporadic updates by email.
Scenario 3 – You visit the artist at their studio, which occupies a handsome flat in a charming and affluent community. You are greeted at the door by a proper British butler and ushered inside. The artist greets you cordially and is well-spoken. They are wearing a tailored suit with a crisp shirt and a silk necktie. You sit together on plush leather wing-back chairs which flank an antique Regency table. While you unhurriedly discuss your commission, the butler serves you tea. Oh, and this artist only accepts ten commissions per year. After everything has been agreed, as your commission progresses, you get hand-written updates on beautiful stationary at regular intervals.
In all three scenarios, it’s the same cordial and well-spoken artist. Their professionalism and artistic capability are also the same in each. You already love their work and are inclined to commission something new from them. But in which scenario would you be most confident and comfortable writing a check for that commission? In which do you think you would value their work most highly, and expect to receive the greatest emotional fulfillment from it? Every time you look at the final product, it will revive all that you experienced during the commission process, as well as every emotion the piece itself evokes. Even though it would be the same object in each case, which experience do you think would create the most positive feelings throughout your ownership of their work?
As a potential investor, which business model would most attract you? Which would you think is likely to be the most profitable, command the highest prices and attract the most affluent clientele? Many artists run their businesses like scenarios one and two. But in terms of a client’s experience, there is no reason why things couldn’t be run like scenario three, or better. In fact, in the opinion of this writer, they should be. The industry would be better for it.
Cameron John Robbins is the founder of The Gentleman Artist Studio – www.thegentlemanartist.co.uk
He is represented by A. Joseph Galli IV +12182350110 firstname.lastname@example.org