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The art market in 2016

Financialisation of the Art Market

Throughout 2016, auction operators have demonstrated their capacity to stimulate demand despite a climate of uncertainty. China has managed to stabilise its auction turnover, while the West saw its highest level of transactions ever recorded (398,000 lots sold). In both the East and the West, a focus on consolidating the core of the market took priority over the race towards new auction records.

This market configuration owed much to an intensification of competition between the market’s different players that has, in turn, led to a more stable and solid market environment. In 2014, Sotheby’s yielded to pressure from its shareholders, including hedge-fund manager Daniel Loeb. After 34 years of loyal service (including 14 as CEO), William Ruprecht handed the reins to businessman Tad Smith. At Christie’s, a series of CEOs from major industrial groups have attempted to make the organisation ever more efficient: Steven Murphy in 2010, Patricia Barbizet in 2014, Guillaume Cerutti in 2016. An acceleration of personnel changes in key positions also reflected the tougher competitive environment, initially at the auction houses, and then later throughout the Art market as a whole. In December, Brett Govry defected as head of Postwar and Contemporary art at Christie’s to join the Galérie Dominique Lévy.

Today, the Art Market’s dependence on the financial sector is palpable at nearly every level. Recall that major banks (UBS, Deutsche Bank, JP Morgan, etc.) have become powerful partners in major artistic events (art fairs, biennials, exhibitions, awards, etc.) that substantially influence the success and prices of artists. Meanwhile a number of major multinational corporations are actively enhancing their public images by partnering with artistic causes, or by building their own exhibition centres, like the Louis Vuitton Foundation in Paris.

The upper echelons of the Art world are nowadays intimately connected with industrial and financial power whose requirements have given the market a new level of efficiency. The result is that every item in the major players’ cost & income statements is being carefully scrutinised. During his first year at the head of Sotheby’s, the new CEO Tad Smith imposed a vigorous voluntary departure plan. The firm has also adjusted its buyer’s premiums twice over the last two years and we are seeing a multiplication of the incentives used to convince buyers and sellers of artworks: guarantees, online auctions, etc.

The Art Market’s adjustments over the last twelve months clearly reflect an increased level of efficiency. The market is now capable of adapting supply to demand far more quickly than ever before. The result is a sharp increase in the number of transactions and a significant rise in the liquidity of artworks, an aspect that was long considered the weak point of this type of investment. More than ever before, the art market guarantees that it can buy and sell at the right place and the right time, and, in an era of negative bank rates, art represents a particularly competitive and attractive alternative investment.

At the heart of this new balance, public museums retain a central position, though a greatly modified one. On top of mounting financial pressure, they now face competition from private exhibition spaces. Increasingly unable to acquire masterpieces directly, public institutions rely on gifts, donations and sponsorship and are also expected to play a more active role in supporting creativity. Nevertheless, museums still represent a “black hole” that is impossible to ignore if we want to understand the exponential growth of art prices and the most influential forces in the art market.


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