This year is one of marked upheaval that has left no business, sector or industry unaffected. Little could have prepared the global markets for a pandemic like COVID-19 and the obstacles it has presented, and the art market is no different.
With a value of USD 64.1 billion in 2019, the global art market was already facing challenges, with sales down 5% on the previous year and sales in China, which holds the third-largest share of the market for art and antiques, falling by 10%. In March 2020, auction rooms, which accounted for 37% of the sales in 2019, were closed, opportunities to see and buy art in person were rare, and art fairs (with sales estimated at USD 16.6 billion in 2019) were cancelled.
At the time, economist Claire MacAndrew commented: “People were already concerned about the macro distractions, but the coronavirus will have a wider financial impact that will filter down to the art market.”
Within every crisis, there is opportunity, and auction houses, dealers and artists are now accelerating their capabilities with online sales platforms, social media offerings and a greater focus on data and analytics. COVID-19 has been a catalyst for many changes around the world, both positive and negative, but the survival of businesses will depend on how they can weather this storm.
Auction houses that had already invested in their online offerings, such as Sotheby’s, which held 129 online-only sales in 2019, seem to be prepared for the shift to digital, but how will this impact its clients and sales going forward?
Amy Cappellazzo, chairman of the fine art division of Sotheby’s, said, “The market is like the weather; you can’t fight the weather, you can just learn to be smart and predicting a little bit or prepare yourself for it but you have to sort of go with the force of the market itself.”
Opportunities or forced revolution?
Online sales made up approximately 7.5% of global sales in 2019, growth of just 4% on the previous year. Hiscox reported this year that the art world holds a “stubborn reluctance” to embrace the digital art world, and this has hindered growth until now. With a forced move onto digital platforms, auction houses need to support innovation to maintain sales and allow for online engagement to drive the art market’s success in the immediate future.
For example, earlier this summer, Picasso’s series of 15 canvases, based on Eugène Delacroix’s masterpiece “Les femmes d’Alger Version ‘F’” appeared at auction for the first time. It was sold using streaming technology in the first auction of its kind to take place in consecutive sessions in Hong Kong, Paris, London and New York. This was also the debut of Christie’s new cutting-edge auction platform “ONE”.
In the summer, Sotheby’s auctioneer conducted an auction from London, interacting through video technology with colleagues bidding in real time in New York, London and Hong Kong. Purchases were announced on three screens, and over GBP 292 million worth of art was sold without a physical audience. This type of virtual auction is the first of many to follow.
While real life will eventually return to the auction world, albeit with extra safety precautions, COVID-19 has forced auctioneers to rethink their businesses. The past few months have been a period of experimentation, accelerating a change that might otherwise have taken years to happen. We can almost talk of an “auction revolution”, potentially signalling the end for the traditionally packed salerooms.
Before the pandemic, although the online market was already showing a significant growing trend, it was generally restricted to specific artworks, and almost every sale still occurred in the salesroom, attracting billionaires and their representatives as well as interested observers in the typical audience.
Now, with large companies such as Deutsche Bank and British Airways reporting intention to auction their art collection to ease COVID-19 pressures, there may be some buyers’ opportunities on the horizon.
For auctions and dealers, COVID-19 presents significant economic challenges, as with most industries, but it may also be an opportunity to adapt and innovate the methods of the art market, expand its audience and move into a new era.
Sotheby’s has reported that live-streamed sales and online auctions are attracting new buyers who have never been in an auction house before. “The buyer demographic across our online sales is particularly striking: almost 40% are new to us and 30% are under 40 years old,” Sotheby’s said.
Tech and online access allow collectors to scrutinise art for flaws much more closely than in a pre-sale visit to a busy showroom. Christie’s, for example, is offering buyers super-zoom photography to inspect the art before bidding.
By embracing social media, most notably Instagram, auction houses can expand their audience at minimal cost. Brett Gorvy, who was working at Christie’s in 2016, sold an artwork for USD 20 million after posting it on Instagram and receiving enquiries from existing clients almost immediately.
Living artists can also sell directly to the public without an agent. The audiences can track the trending of artworks, message the artist privately and buy in less than a minute. Whilst these artworks are generally low value, this online trading capacity hugely expands the accessibility of the art market. Furthermore, virtual art fairs can take advantage of social media platforms, enabling experiences and buying opportunities without geographic limitations.
Collectors who have purchased works through the #ArtistsSupportPledge on social media, where artists sell works for GBP 200 through a hashtag to encourage the sales during the pandemic, may grow into more significant collectors over time and create broader audiences for art fairs and online art sales.
Adam Lindemann from the New York Observer stated: “Instagram is custom-made for the art world: you get a quick flash of an image with virtually no text or explanation. There’s no need to read. It’s perfect for people with zero attention span, zero education and zero interest in learning about anything; perfect in other words, for the art collectors of today.”
Nothing, of course, can replace experiencing a piece of art first-hand. Colour and texture come to life when one stands in front of a painting, but the online world does offer commercial advantages. It can increase profit margins on sales, allow for a global audience and those who were uncomfortable standing in the auction room, a paddle in hand, can now bid from home at no disadvantage to the rest of the audience.
Whilst the pandemic is undoubtedly going to result in a drop in sales, the changes that 2020 has pushed into practice may bring more resilience to the art market. Adapting methods and broadening audiences may create growth opportunities within less traditional methods, such as more direct artist purchases and, as mentioned previously, online sales and art fairs.
The trend of falling market values correlates with the economic recession, as it did in 2008, where sales were down by over 30% as demonstrated by the Financial Times.
For insurance, this means that the basis of valuation for collections is of increasing interest. Rolex watches may be selling for a higher price, but contemporary art sales are falling. Ensuring coverage meets requirements is important, and access to recent appraisals can avoid disagreements on the value of a piece in the event of a claim. The risk landscape for those selling art is expanding; along with physical risks, sellers must now protect themselves against cyber exposures. The increasing access to data and analytics may provide sophisticated buyers with more transparency and detail on potential purchases, which in turn may impact the prices that artworks will achieve at auction.
Yet, the art market is likely to remain unpredictable and exciting. Christie’s sold a near-complete skeleton of a Tyrannosaurus rex in October 2020 for USD 31.8 million, which was four times its estimate, and 280,000 viewers tuned into the virtual sale.
After decades of unhurried progress, the art market is now evolving at an exponential rate. Still, if the auction houses and dealers can make it attractive and stay on trend, they should find their audiences are growing and diversifying (albeit virtually). The art market may be ushering in a new world of data, transparency and efficiency, which could make it even more appealing than it was before.