Art Commerce Market Analysis

THE CURENT MARKET

TEAF (The European Art Foundation) defines art as objects including fine art, antiques, decorative art, collectibles, haute jewelry, photography, and design. Digital art is a creative medium in its own right and the medium is built upon traditional art practices, such as painting, drawing, and sculpture. The foundation is very much the same. Digital artists go through many of the same processes that artists of traditional mediums experience. It requires creativity and a heightened level of practice. Digital art is like any other form of art. The only difference is that it is created with digital tools.

The art category is very broad and it covers Paintings, Works on Paper, Photography, Sculpture, Silver, Art Glass and Lamps, Porcelain and Ceramics, Decorative Arts, Objects de Vertu, Coins, Watches and Clocks, Jewelry, Luxury Accessories, Asian Collectibles, Furniture, Modern Design, Carpets and such.

Art has always remained of great interest to humans since early ages. Interest in Art is not confined to a specific region or culture. People have pursued this profession equally in the times of war and peace for centuries. During WW-II when Winston Churchill was asked to cut arts funding to support the war effort, he replied: "Then what are we fighting for?" This famous quote underscores the importance of art in a civilization and culture. Art defines a civilization and culture forever (Toujours) and preserving art is an essential element of preserving a culture.

Compared with other industries, the commerce aspects of the art market are famously difficult to quantify due to majority of high-end art sales being conducted with discretion in private art galleries, exhibitions and auctions. Additionally, the existing online art Commerce branch of the market is highly fragmented with no visible leaders. The high-end of the art market is dominated by a few incumbent mainstream art dealers and auction houses, such as Sotheby's, Christie's, Bonham's, Phillips, and China Guardian (aka Top 5). This segment has a firmly etched mindset that revolves around exclusivity and has profited handsomely from the extended reach of the Internet. Traditionally, provenance and trust has been in their hands and as intermediaries they charge exorbitant fees for establishing provenance, establishing prices and transacting trades.

The extremely opaque business models and processes make it difficult for ordinary Artists to participate, particularly for those residing outside the top European and US cities. Thousands of Artists and collectors of Art worldwide have simply not been able to pierce the veil behind which Art provenance and financial transactions occur. This exclusion is holding back the overall growth of Art e-Commerce.

The mid-price market consists of art galleries, dealers and auction houses who have physical presence and who also reach collectors and new buyers using online platforms and social media. Within this space there are three general types of galleries and dealers, (i) traditional 'Bricks & Mortar' galleries and dealers that are offline, (ii) those with an offline and online presence (aka 'Bricks & Clicks'), and (iii) 'Online Only'. One successful business is Heritage Auctions, which is one of the first art auction houses to embrace online technology and is expanding to other areas of collectibles such as coins, sports memorabilia and comics.

Other sales channels selling art on-line are '1stdibs', and 'Artsy'. Most art ‘dealers’ in the first world have their own website through which enquiries can be made and potential sales can follow. Some dealers use a white label software product to power e-commerce and frequently list with other online platforms that redirect sales to them (e.g. artnet, Artsy, Barnebys). In terms of value, the percentage sold through dealers online is currently a small fraction of their overall sales.

ONLINE ART MARKET AND TRENDS

The advent of the internet has helped many of the disenfranchised artists to some extent. It has brought about a fundamental shift in the way art and antiques are purchased, transitioning this once local activity into a global endeavor. Collectors are no longer confined to the limited selections offered by local galleries, dealers, and auctions. As more artists, dealers, galleries, and auction houses showcase their creations online, the artistic landscape has expanded dramatically, offering a wealth of choices to art enthusiasts. This expansion has been further amplified by the rise of social media, where individuals are not only empowered with access to vast amounts of information but also provided with an unprecedented array of art from across the globe.

Today, an array of online art websites offer artists a cost-effective platform for exhibiting their work. As a result, many artists worldwide have embraced the web, leveraging its low entry and startup costs to establish an online presence. From social media platforms like Facebook to personal blogs, artists and photographers have been able to showcase their portfolios, making their online presence a critical component of promoting and raising awareness for their art.

However, despite the proliferation of 'virtual showcases' and a thriving internet culture, meaningful revenues and profits for artists and art owners remain elusive. The art community is expanding in parallel with global population growth. The past 25 years witnessed an unprecedented surge in the number of artists and art assets – more so than in the entire 700 years of known Art History – but majority of the artists are still struggling to monetize their talents. Emerging artists hail from every corner of the globe, including Europe, North America, China, Russia, South America, Africa, and Asia, each adding to a rich tapestry of global talent. Yet, despite the remarkable works produced by these artists, monetization of their creations remains a significant challenge. For majority of worldwide artists, the promise of the Internet and World Wide Web has yet to yield sustainable economic and financial rewards. Despite their expanded virtual presence, these artists struggle to control and profit from their work.

Many Artists in the 'developed world' have online presence in the form of a website with a virtual gallery that is similar to those market platforms specific to art but with little or no curated approach to participating. The website could be a standalone or a 'cloud-based' model such as London based 'Artfinder' which provides a marketplace for 10,000 artists, or as 'Artsy', which has a 1,700 strong art gallery following, or as 'Wdyr' that launched in 2015 in Zurich and provides an online space for 2,600 artists. Others such as 'Artists.de' and 'Art&Only' based in Geneva offer a marketplace for artists, dealers, and collectors. 'Art&Only' operates at the mid-to-higher end of the market and facilitates sales for art over US $10,000. 'Collectionair' in Dubai is a marketplace for collectors selling artworks from over 1,100 artists with prices ranging from $500 to $5,000. There are also 'Art-tech' companies that supply support services to the art industry. Two art-tech companies that stand out for having provided essential services to the art industry from the start are 'Artnet' and 'Invaluable'. Artnet focuses on modern and contemporary paintings, prints, and photographs and is also a primary source for the TEFAF Art Market Report since its first release in 2002.

In summarizing, the following list illustrates the fragmentation in the Art world:

1. Artist online sales: Artists make direct sales to clients online via their private websites.

2. Artist marketplaces: An online marketplace facilitates a virtual environment for artists to display and sell their work. Payments take place directly on a third-party website.

3. Online Artist platforms: An online platform that functions much the same as an online marketplace with the main difference being that sales do not take place on the platform. Buyers are redirected to the artist's website in order to purchase.

4. Art gallery and Dealer online sales: The gallery or dealer makes direct sales online via their website.

5. Gallery and Dealer marketplaces: The online market place brings galleries and dealers together with buyers on a third-party platform. The marketplace facilitates the sale on their website (usually buy-now).

6. Online Gallery/Dealer platforms: The platform provides an online introduction between the buyer and the dealer or gallery but the sale does not take place on the platform. Buyers are redirected to the dealer or gallery's own website or to their offline premises.

7. Auction house online sales: Auction houses use an online platform with their own name, either to accept online bids to a traditional live auction sale, or to run a timed, online-only auction (usually bid-now with some buy-now options). Platforms are either built internally or hosted by an auction software provider.

8. Auction marketplaces: There are two types of auction marketplaces: (i) A website which hosts online auctions for multiple offline auction houses and, (ii) An intermediary website through which visitors can follow multiple online auctions from different online auction houses. For live auctions the website collects (absentee) bids from potential buyers and bids on their behalf on the website where the online auction is actually taking place.

9. Private seller marketplace: An online marketplace facilitates a virtual environment for private sellers (distinct from a dealer or artist) to display, sell or buy works of art. Payments take place directly on the third-party website.

Despite all these avenues, the current art commerce landscape has yet to tap into its tremendous global growth potential as it is held back by a series of systemic issues. At the heart of this stagnation lie prohibitive and cost-laden, tedious and time consuming processes. For most artists, the financial burden of monetizing their art assets remains exorbitant, despite having access to the internet and social media. Even for those who manage to pass through the rigorous selection process, there is scant guarantee that they will receive equitable compensation for secondary market transactions such as limited-edition prints, copies, or permissions for publication.

In our perspective, the prevailing art commerce model is fragmented and dismissive of the majority of creative individuals. Without an open, transparent, affordable, and trustworthy system for provenance, transactions and easy fulfillment, the existing Art Commerce model will continue to be a formidable barrier that deters the participation of more artists and buyers in the global 'Art Economy.' Our mission is to dismantle these obstacles and pave the way for a more inclusive, equitable future for the world of art.

CURRENT CREATIVE WORK MONETIZATION PREDICAMENT

Several critical factors contribute to this monetization predicament:

Lack of Trust: Firstly, there's an inherent lack of trust amongst buyers in the authenticity and condition of art assets displayed online. Without provenance information – the trusted record of origin, ownership, authenticity, and quality – trust is an elusive commodity. Provenance is the backbone of the art industry, underpinning the authenticity of art objects and maintaining their investment value for buyers. Currently, provenance is a cumbersome process and the power of provenance lies with a select group of intermediaries who operate under opaque business models, charging astronomical fees for establishing provenance. This not only deters art investment but also stifles the evolution of a modern, efficient art market. Countries and cities outside the mainstream European and US art hubs lag significantly in this fundamental requirement for art commerce. Without trusted, seamless provenance systems, the true potential of global peer-to-peer exchange of Art and collectibles remains unfulfilled.

Intermediaries and Fees: Secondly, the prevailing art trade model is replete with intermediaries, resulting in a cumbersome, friction-laden transaction process. The burgeoning visibility of artists and their works online is paradoxically stifled by 'transaction friction' when it comes to monetization. A small group of artists with connections to established galleries and auction houses manage to profit, but only after heavy commissions and transaction charges are subtracted.

Forgery and Theft: Thirdly, the primary motivation for artists to establish an online presence is to connect with a larger consumer base and generate pre-sales awareness and interest. However, the increase in the volume of uploaded art has amplified issues like forgery, imitation, intellectual property theft, and copyright abuse. The ease of committing fraud and other illicit activities within the online ecosystem is a growing concern. With countless skilled forgers worldwide, artists and art owners are increasingly wary of the unchecked spread of illegal use of their art. Art owners and artists are obviously the stakeholders who stand to lose the most unless actionable measures are put in place.

Order Fulfillment: Finally, artists face the daunting challenge of order fulfillment. Obstacles in payment processes, shipping, insurance, storage, and delivery impede the expansion of the art commerce world. The fulfillment process lacks the reliability and standardization necessary for easy contractual enforcement. To protect the economic interests of artists globally, cross-border payments and delivery mechanisms must be transparent and seamless. Until these hurdles are overcome, the art commerce sector will continue to grapple with fundamental obstacles, denying artists the opportunity to fully exploit their talent and creativity.

All this can change if we envision a world where ardent collectors ‘Enter the Metaverse for Art’ and can explore art created by talents tucked away in any nook and cranny of the planet. They can leverage cutting-edge technology to obtain essential provenance information, secure their chosen pieces effortlessly, arrange for swift delivery, and confirm ownership via an immutable record on a globally distributed ledger. The impact of digital media and mobile channels on the art business landscape is undeniable and, indeed, transformative. The art market is poised for a new era of accessibility, transparency, and global reach – and this creates an opportunity for a 'Metavese for Art’.

Last updated