The $12 Million Stuffed Shark

1. The art world is driven by branding, not just artistic merit

Never underestimate how insecure buyers are about contemporary art, and how much they always need reassurance.

Branding is paramount. In the contemporary art world, the reputation and brand of artists, dealers, auction houses, and collectors often outweigh the intrinsic qualities of the artwork itself. This branding effect can significantly inflate prices and create a sense of legitimacy around certain artists or works.

Reassurance through association. Collectors often seek validation for their purchases through association with respected names in the art world. This can include:

• Buying from branded dealers like Larry Gagosian or Jay Jopling
• Acquiring works by artists represented by prestigious galleries
• Purchasing art previously owned by famous collectors
• Bidding at high-profile auction houses like Christie's or Sotheby's

The power of provenance. The history of ownership and exhibition of an artwork (its provenance) can dramatically increase its perceived value and desirability. Works that have been part of renowned collections or exhibited in major museums often command higher prices, regardless of their aesthetic merits.

2. Contemporary art prices are influenced by complex market forces

A fair price is the highest one a collector can be induced to pay.

Supply and demand distortions. The contemporary art market often defies traditional economic principles. Factors influencing prices include:

• Perceived scarcity, often manipulated by dealers and artists
• Emotional and status-driven buying decisions
• The "ratchet effect," where prices are sticky in a downward direction
• Speculation and investment-driven purchases

Price-setting mechanisms. Prices in the contemporary art world are set through various means:

• Gallery pricing strategies, often based on an artist's reputation rather than production costs
• Auction estimates and results, which can create new price benchmarks
• Private sales, where prices are often opaque and based on negotiation
• Art fair pricing, which can differ significantly from gallery prices

Market manipulation. Various players in the art world can influence prices:

• Dealers may buy works at auction to support their artists' market values
• Collectors might bid up prices of artists they already own
• Auction houses may provide guarantees that artificially support prices

3. Auction houses dominate the art market, challenging traditional dealers

At auctions new values are assigned and desire is fetishized.

Shift in power dynamics. Auction houses like Christie's and Sotheby's have increasingly encroached on traditional dealer territory:

• Offering private treaty sales
• Providing financing to buyers
• Acquiring galleries and moving into primary market sales

Spectacle and transparency. Auctions create a unique environment that can drive prices:

• Public nature of bidding creates competition and fear of missing out
• Transparent prices become new benchmarks for artists' values
• Evening sales become high-profile events, attracting media attention

Financial innovations. Auction houses have introduced new financial instruments:

• Guarantees to consignors, sometimes shared with third-party investors
• Advances and loans to buyers and sellers
• These tools give auction houses advantages over traditional dealers in securing consignments

4. Art fairs have become crucial events shaping the contemporary art scene

Art fairs have surpassed auctions as the premier events for buyers in the market's upper tiers.

Concentrated marketplace. Major art fairs like Art Basel, Frieze, and TEFAF Maastricht have become essential events:

• Bringing together hundreds of galleries in one location
• Attracting international collectors and curators
• Generating significant sales in a short period

Shifting buying patterns. Art fairs are changing how collectors interact with the market:

• Encouraging rapid decision-making and impulse purchases
• Reducing the importance of long-term gallery relationships
• Creating a more event-driven, social aspect to collecting

Global reach. Fairs have expanded the geographical scope of the art market:

• Facilitating international sales and networking
• Introducing collectors to new artists and galleries
• Creating satellite events in emerging markets (e.g., Art Basel Miami Beach, Art Basel Hong Kong)

5. Museums play a significant role in validating artists and driving prices

The museum has largely supplanted the church as the emblematic focus of the American city.

Institutional validation. Museum acquisitions and exhibitions can dramatically impact an artist's career and market value:

• Solo exhibitions at major museums can establish an artist's reputation
• Museum purchases often set new price benchmarks
• Inclusion in prestigious collections adds to an artwork's provenance

Changing acquisition strategies. Museums are increasingly involved in the contemporary market:

• Purchasing works by emerging artists, sometimes directly from art schools
• Competing with private collectors for high-profile works
• Collaborating with dealers and collectors to secure donations

Architectural branding. Many museums use iconic architecture to increase their profile:

• Buildings by star architects become attractions in themselves
• New museums in emerging economies use architecture to establish legitimacy
• These architectural statements can overshadow the art collections themselves

6. The concept of authenticity in art is increasingly complex

What few art professionals seem to want to admit is that the art world we are living in today is a new, highly active, unprincipled one of art fakery.

Shifting definitions. The idea of what constitutes an "authentic" work of art has evolved:

• Many contemporary artists use assistants or fabricators to produce their work
• Conceptual art often prioritizes the idea over the physical object
• Some artists, like Damien Hirst, have replaced deteriorating components of their work

Market implications. Questions of authenticity can have significant financial consequences:

• Authentication boards wield enormous power over an artist's market
• Disputes over authenticity can lead to lawsuits and market uncertainty
• The discovery of fakes can dramatically impact an artist's entire oeuvre

Technological challenges. New technologies both complicate and assist in questions of authenticity:

• Digital and reproducible art forms challenge traditional notions of originality
• Advanced scientific techniques can assist in detecting forgeries
• But sophisticated forgers are also using technology to create convincing fakes

7. Contemporary art as an investment is risky and often misunderstood

Buy inexpensive art if you love it and want to live with it, but not in the hope it will appreciate in value.

Misleading success stories. High-profile sales of contemporary art often create unrealistic expectations:

• Media focus on record-breaking prices obscures the broader market reality
• Most artworks do not appreciate significantly in value
• Transaction costs (commissions, insurance, storage) can eat into potential profits

Market volatility. The contemporary art market is subject to rapid changes:

• Artist reputations can rise and fall quickly
• Economic downturns can dramatically impact art values
• Tastes and collecting trends shift over time

Limited liquidity. Unlike many financial investments, art can be difficult to sell:

• Finding buyers for specific works can be challenging
• Auction houses and galleries may refuse to handle works that have lost favor
• The timing of sales can significantly impact realized values

8. Emerging markets and new wealth are reshaping the art landscape

First-time art buyers usually begin with modest purchases, but many Russian and Far Eastern buyers now enter the contemporary art market at the very top.

New collectors. The rise of wealth in emerging economies is changing the art market:

• Collectors from China, Russia, and the Middle East are major forces at auctions
• New museums in these regions are aggressively acquiring Western art
• These buyers often focus on trophy works by established names

Shifting power centers. The geography of the art world is expanding:

• Art fairs and biennales in new locations are gaining importance
• Auction houses and major galleries are opening offices in emerging markets
• Local artists from these regions are gaining international recognition

Cultural considerations. The influx of new collectors raises questions about cultural values:

• Western contemporary art is often viewed as a status symbol
• There's growing interest in promoting local artistic traditions
• Questions of repatriation and cultural heritage are becoming more prominent

9. The role of art critics has diminished in the contemporary art world

At no time in the last fifty years has what an art critic writes had less of an effect on the market than now.

Reduced influence. Traditional art criticism has less impact on the market than ever before:

• Collectors often rely more on advisors and auction specialists than critics
• Positive reviews rarely translate directly into sales or price increases
• Negative criticism has little effect on established artists' markets

Changing media landscape. The platforms for art criticism have evolved:

• Art magazines have less influence than in previous decades
• Social media and online platforms have created new forms of commentary
• Many critics now work as curators or advisors, blurring traditional roles

Focus on description. Much contemporary art writing avoids strong value judgments:

• Critics often explain or contextualize work rather than evaluate it
• Positive reviews are more common than negative criticism
• This shift reflects the close relationships between critics, galleries, and institutions

10. Damien Hirst exemplifies the modern branded artist-entrepreneur

Becoming a brand name is an important part of life. It's the world we live in.

Marketing savvy. Hirst has leveraged media attention and shock value to build his brand:

• High-profile works like the shark in formaldehyde generate massive publicity
• He cultivates relationships with collectors and dealers to maintain market momentum
• Hirst actively manages his public persona through interviews and stunts

Diversified production. Hirst's artistic output spans various series and mediums:

• Spot paintings, spin paintings, and butterfly works are produced in large quantities
• He employs numerous assistants to create works under his direction
• This approach allows for a consistent supply of "Hirsts" to the market

Business acumen. Hirst has taken control of many aspects of his career:

• He has bypassed galleries to sell directly to collectors
• Hirst has created his own publishing imprint and restaurant ventures
• He strategically times his market moves, such as his record-breaking auction

Last updated: December 3, 2024