Contemporary art as a growth driver
Contemporary art has now become the most dynamic and profitable segment of the entire art market. It is being offered in twice as many auction houses as it was 20 years ago. We explain which trends are accompanying this development and how private investors benefit from them.
The market for contemporary art is changing rapidly. Up until the 1990s, contemporary works were almost economically irrelevant. Today, according to the current Artprice Report “20 Years of Contemporary Art Auction History” accounts for around 15% of the visual arts segment and have become a significant growth driver over the past 20 years with growth of 2,100%. On the one hand, this is due to an increasing number of artists (5,400 to approx. 32,000) and works (increase from 2,000 lots offered to 123,000 lots). While the geographical expansion of the market in 2000 was 34 countries, today there are 64 countries participating in corresponding auctions. On the other hand, the days in which individual Western artists irrevocably dominated the market are over.
Alternative narratives open up new international markets in Africa and Asia
The market is now significantly more international and also requires intercultural diversity. This allows a wide range of up-and-coming artists, from countries on the African and Asian continents that have so far been rather underrepresented on the world market, access to the global stage. This in turn also meets the increasing demand for alternative narratives.
China in particular has begun to play a significantly larger role in the international art market and overtook the USA for the first time in 2010 in terms of cumulative auction figures. Influential investors, as well as many of the most important auction houses, are increasingly focusing on the Chinese market. This appears to be an unavoidable development, as in Hong Kong, for example, up to 10% of sales are now made in the contemporary art segment and the number of ultra-high-net-worth individuals, who make up the majority of the buyers of contemporary works of art, has risen in China more than in any other country.
The three largest Anglo-Saxon auction houses still account for 69% of the auction volume (Christies: 28%, Phillips: 11%, Sothebys: 30%). However, with positions 4-11 on the list, seven Chinese auction houses are hot on the heels of them. These are led by China Guardian and Poly International.
Chinese artists bring a breath of fresh air, American stars generate revenue
As a result, China is the biggest beneficiary of this development — including on the supply side. While works of art by contemporary Chinese artists have so far rarely been offered on the international market, let alone achieved high auction prices, the works of Asian market stars, such as Zhang Xiaogang or Fang Lijun, are now being auctioned off at top prices. This is how the work achieved Bloodline: Big Family No. 3 (1995) Zhang Xiaogang set an auction record of $12.1 million, during whose works changed hands for around $5,000 in 2000.
The development in China is representative of the increase in popularity and price levels that contemporary artists and works of art have enjoyed in recent years.
For example, most works are sold at auctions by contemporary artists such as Koons, Banksy, Murakami and Hirst with a number of around 2,000 to 6,000 lots. One reason for this will be the mixing of art and commerce, which will make a larger number of works available to a larger number of buyers.
However, despite increasing diversity, revenue drivers are still just 0.3% of the total number of contemporary artists. Although the works of up to 30,000 artists are publicly auctioned off, only a small elite of 100 of the most sought-after artists still account for the majority of the turnover. For example, American artists Jeff Koons and Jean-Michel Basquat are responsible for 12% of global sales. The latter is now demanding prizes for his works, which have so far been called for for Claude Monet and Pablo Picasso.
Global sales structures and greater differentiation through digitization
Digitalization represents one hope for contemporary artists who have so far been less successful and visible. Because, of course, the art market has not remained unaffected by them either. Social media results in new exhibition and distribution opportunities. Artists now have the opportunity to present their works to a broad public regardless of established sales structures such as galleries or museums. Despite low editions, artists benefit from the fact that they address a global and significantly larger audience, but can also differentiate very precisely who gets their works suggested. Until now, this has been in the hands of museum directors or influential gallery owners.
The demand side could also be radically transformed in the near future as a result of technological progress. While ultra-high-net-worth individuals have so far acquired the works of the most important contemporary artists, blockchain technology enables a new form of participation in the art market.
Conclusion: Liberal change, elitist core
Driven by technical innovations and an increasing demand for diversity, there is a shift in power on the art market. Until now, buying and profiting from the increase in the value of various works of art has only been reserved for financially strong family offices or very wealthy collectors. The tokenization of works of art, i.e. the division of a work into a variety of technically represented units, enables private investors to to participate in the increase in the value of the art market.
The tokenization of works of art does away with traditional privileges and thus represents a liberalized alternative to traditional art investments. Diverse narratives are required instead of a homogeneous leading culture. Instead of individual major investors, many retail investors participate in the increase in the value of the art market. Yet a small elite of contemporary artists still dominates the market.
