This weekend, two of my works will be put up for auction by the person who bought them at my first solo show, ten years ago.
The gallery that showed them is now closed. I still remember opening night – I got there late, and I have been showing up late to my openings ever since.
Everything in that exhibition sold – another pattern that has repeated itself over the years. The market has always played a role in my art. Or is it the other way around?
I’m grateful to the people who buy my work, show after show. Along with the cash to fuel the next project, consistently selling out has brought opportunity, recognition and legitimacy.
So why do I have mixed feelings about my auction debut? Partly it’s because I haven’t fully reconciled to the reality that I’m a politically aware, socially engaged, peddler of luxury objects. Partly it’s the fact that I don’t know enough about auctions, and we fear what we don’t understand.
The former trouble will need more time and thought before I can write about it usefully. I decided to deal with the latter by sending a long list of questions to Shyan, art enthusiast and writer of the blog Art KL-itique. I find his outsider perspective useful, particularly his takes on money in Malaysian art. His answers are forthright and detailed. I hope you get as much out of them as I did.
Disclosure: I’ve been a regular reader of Art KL-itique for awhile now. Shyan and I have corresponded casually over email, and he has expressed interest in buying my work.
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We’ve only met on the Internet. I know you through your blog, Art KL-itique, which I find refreshingly broad, yet personal and analytical at the same time. Can you say more about your background and what got you interested in Malaysian art, so we get an idea where you’re coming from?
I discovered Malaysian art in 2012, and found solace in the art gallery amidst a very busy year professionally and personally. I have always been interested in history, art, and culture, and despite having the privilege of travelling to many places, I had no idea what Malaysian art was until 2012. I am not from the art industry, have never studied art formally (engineer by training, business process consulting by profession), and am surrounded by people whose idea of good art are Impressionist paintings. It was difficult at first to know where to look and to locate local art events.
After many gallery visits, I remain fascinated that Malaysian visual arts produce compelling works, and its industry/scene reflects a microcosm of Malaysian urban life. My personal interest in aesthetics (i.e. “why does this appeal to me?”) and local content (i.e. I grew up and live in KL/PJ), drove me to document my observations and thoughts, within a defined scope.
Is it accurate to say that your work in the corporate sector has given you the background knowledge to contextualize how auctions work, in terms of their mechanics as a financial instrument?
It is a statement I find hard to agree with, because when I write about money in Malaysian art and include the analogy of the stock market, my knowledge of the stock market is entirely personal, i.e. my job does not require knowledge of the stock market. I would attribute my arguments to a general knowledge of corporate business, and from the art market reports I read from art publications.
Shyan, explain the mechanics of an art auction to me like I’m 5 years old.
“So… Mummy did a painting and sold it to Aunty Rose for $100, who hangs it on a wall in her house. Aunty Rose had an open house one day and her friend Uncle Chris tells her that this painting on her wall is now worth $500. Uncle Chris says he has five friends who are willing to spend at least $500 on Mummy’s painting, and Aunty Rose should put this painting up for auction. Aunty Rose agrees. Uncle Chris informs his friends that Mummy’s painting will be sold to the highest bidder in the auction, and he estimates that the painting will be sold between $500 and $700. During the auction, Mummy’s painting is presented in front of a crowd whose eyes are glued to the overhead screen. “450, 500… 700, 750, 750 going once, 750 going twice, SOLD!” Uncle Chris manages to sell the painting to his friend who pays him $840, out of which he hands $750 to Aunty Rose, and keeps the remainder to himself. What did Mummy get? Nothing? You are right! Clever girl…”
What is an estimate price and who or what decides it? And how is that related to ‘buyer’s premium?’
The auction house specialist decides on the estimates, based on factors such as previous sales record, type, medium, size, provenance (who were the previous collector(s)), how well-exhibited is the artist, is the artist still producing work, how significant is the work within the artist’s oeuvre, rarity, condition, and how many collectors do the specialist know who are pursuing work by this artist.
A ‘buyer’s premium’ is a fixed percentage amount (12% for Henry Butcher Art Auctioneers) paid on top of the hammer price for a successfully auctioned work. It functions like a sales commission paid to the auction house.
The ‘buyer’s premium’ is reported in the final sales amount, but not factored into the estimates. For example, a work is estimated at RM 7,000 – 10,000. The bid starts at RM 6,500 with an increment of RM 500 and eventually hammered down at RM 9,000, still within the estimates. Factor in the ‘buyer’s premium’ at 12%, and the successful bidder pays RM 10,800. This gives the auction house a legit reason to announce that this work “sold over the highest estimates”.
Here’s a link to art auction lingo.
You wrote a blogpost, ‘Money in (Malaysian) Art‘ where you used words like BUY, HOLD, SELL and TRADING BUY, and I was like, OMG, foreign language, artist brain not understand. Can you translate those terms into human speak?
Those words are quoted in analyst reports produced by stock brokers, as recommendations to potential investors regarding a particular stock in the stock market:
‘BUY’ – recommends the investor to buy stock, because the broker thinks the stock has potential to provide the investor substantial returns in the future.
‘HOLD’ – recommends the investor who owns stock to not sell stock, because the broker thinks the stock may still have potential to provide the investor significant returns.
‘SELL’ – recommends the investor who owns stock to sell stock, because the broker thinks the stock has lost its potential to provide the investor significant returns.
‘TRADING BUY’ – recommends the active investor to buy stock, because the broker thinks the stock has potential to provide the investor significant returns in the short-term future.
Stocks, as a perceived valuation of a corporate entity, are markedly different from an artwork, which is a product. I used this analogy, because proponents of “art investment” refer to art as a commodity traded within a relatively small marketplace, similar to the stock market.
The secondary art market is like the stock market in one aspect – the value of an individual stock/artwork is based much more on perception than on fundamentals. This explains why contemporary art has leapfrogged other art categories in terms of sales in recent years. The current value of one Koons’ ‘Balloon Dog’ ($30 – 50M), can buy someone a Raphael drawing, a Rembrandt etching, a Rodin sculpture, a small Degas, AND perhaps even a Klee painting. The latter five artists have a firm place within the Western art canon (strong fundamentals), but the former (Jeff Koons) is perceived as the greater artist due to his higher auction value. This is partly because the auction houses have successfully promoted art as a trophy collectible.
The estimate on my work is RM3,000 – 5,000. At the lowest estimate that’s 5 – 6 times the original selling price in 2005, almost 10 years ago. Where did that extra value come from? Did I create it? Did time create it?
You, by virtue of being alive and still actively producing art over the past decade, and taking part in art events (especially international ones), helped contribute to that valuation.
Since this is your auction debut, and you have not produced or sold similar works recently, I guess that the specialist provided the valuation based on a current assessment. There is no need to regard what the original price was, if one knows that there are collectors willing to pay this amount currently, for a collage work of this size, by a practicing (for 10 years) Malaysian contemporary artist.
Should I care about this art auction, considering that if my work sells none of that extra value actually comes to me? Bonus question: where does the profit go? How is the pie divided?
The secondary market wants you to believe that the art auction is important for you (the artist), by insinuating that the price of a successfully auctioned work, helps determine the price of your artworks in the primary market. If your work successfully sells above the high estimate (e.g. RM 5,040 with ‘buyer’s premium’), feel free to price your next collage on paper work, sized ~20 by 30 inches, at RM 5,000. None of the extra (real) value went to you now, but your future (potential) value has just increased!
The secondary art market wants you to believe in this theory, because they want to control your prices, a logical thing to do in a capitalist marketplace. If you subscribe to this theory and follow the (secondary) market trend for pricing of your future works, you put yourself at risk of a marketplace where prices can go up but also go down. Some argue that the primary art market and galleries do the same (which I agree), but I think any respectable gallery will not depress prices of an artist it represents. A gallery is held accountable when prices are set too high (its reputation and represented artist suffers); whereas an auction house can cover up unsold works due to overestimation, by placing the blame on the “free market”.
For each successfully auctioned work, the hammer price amount goes to the consignor (i.e. seller), and the ‘buyer’s premium’ goes to the auction house, who then needs to pay its specialists, catalogue writer, framer, movers, auctioneer, venue rental, insurance, marketing, etc. The auction house may also entice a collector to sell a prominent work (beneficial to its own publicity) by offering to share a cut of the ‘buyer’s premium’, or pay a conditional fee, but this practice is only apparent for the large auction houses (i.e. Sotheby’s and Christie’s).
Is it bad for me if the work doesn’t sell?
Since “art investment” is touted so often nowadays, it is inevitable that collectors will assess an artist’s investment potential before purchasing a work. Your non-selling work may then become a factor.
However, if you believe that you produce good art, and good art sells itself, not selling a work in auction is a non-factor.
By talking about the auction like this publicly, are we manipulating the market?
No, that would be overestimating our influence.
Art is historically an elitist endeavour that are sold as luxury items, and that definition remains till this day. Luxury items are frequently sold based on a personal relationship between seller and buyer. We can talk about the risk in art auctions, but if a potential collector trusts a specialist and his/her sales pitch, the transaction will take place regardless.
Just for fun, if I wanted to, what other ways could I manipulate the market?
As an artist, you can bid up the price or sell to yourself via a proxy. You do not even need a friend to be physically present at the auction, since one with a valid credit card can register as an absentee bidder, telephone bidder, and for Henry Butcher, even as an online bidder.
What you can do, a collector can do better. A collector who owns ten works of yours, can choose to sell one of your works in the next seven art auctions, effectively making you ‘in demand’. To create this perception, the collector has to ensure there are people bidding up and buying your works at these auctions, so that’s where the proxy trick may come into play. A collector can also stage a “solo exhibition” of your works from the collector’s own collection, and commission a catalogue, in order to boost your artist credentials that may result in a higher valuation in the next auction.
What you or a collector can do, an auction house can do better. Possessing a wider network of collectors, it is easier for the auction house to manufacture an ‘in demand’ scenario as described above. An auction house can also choose to under-price your estimates, so that your work gets sold “over the high estimates”, which creates the perception that you are ‘in demand’.
More complex transactions include the use of guarantees by Christie’s and Sotheby’s, where a work is guaranteed to sell, thus maintaining the perceived value of an artist. These guaranteed amounts can be borne either by the auction house or a third-party underwriter. More about guarantees in this Financial Times article.
Thanks Shyan! I’ve learned alot from this.
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*The title of this post was inspired by an essay called ‘Explain Bitcoin Like I’m 5‘ by Nik Custodio.
