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Art

Throughout history, humankind has shown an appreciation for the visual arts by purchasing the works artists produce. Initially patronage by wealthy families dominated the art market, but as standards of living rose and wealth spread over the last few centuries, art became more broadly affordable, spawning art galleries and art shows for the culturally engaged as well as the affluent. Eventually a resale market developed for art produced in earlier times. Today, we can characterize the art world as having many channels to represent and distribute the art produced by artists, historical or contemporary, through many purchase venues offline and online, for new as well as resale art.

In addition to galleries, specialized auction houses that deal in specific types of art in a broad price range and top-shelf auction houses with a global reach that resell art at a premium price, round out the resale art market. The effect of this ongoing development has been to democratize art, making it available to every interested buyer, for every artist throughout the world, evolving into the sophisticated art market we have today.

Today’s art market is a blessing for visual artists. It has vastly expanded artists’:

* Reach and access to buyers anywhere in the world,

* Capacity to produce artwork by insulating the artist from the intricacies and investment needed to distribute art, and realize sales revenue,

* Ability to compete with other artists for buyers and their scarce purchase dollars.

Though I’m a full-time artist with work represented, collected and exhibited internationally, (private, corporate, museums), my various experiences on the other side of art-making have broadened my perspective. I’ve curated many exhibitions, am the director of Cain Park Arts Festival (a prestigious Nationally (US) recognized art festival), have taught and lectured (Cleveland Institute of Art, Case Western Reserve University), and most pertinent to the subject, owned a spacious contemporary art gallery.

As an artist on the “sell” side of the art market, and wishing to maximize my studio time, I have built a network of:

* Agents who represent me,

* Designers/advisors/consultants who place my work,

* Small, focused contemporary art galleries that consign, show, and sell my work locally

* Broader scope contemporary art galleries that consign, show, and sell my work globally

On the “buy” side of the art market, my gallery/curating, art festival experience, I very well know the challenges of selecting contemporary art, pricing it, presenting it, marketing it, and selling it.

I chose not to resell art in my gallery. Why? Because reselling art comes with additional costs, such as appraisal cost, more comprehensive insurance, and investment in expertise.

Although artists (including me) and galleries (including me) think a work of art is worth a specific amount, in reality it’s worth only what a buyer is willing to pay for it. Until then, it’s only a storehouse of potential value, having incurred the cost of conception, production, and distribution in addition to continuing storage costs over time. Art is a matter of personal taste and desire. No two works of art are exactly alike, and, we all see each work of art subjectively. Since the art purchase decision is very dependent on circumstances unique to each buyer at the time of a considered purchase, each transaction is at a unique price. In general, this means that pricing in the art market is discretionary.

Having deep knowledge of both the “sell” and “buy” sides of the art market, what do I think of the proposed Resale Royalty? I think it’s a bad idea.

Here’re my top three reasons why.

The Resale Royalty increases selling expenses on the “buy” side of the market. With many more artists trying to go to market through much fewer-in-number high-end distributors, marketing power is in the sales channels. So, sellers will inevitably pass on the added royalty-related costs to buyers and/or artists, maybe only to the artist whose work they resell, or more easily, across-the-board to all artists. This could come in many forms, including less promotion for artists, a higher commission on consigned works, or cost-sharing such as charging the artist for a showing, or marketing expenses.

The Resale Royalty imparts more complexity and new costs to the art market. Despite artist and galleries generally establishing a clear retail/artist net price, each buy/sell transaction is at its own price. This means that complete and accurate sales records must follow each work of art throughout its life to establish its cost basis for each transaction.

The devil is in the details of how such a system will be implemented throughout the art world. For example, what happens when a gallery closes (and many do all the time)? What happens when a charitable organization auctions off a painting? Who has the sales records? How are records verified? Who will do the verifying? What is the impact of the different forms of taxation on the participants doing a transaction? A possible answer would be a national registry of all art works produced and sold. However, someone will have to oversee this database. Would artists willingly register their art works and pricing? Would the artist or the seller be the party responsible for updating the database with each transaction’s price and cost information? When there are taxable income discrepancies, which party is the record-keeper keeper-of-record? Will the implementation of the Resale Royalty be consistent across the 50 states as well as the federal government? What about internationally? For this type of system to work, all art market participants including artists must adhere to the new set of complex rules. And, administering such a system will be cost prohibitive to struggling artists and small galleries, driving them out of creating art and selling it.

The resale royalty would contaminate the art world with outside interests. Introducing into the art market unrelated third-parties such as lobbyists and politicians will create a broader set of interests than “sell” and “buy” side art market participants. Only the most powerful and wealthy art market participants will be in a position to influence forthcoming policies. It’s likely that any policy will be to the benefit of the most influential art market participants, to the detriment of most visual artists.

In theory, the visual arts Resale Royalty would apply only to galleries and auction houses that resell art produced (roughly) within the past 75 years or so, including contemporary art. With any public policy initiative, it’s the camel’s nose under the tent. When will the first change to this policy come? How will the next change and the inevitable future changes affect “sell” and “buy” side participants of the art market?

Public policy, such as regulatory and tax, always creates an incentive that changes behavior. Unfortunately, with the proposed visual arts Resale Royalty, the incentive is in the wrong place. It favors well-established artists whose work sell for considerable amounts, over young, new artists trying to establish themselves. It favors large, profitable galleries and auction houses over small galleries where new artists are most likely to showcase their work. It favors the most influential art market participants over participants who don’t have the same access to policy makers.

Rather than creating an incentive for artists - especially young and new artists who don’t have an established body of work - to improve continually their art, produce more of it, and establish their own way to market, it puts a roadblock in their way.

The proposed visual arts Resale Royalty will be a bane for the art market, opening it up to distorting influences from the outside. Do visual artists really want to go through with this change and future unknown changes? I know I don’t. It’s hard enough to create and sell art as it is. The Resale Royalty won’t make it any better or easier for me, or other artists.

 

About the Author

George Kozmon

George Kozmon

GEORGE KOZMON, an internationally collected artist, is best known for his monumental architectural paintings, which have been widely exhibited and critically acclaimed throughout the US and abroad. &...