Consider what happened to Rauschenberg, who, far from pursuing a quiet life as a suburban accountant, went on to push the boundaries of sculpture and performance, collaborating with everyone from choreographer Merce Cunningham to the National Aeronautics and Space Administration (NASA). His continued investment in his own career drove prices higher for his oeuvre as a whole.
In Whitaker’s vision, Rauschenberg’s famous auction-house confrontation with Scull
could have been avoided if he had retained a stake in the works himself (the artist shoved the collector, then asked him to buy a new work at his current, sky-high prices). It works like this: Instead of the typical 50/50 split between artist and dealer on a primary market sale, the artist forgoes 10% of the purchase price and receives 40% plus a 10% stake. The value of that equity stake rises as long as prices for the artist’s work go up, meaning Rauschenberg could have recouped $8,500 at the auction had he forgone $90 in cash at the time of the primary sale.
Contracts and legislation with similar aims already exist. In the 1970s, for example, the art dealer Seth Siegelaub developed a contract, The Artist’s Reserved Rights Transfer and Sale Agreement
, that stipulated artists were entitled to 15% of the profits on any subsequent resale of their work, and of course contract provisions can be worked out on a case-by-case basis. The European Union and the state of California mandate artists royalties by law, but Whitaker points out that enforcement is weak. Over the period from 1977 to 2011, the council in charge of collecting royalties from the California Resale Royalty Act netted just $325,000 in royalties
on a total $6.5 million of art sales.
“This debate has been going on for over a hundred years,” says Franklin Boyd, a New York lawyer specializing in intellectual and cultural property rights. She says she is intrigued by the potential for blockchain technology to help facilitate artists’ resale rights, but cautions that the radical ownership transparency promised by blockchain might butt up against the art market’s culture of privacy.
Indeed, that’s part of its promise, says Whitaker, who is preparing to launch such a platform herself. She is currently inviting galleries to contact her and share historical sales data anonymously to help build a model portfolio. Whitaker also serves as an advisor to Bitmark, a Taiwan-based firm that helps enable property rights for digital assets. Blockchain could provide an elegant private-sector solution that lets artists easily track an artwork and its traded price as it passes through the hands of collectors and institutions, bringing much-needed transparency to a market long on information asymmetry and opacity.
It’s unclear who might be the first to adopt the technology. Collectors could be disincentivized to use it, because it could stymie their ability to resell works, a criticism that’s been lobbed at similar royalties efforts in the past. Professor Roman Kräussl of the Luxembourg School of Finance says artists clearly have the most incentive to use it, but if none of the artists who take it up have a large market presence, it’s hard to see the technology gaining traction. He could envision a progressive gallery or a prominent artist getting on board, though, and pushing others to do the same.
Giving artists a chance at the upside “would revolutionize the art world, and would make it a bit nicer,” he says. The art market, according to the most recent TEFAF Global Art Market Report, was worth $45 billion in 2016
. But despite those jaw-dropping numbers, Kräussl says, “no one talks about whether the artist can live or not.”
Still, there are few artists whose work reaches the heights where an ownership stake might be worth the trouble, says Will Goetzmann, a finance professor at Yale University who has studied the art market. In 2015, works that sold for $1 million or more at auction accounted for the majority of the art market’s value, but less than 1% of the total number of transactions, according to the TEFAF report published in 2016.
He notes the price distribution in the art market is unlike most other industries, with a handful of stars and thousands, perhaps millions, more artists who make very little through the sale of their work.
“There are a very tiny number of people who get high prices for their art,” he says. “It’s not a one in a hundred chance, it’s more like one in ten thousand.”
He also raises the question of how to properly assign value to an equity stake in an artwork that may never get resold, especially since the artist doesn’t share in the aesthetic value of the work (since “it’s in some rich guy’s house,” Goetzmann says). Indeed, many galleries’ stated aim is to “place” works in the hands of thoughtful collectors who hold works over the long-term, and have even gone so far as to call for blacklisting “flippers”
who seek to resell art at a profit.