We Need to Change the Language around Price Transparency in the Art Market
In 1897, standing on the deck of his yacht the Corsair, financier J.P. Morgan allegedly responded to a guest inquiring about the boat’s cost: “If you have to ask, you can’t afford it.” This attitude has since become seared into the American subconscious through all manner of media. And it’s one the art industry tends to embrace.
Entrenched beliefs in the art world suggest collectors expect discretion and should only be interested in the content of the work, not its cost (read Eileen Kinsella’s great piece in artnet News from last month for a deeper dive on this matter). As a result, pricing information is kept behind reception desks at galleries, on locked iPads at fairs, and is traded among in-groups of collectors and advisors as a form of cultural currency.
This is a problem.
Most of the art industry is in serious need of new buyers: sales volumes have contracted by nine percent over the past ten years, according to Art Basel’s most recent edition of its annual art market report prepared by Clare McAndrew. And in each of the past two editions of the report, galleries have reported that their top challenge for the next five-year period is “finding new clients.”
But finding new clients means breaking out of the very small percentage of high-net-worth individuals who come from or have modeled themselves after the type of aristocratic connoisseurship the art industry is best tooled to serve. It means attracting buyers from the lower reaches of the first and well into the second quintile of income and wealth distribution. These buyers have been conditioned to have frictionless and up-to-the-minute insight into the value of everything, from their homes to their sneakers. They also may genuinely have to consider whether they can afford the work they’re passionate about and if it will hold its value over time.
At the very least, these newer buyers want to know the price without the potentially uncomfortable conversation that comes with having to ask. In the most recent edition of ArtTactic’s Hiscox Online Art Trade Report, 87 percent of respondents said having prices visible was among the most important factors when buying art, even beating out “background information about the artist and the work” by six percentage points. At Artsy, we’ve also found this to be true: In a recent survey of users, public access to the asking price for a work was the most frequently requested change to how galleries operate on the platform, with nearly four times as many collectors mentioning the need for public pricing as mentioned needing additional contextual information about the artist and their practice.
(The next edition of this column will further examine our data, confirming that works with their prices publicly available are more likely to sell overall and also require significantly less time and attention from gallery staff for a sale to be made.)
So if making prices available without forcing a buyer to ask is one of the easiest changes the art industry could make to bring in new collectors and help support more artists and art in the world, why hasn’t it happened? In part, dealers and collectors say the language around public pricing and most common arguments for it place the goalpost out of reach. Conversations around prices tend to more often focus on the notion of “transparency”—not just listing the current price but showing the price of the work in all past transactions as part of the work’s provenance.
The public ledger of private art sale prices that would result in the latter case is an undeniably scintillating prospect for those of us who analyze the market. But knowing what a work sold for even five or ten years ago isn’t always helpful when trying to evaluate what it should sell for now. Because of how quickly artists’ markets can change due to developments in their careers or changes in taste, we have found in our research that access to information that can help contextualize the current price—for example, readily available information about the artist’s career development or current prices of other artists at similar stages in their careers—is more helpful. Past prices are nice to have, but not a necessity for expanding the buyer base.
Some would say the argument for “price transparency” isn’t about buyers at all, but rather the threat of external regulation on art sales and an ethical obligation to greater openness in a market that caters to the global elite.
But price transparency would have little impact on the potential for regulation. For example, the 5th Anti-Money Laundering Directive, which will go into effect in the European Union on January 10, 2020, imposes stringent reporting requirements about the buyer and seller in any art transaction above €10,000 ($11,100) that is carried out by cash or wire transfer. Like with current ‘know your client’ requirements, this verification process can be effectively carried out through intermediaries. A public ledger of private art transactions isn’t necessary, nor would it have prevented the regulations from coming into being.
Meanwhile, the ethically-driven arguments actively push more transactions out of public view and are symptomatic of an availability bias brought on by internal art world scandals and adjacent incidents like the Panama Papers. Rehashing incidents like the Knoedler forgeries and 1MDB money-laundering scandal or speculating about the shady stuff that must be going on in freeports as examples of why more transparency is required in the market makes for great reading. But it also creates the false public perception that nefarious activity is rampant among the wealthy and within the art industry; this is good for exactly no one who cares about the health of the art ecosystem or the prospects for artists.
The current notion of transparency and public perception of the rich push dealers and collectors toward more private forms of transactions. Private sales, for example, have grown significantly in their share of the market over recent years, with Sotheby’s notching 37 percent growth in the sector in 2018, compared to a relatively more modest 15 percent increase in public auctions. As one prominent London collector put it to me bluntly during Art Basel last month, echoing many other buyers and sellers throughout the week: “Having more pricing information available is absolutely crucial for the future of the market, but the word ‘transparency’ scares the shit out of all of us.”
Such a statement may stoke anti-capitalist sentiment that the majority of wealth comes through misdeeds and therefore collectors deserve to be put under the microscope by virtue of their ability to collect. But before you go whip up a tweet, consider the outrage and anxiety generated last summer when a researcher’s analysis highlighted that Venmo transactions are public by default, much to the surprise of many users. The mushrooms on my pizza don’t have to be magic for it to feel a little weird that anyone in the world can know I sent my buddy eight bucks for a couple of slices last night. There is a big difference between having a price posted on the wall and broadcasting out exactly who bought what when.
More neutral and specific language like ‘publicly available pricing’ has, in my conversations over recent months, elicited a more common-sense response. And even if you think full price transparency is crucial, galleries listing current prices outwardly is a logical—and, most importantly, achievable—step in the right direction.
If you have feedback, ideas, or comments, don’t hesitate to reach out via email or Twitter.