For a few, the art gallery business is immensely lucrative. Here’s how it works, the super-rich invest in artworks which are going to increase the value of their overall portfolio. As art prices rise, the individual’s investment rises but the entire market value rises as well. This is good news for the wealth manager and the investor; art in wealth portfolios is estimated at US $1.5 trillion.
When an art gallery has a couple of dotcom billionaires as their clients, they have a huge opportunity to manipulate the market in terms of the art and artist brand and the value of the brand to the people with big bucks.
But the entire structure rests on a painting or a sculpture or some installation art, and if the gallery over-hypes or over-prices things can quickly come crashing down.
The gallery as a mentor
Galleries are run by people who put a great deal of time and effort into the artists they represent. They will be a guide and a guru to the nascent talent, they will make introductions where that is appropriate and they will help plot an artist’s career.
Before the work is even shown in a public setting, the gallery will have invited their preferred viewers to take a look. These influences will include museums and collectors known to be of excellent reputation or at least the best the gallery can get.
The next step is the exhibition which, if everything has gone well, is already carrying a significant endorsement and with that, the hype commences and the price might just go up a little.
This honeymoon period will not last long if the artist becomes a desirable brand. Once they do, they will move onto a higher tier gallery, one who would not have given them the time of day, way back when.
Who can blame the gallery for making hay while the sun shines?
It is a question of control
The artist will be seen as being over-hyped and over-priced and their career could hit a low patch as a result.
The gallery may be seen as the source of inflated price and hype, a sin in itself. But worse, the gallery could be seen to be wrong, which is much more damaging to their reputation in the long run.
The seller who takes a loss may also take a reputational hit. They also take a hit to the pocket too.
The art world likes it this way
There are alternative market structures, the Medici had one hundreds of years ago. But the art world probably won’t change because this works. It makes art elite and worth billions which doesn’t hurt.