In recent art world news, the technology augmented reality (the cousin of virtual reality) has been making headlines in the media these days. Simply defined, augmented reality (AR) technology superimposes a computer-generated image on a user’s view of the real world hence providing a composite view.  It has been widely reported that AR technology promises to transform how we learn and interact with the real world and now this includes the art world.

Many already know that art has been a relative latecomer to the digital revolution in recent years. People become accustomed to associating the value of art to seeing such art in person.  As such, art galleries and museums still rely on special exhibitions for a significant share of their revenue.

ArtFinder, a London-based e-commerce start-up, has built an IMDb-type searchable digital catalog containing hundreds of thousands of artworks in the form of paintings, sculptures, and art-related media.  The site also includes “essays on artists, artworks and artistic movements, making it a useful (and free) reference resource for art discovery, while social features open up new opportunities for enjoying art.  It allows you to virtually collect and share your favourite artworks, and as users build up a profile that reflects their particular tastes, the system also generates further recommendations of what they might like.”

ArtFinder’s co-founder Chris Thorpe believes that “this element of recommendations, when combined with geo-location, adds a crucial element of serendipity to art discovery and keeps that physical connection to the real world which is so crucial to connecting emotionally with a piece of artwork.”

Artivive, a Viennese start-up recently founded in 2017, offers an easy to use AR tool that allows artists to create new dimensions of art by linking classical with digital art.  Artivive’s AR tool also enables museums an innovative way for visitors to interact with exhibits in which the visitors use their smartphones or tablets to experience the layer of AR.  Artivive aims to become the “go-to solution for artists, galleries and creators and change the way art is created and consumed while building a community and movement around augmented reality art.”

Artivive’s CEO Codin Popescu believes that the “experiential element will always be central to how people enjoy and relate to artworks.” Specifically, Popescu believes that the key is “to use immersive technologies such as Augmented Reality to seamlessly add digital elements to those existing and well-loved experiences, making them richer and more accessible in the process.”

Prior to AR tools such as the type offered by Artivive, for artists to create in AR they had to develop their own isolated solutions, which required resources and technical skills, but today with the latest AR technology artists can take visitors on a journey in time and enhance art with illustrations or discuss how such art was made.  For museums, galleries and other art institutions, AR technology offers a new and innovative way for visitors to interact with exhibits.

It has been frequently reported that the art business needs to find ways of engaging the next generation of buyers.  AR technology may be just what the art business needs as it has certainly transformed how we experience art today.

For further information on the application of this dynamic, innovative technology to art, see “Augmented Reality Will Reinvent How We Experience Art,” recently published online by Forbes on June 20, 2018.

 

 

 

In recent art world news, Verisart has launched the “P8Pass,” developed in partnership with online auction house Paddle8, to offer blockchain certification and authentication services to the worldwide art marketplace.  According to Paddle8’s website, the “P8Pass is a digital certificate with data encoded continuously onto the Bitcoin blockchain.  The certificate will be offered for any work of art or object purchased on Paddle8 and will detail provenance including ownership history and artist authorship.  P8Passes will leverage the Bitcoin blockchain to build a decentralized database containing certificates of authenticity and provenance for artworks providing a guarantee, accessible and verified at any time.”  Buyers, consignors and partners will have access to the P8Pass in all curated and benefit auctions featured on Paddle8.

Paddle8 believes that the P8Pass has “the potential to significantly reduce transaction costs for the trade with art [and] collectibles and broaden the market by including new buyers encouraged by authentication process simplicity and transaction safety offered by the P8Pass blockchain product, the risks traditionally being the primary reason for affluent consumers to stay away from the art trade.”

Paddle8’s strategic investor, The Native SA, believes that this innovative new application of blockchain technology to the art market has “the potential to disrupt the art market for good[.]”

Verisart claims to be “the world’s leading platform to certify and verify artworks and collectibles using the Bitcoin blockchain.”  Since the start-up’s 2015 launch, Verisart has offered contemporary artists a simple way to generate permanent certificates of authenticity and reduce the extent of fraudulent activity.  Verisart “combines museum certification standards, distributed ledger technology and image recognition to its provenance and registry services.”

In addition to its partnership with Paddle8 on development of the P8Pass, Verisart has partnered with ArtSystems to offer blockchain certification to leading galleries throughout the world.  This would be the first art inventory management platform to integrate such kind of blockchain-based certificate.

New start-up Codex Protocol is another player, among others, entering this dynamic growing field of placing art on the blockchain.  Specifically, the start-up is a blockchain-based decentralized title registry for art and collectibles.

This is certainly a fascinating area that I will be keeping an eye on in the application of blockchain technology to the global art market.

In recent art world news, specialist global fine art insurer Hiscox in partnership with London-based art market research firm ArtTactic has published its sixth annual Hiscox Online Art Trade Report 2018.  This latest report reveals an online art market worth an estimated $4.22 billion (up 12% this past year).  While this represents a solid year on year increase, it is notable that this was lower than the 15% growth in 2016, and the 24% growth in 2015.  This week’s Art Law blog post will highlight several key findings from the report.

Fewer art buyers buy art online, but those that do spend more.  Approximately 43% art buyers bought art online in the past year (down from 49% in the previous year).  Notwithstanding the decrease in online art buyers, the share of online art buyers paying (on average) more than $5,000 per fine artwork increased to 25% (up from 21% the previous year).  Notably, active online art buyers are also buying more online art than in previous years with 74% making multiple online art purchases (up from 65% in 2017).

Lack of price transparency is an issue for new online art buyers.  While existing art collectors are used to lack of price transparency in the purchase of art, for 90% of new art buyers, lack of price transparency is a significant issue that isn’t being addressed.

New media art is gradually making traction.  New media art (e.g., video or digital art) is gaining traction right behind preferred mediums, paintings and prints, for online buyers.  About 17% of online art consumers purchased new media art this past year and average prices paid for same have seen a gradual increase.

Significant growth for mobile commerce and Instagram is preferred platform among art buyers on social media.  The use of a mobile device to buy art has steadily climbed from 4% in 2015 to 20% in 2018.  As for social media, 63% of art buyers consider Instagram as their preferred platform (up from 57% in 2017 and 48% in 2016).  Instagram has become a key tool for the art industry in reaching consumers beyond the existing art market with nearly 1 billion users.  For the Art Law blog’s recent coverage on the effect that Instagram is having on the art world, click here.

Higher rate of industry consolidation is expected in the future and online auction market is expected to be highly competitive.  As a result of the number of new mergers and acquisitions that took place this past year, 81% of online platforms are expecting a higher rate of consolidation going forward, especially in the form of vertical mergers.  The online art auction market is expecting a highly competitive environment this year.

Third-party marketplaces are helpful sales tools.  Perhaps not surprisingly 75% of galleries used third-party marketplaces to sell art online in 2018—this is up from 59% in 2017 and 41% in 2016.  Nearly 20% are presently using such marketplaces as an outlet for at least half of their online sales (up from 3% in the previous year).

Prevalence of cybercrime hitting platforms and galleries affects buyer confidence.  Over half (54%) of platforms and nearly 30% of galleries have been targeted in an attempted cyber attack this past year (10% to 15% of attempts were successful).  Just under half (41%) of online art buyers indicated that they are concerned or very concerned when buying art online.

High expectations for incorporation of blockchain technology, but minimal adoption.  Over half (60%) of online platforms believe that the use of cryptocurrencies will be the way blockchain technology makes its debut in the online art market.  However, only 7% presently accept cryptocurrencies as a payment method and just under 10% have embedded blockchain technology into their businesses.  Further, well over half (64%) of online platforms believe that using blockchain technology as a “title/ownership registry for the art and collectibles market” will be the “most successful use of blockchain technology in the future.”

Regulatory readiness for forthcoming EU regulation is questionable.  The new General Data Protection Regulation (“GDPR”) is coming into effect on May 25, 2018 and will have widespread applicability as it seeks to unify data privacy standards and provide greater data privacy protection for citizens of the European Union.  Surprisingly though, 41% of galleries and 21% of online platforms surveyed were unaware of this forthcoming new regulation and many were unprepared for it.

For those interested in reviewing the widely anticipated sixth annual Hiscox Online Art Trade Report 2018 in its entirety, click here.

 

In recent art world news, popular social media site Instagram has been having a significant effect on the art world since its launch in 2010.  The photo and video sharing app has evolved into the cornerstone of the art world becoming a home to many in the industry, including artists, art collectors, auction houses, curators, galleries, and museums.  Many artists are using Instagram to promote, discover and sell art.

Many emerging artists see the photo and video sharing app as a democratizer, helping artists who might not have representation from the most prestigious galleries or degrees from the most exclusive art schools get their work in front of big audiences.”

Before the arrival of social media, emerging artists had a more difficult time getting their work out there and being noticed.  In the past, under the traditional route, artists would contact local galleries and hope for a favorable outcome.  To promote a bigger following, artists faced numerous hurdles, such as securing representation at prestigious galleries, exhibiting around the world, and participating in premier art festivals.

With the arrival of social media, artists started using various services such as Facebook, Flickr, Tumblr, and Twitter to highlight their work, attract audiences around the world, and advocate on their own behalf.  Instagram, however, is said to have the biggest impact on the art industry.  Remarkably, Instagram is on track to achieve a billion monthly active users in 2018.

The coalescence of tech, demographics and changing buying habits also plays a role in making Instagram the tool of choice for art professionals.  In the Venn diagram of people who use Instagram and people who are discovering and willing to buy art online, the overlap is increasing.”

According to research from Pew, about a third of online adults in the United States use Instagram and among those aged 18-29, the app’s usage increases up to 59%.  Online art marketplace Invaluable, in its 2017 survey, found that nearly 56% of consumers in the United States aged 18-24 said they would purchase art online and 45% said social media is the primary way they find art.

Although art sales from the big auction houses from the likes of Christie’s and Sotheby’s are well documented, there isn’t much data on private art sales, and it’s difficult to say whether direct sales via Instagram are taking away gallery sales.  Though it has been reported that auction houses and galleries are seeing their own sales gain traction as their work is discovered on Instagram.

Major galleries and museums have even benefited from use of the app by cultivating tremendous followings on Instagram.  Museums use Instagram to promote upcoming exhibitions, provide followers an inside look at their operations, and make art more accessible.  The Los Angeles County Museum of Art (LACMA) views its Instagram page “as something of a virtual gallery that allows followers to feel like they’re seeing an exhibition, even if they’re not in Los Angeles.”  Smaller galleries, on the other hand, use Instagram to discover new artists.

Some artists have said that Instagram can be distracting, particularly when artists get wrapped up in seeing how many “likes” or comments their work receives as compared to others.  Some are concerned that “an overreliance on Instagram could discourage people from attending art shows and shift the enjoyment of art from an in-person experience to something that happens over a phone.”

As with any technology, there are going to be pros and cons, but it certainly appears that Instagram has had a mostly positive effect on the art world.

 

 

In recent art world news, one may think that the digital revolution has provided some “much-needed transparency” to the art market with the sale of artwork now being bought online as regularly as books and music.  However, according to last year’s Hiscox Online Art Trade Report (publication of the 2018 edition is forthcoming in April), it is estimated that online platforms accounted for about $3.75 billion of sales in 2016 (up 15% from 2015), which represents just an 8.4 percent share (up from 7.4% in 2015) of the overall art market.

Despite the low overall art market share for online platforms, the art world’s digital sector has seen new developments.  In particular, just last week it was announced that online auction house Paddle8 had merged with Swiss tech company The Native, and would develop an auction that accepts virtual currency (i.e., bitcoin).  Also, last week Sotheby’s announced that it had acquired Thread Genius, an artificial intelligence (AI) startup company specializing in developing identification software by using algorithms to identify objects and suggest images of similar objects.

While the music and publishing industries have been transformed by retailing via an online platform, this has not been the case for the art market, which has been slower to move in such direction.  Some in the art world have made the well taken point that artwork is unique and much more expensive than mass-produced books and music.  A high price tag of six figures and up has the effect of deterring digital impulse purchases.  Indeed, online art sales tend to be dominated by artwork priced below $5,000.

Prices remain a major hurdle for the expansion of the digital art trade, not just because they are often so high, but because of their lack of availability.  Consumers looking to buy, say, a shirt online can browse numerous fashion websites where thousands of items are clearly labeled and priced.  But all too often, prices on art dealers’ websites—and in their galleries and booths at fairs—are ‘on application,’ a process that can be both laborious and forbidding.”

Unsurprisingly, from the perspective of the consumer, dedicated online-only art auctions having transparent price structures benefit from a definite edge over dealer transactions in the digital space.  Since last May, in an effort to aid transparency, Christie’s website has included results from its online-only art auctions, which had an average lot price of $7,305 (up from $6,047 in 2016).  This information is not provided by competitors such as Sotheby’s and Paddle8.

Although results achieved for resold artworks can be accessed via subscription websites such as Artnet and Artprice, the “primary market” prices charged by galleries for new artworks by contemporary artists remain private with “many dealers regarding them as trade secrets available only to insiders.”

A new app started in 2016 named Magnus seeks to disrupt the art market and make it more transparent.  In use, the smartphone user simply aims their device at a particular artwork in a gallery or fair and visual recognition technology rapidly provides auction and dealer prices for the specific artist.  In such way, it is said that Magnus works for art as Shazam, the mainstream song-identifying app, works for music.  The new app’s database stores about 10 million prices, which are compiled through crowdsourcing, and 10 percent of which are from the primary market.  The app is said to be especially strong at art fairs with estimates that it identified around 80 percent of the prices at events such as Art Basel.

It will be interesting to see how the art market engages the next generation of art collectors and buyers.  The recent developments in the digital space described above seem like a solid start.

 

 

In recent art news, the gap between small galleries and large galleries is widening at a steady pace as a number of small to midsize art galleries have closed their doors since 2012 to present and the numbers are remarkable.  Small to midsize galleries have “long struggled to compete in a field increasingly dominated by mega-galleries with multiple locations, like Gagosian, David Zwirner and Hauser & Wirth.”  This recent trend towards an “intensely commercial and competitive art market has resulted in a critical mass of galleries folding, moving or merging.”

According to Editor-In-Chief Sarah Douglas of Artnews, “[i]n the three years between July 2012 and June 2015, there were only a handful of notable closures—around six. By contrast, the two years between July 2015 and June 2017 saw 25—and 18 of those happened in the past year alone.”  A rundown of some of the significant closures, from 2012 to the present, include as follows:

May–June 2017

Envoy, New York

On Stellar Rays, New York

Acme, Los Angeles

CRG Gallery, New York

January–April 2017

Ibid, London

Vilma Gold, London

Sandra Gering Inc., New York

Limoncello, London

Andrea Rosen, New York

Feuer/Mesler, New York

Susanne Hillberry Gallery, Detroit

Murray Guy, New York

September–December 2016

Mike Weiss Gallery, New York

Mark Moore Gallery, Los Angeles

Young Art, Los Angeles

Kansas, New York

June–August 2016

Lisa Cooley, New York

Robert Miller Gallery, New York

Tracy Williams, Ltd., New York

Rosamund Felsen Gallery, New York

January-May 2016

Clifton Benevento, New York

Thomas Duncan Gallery, Los Angeles

Laurel Gitlen, New York

2015

Mixed Greens, New York

Joe Sheftel, New York

Wallspace, New York

McKee Gallery, New York

2012–14

Churner & Churner, New York

Harris Lieberman, New York

Nicole Klagsbrun, New York

Donald Young Gallery, Chicago

Margo Leavin Gallery, Los Angeles

Some of the reasons behind this widening of the divide between small and large galleries are high-priced real estate in gallery neighborhoods, such as Chelsea, and the rapid expansion of expensive art fairs, where art collectors now tend to do most of their browsing and buying of art. Instead of visiting smaller galleries, collectors are setting their sights on market-tested “trophy works” offered by the major dealers.  Collectors are also buying art through social media (e.g., Instagram) or other online images without even viewing the work in person.  Collectors appear to be less willing to bet on the emerging artists represented by the small to midsize galleries.

For many small to midsize gallery owners, running an art gallery is simply not a sustainable business in the current market hence the steady stream of closures highlighted above.

 

In recent art news, the Frick Collection is among a distinguished group of art institutions around the world that is taking its antiquated system of photography archives and digitizing it such that the photography archives are part of a “mega-size, searchable scholarly database and web portal that will eventually hold 22 million images, 17 million of them artworks and the rest supplemental material.”

This collaborative effort of the participating art institutions is known as Pharos, which is an international consortium of fourteen European and North American art historical photo archives committed to creating a digital research platform allowing for comprehensive consolidated access to photo archive images and their associated scholarly documentation.”

Although Pharos’ intended audience is art historians, anyone will be able to use it.  It is anticipated that Pharos could have broad implications for genealogical research and art restitution as well as other unforeseen applications.  Pharos provides many advantages in that users will be able to “search the restoration history of the works, including different states of the same piece over time . . . ; past ownership; and even background on related works that have been lost or destroyed.”

As the Pharos consortium is committed to scholarly depth, it is currently working on image-recognition technology so that there will be no language barriers from the scholars’ searches.

For further information and recent developments of the Pharos consortium, visit the Pharos website.

In an attempt to curb illicit trafficking of fine art and antiques, a group of Geneva based art professionals known as the Responsible Art Market Initiative (RAM), which include dealers and art law attorneys, will publish a dossier on art market best practices for free ports and custom-free zones. There have been numerous reports of looted art appearing in free ports. Of recent note, an Amedeo Modigliani painting worth approximately $20 million with Nazi links was located last year in the Geneva free port.  However, despite this high profile Swiss scandal, the Responsible Art Market Initiative has reported that its dossier of guidelines will serve the art market at large, and is not solely designed for the Swiss market (which has been reported to only make up 2% of the art market).  Our contributors have noted in previous posts that the upsurge in the use of free ports by collectors has led to concerns over the use of such storage spaces for illegal activities.

The New York Times recently featured an interesting article on the rapid growth of free ports around the world used by collectors and dealers for the temporary storage of art works.  Many would be surprised to learn that more than a million of some of the most treasured art works ever created, such as ancient Rome treasures, museum quality paintings by old masters and an estimated 1,000 works by Picasso, are crated or sealed in tight storage vaults within the walls of such storage facilities.

With the rise in the price of art, masterpieces and other exquisite art works are increasingly being stored away in free ports by collectors who are interested in seeing such works appreciate in value rather than filling up wall space to be viewed.  As collectors become more financially savvy with art being treated as a capital asset in their portfolios, free ports have effectively become the support for all of this.

This recent upsurge in the use of free ports by collectors has led to concerns over the use of such storage spaces for illegal activities as well as worries in the art world on the effect such wholesale storage has on art itself.  Within the last few decades, a small group of free ports have increasingly served as “storage lockers” for the wealthy.  Free ports are geographically located in tax-friendly countries and cities and offer attractive savings and security to collectors and dealers alike.

In addition to the at least four major free ports in Switzerland that specialize in the storage of art and other luxury goods, such as wine and jewelry, there are four more free ports around the world, including Singapore (2010), Monaco (2012), Luxembourg (2014), and Newark, Delaware (2015).

Out of concern that these rapidly growing private storage spaces could become havens for various illegal activities (i.e., contraband, money laundering, etc.), Swiss authorities initiated an audit back in 2012, the results of which revealed a significant increase in the value of goods stored in some warehouses since 2007 with an increase in high value goods such as art.  The audit estimated that there were more than 1.2 million works of art in the Geneva Free Port alone in which some of the art has not left the facility in decades.

Many in the art world remain critical of free ports.  With many valuable masterpieces being stored outside of public view, critics argue that works of art are created to be viewed.  Those who disagree point out that paintings are not a public good as much art work was created as private property. Others say that free ports represent a financial system in which investors lack a connection with the art they purchase, but recognize that the storage warehouses enable responsible collectors to manage their art collections and limited wall space.

Collectors and dealers often decide to utilize the free ports for the storage of their art for more common reasons than tax avoidance.  Some collectors and dealers simply have no more room in their homes and galleries.  In a free port, their valuable art works are protected in climate-controlled environments behind fire-resistant walls and often under video surveillance.  Some of the free ports even have viewing rooms where collectors can view their art and show it to potential purchasers.

According to an officer of the Geneva Free Port, as a result of the audit, the Swiss have been working to address concerns over the lack of transparency.  As of this September, all storage contracts will require clients to allow inspections of any archaeological artifacts they would like to be stored at the facility.

Only time will tell whether additional free ports across the world will take steps towards increasing transparency as to inventory and ownership as collectors and dealers continue to store their valuable art works in such warehouse facilities.

With the upcoming launch of Skate’s Art Loans Database next week, Skate’s, the global market leader in art business intelligence, has published some analytics in an effort to measure and track the use of leverage in the art trade.  Skate’s Art Loans Database is an extensive database of all the public Uniform Commercial Code (UCC) filings that are practiced in the United States as well as some international lending transactions to secure a pledge over artworks used as collateral in art lending agreements.

As a preview to the upcoming launch, Skate’s ranks the world’s most active borrowers in the art gallery world based on the number of UCC art-collateral pledges over the past ten years (note figure in [brackets] represents the number of borrowings) as follows:  (1) Gagosian Gallery [146]; (2) Paul Kasmin [26]; (3) Wildenstein & Co. [23]; (4) Pace Gallery [21]; and (5) David Zwirner [18].  Gagosian Gallery tops the list as the most aggressive borrower, according to Skate’s data.

Skate’s notes that art galleries do not typically use art lending in their business and the combined art-lending book of the above top five art galleries is “significantly less than the art-lending books of Christie’s and Sotheby’s.”

A glimpse of the above rankings reveals the Gagosian Gallery’s secret to success may simply be that the gallery makes better use of leverage than anyone else in the art gallery world.