Adapting to the new normal – challenges for the art market

Posted on: October 19, 2020 by

The opening of a ‘virtual’ Frieze week in London earlier this month was a reminder of both the significant challenges Covid-19 has posed to the art market, and the innovative and creative responses which have emerged. In contrast to the usual spectacle of bustling crowds cramming into marquees in London’s Regent’s Park, Frieze London 2020 was, by necessity, a more muted affair. Some enticing perks were on offer nonetheless, including a ‘virtual viewing room’ where ticket holders could visit over 250 galleries and ‘try out’ works which took their fancy on their own four walls. Another attraction was the temporary outdoor sculpture park featuring works by internationally acclaimed artists such as Lubaina Himid and Richard Long.

If the arts sector can’t lead the way with a creative response to these unprecedented times, you might surmise, there’s little hope for other industries. Yet the challenges have been immense. News of staff cuts and closures in the public sector have abounded and the figures reported by the trade are equally bleak. Art market analyst, Pi-ex Limited, which tracks auction records, reported a 79% year-on-year drop in the combined revenue of the three major auction houses (Sotheby’s, Christie’s and Phillips) for the second quarter of this year (as compared to 2019).

Against this backdrop, the market has been forced to innovate and seek new opportunities. Online auctions have been around for sometime, of course, and have steadily increased their reach over the past decade. That marathon quickly became a sprint when global lockdowns closed the doors of most auction houses in March this year. Whilst only a fifth of major auction house sales were conducted online in the first half of 2019, this rose to over four fifths for the first half of 2020 (according to Pi-ex data). Sotheby’s used a ‘multi-camera global livestream’ format to reach an online audience of over 150,000 with its Rembrandt to Richter sale in July. Employing a similar model, Christies’ ‘One’ sale was relayed in sequence from Hong Kong, Paris, London and New York. Whether the livestream format can ever quite match the buzz of a real life auction remains to be seen, however, and the figures suggest that it lags some way behind. Reports cite an almost 50% drop in total sales for Christie’s, Sotheby’s and Phillips over the first half of the year compared with last year.

On a positive note, it seems that rather than pitting art market players against each other in a fight for survival, the pandemic has engendered a new spirit of collegiality and collaboration. In particular, the traditionally divergent paths of auction houses and dealers seem to have come together in a spirit of mutual co-operation. Auction houses have organised dealer sales, bringing together prestigious galleries – ordinarily rivals rather than co-sellers. The galleries benefit from the auction house’s global reach and diverse audiences, while the auction houses get to curate the sale, selecting the dealers and the works to be sold. Sotheby’s ‘The Dealer’s Eye’ sales in London and New York were a good example. In another innovative model, Christies swept in to keep the doors of the Paris Biennale art fair open in September (virtually, of course) by providing an online sales platform for exhibitors.

Dealers have launched their own collaborative initiatives too. The London Collective was formed from 40 galleries which had originally come together for mutual support and advice through a WhatsApp group. Out of this venture came a new platform to provide an online space for the gallerists to exhibit works using state of the art AR and VR technology. Leading international gallery Hauser & Wirth also employed digital technology to provide the June Art Fair(a new venture which debuted in 2019) with an online space in which to run this year’s event.

Perhaps unsurprisingly, the sales figures achieved through some of these ventures are not what the dealers might have hoped for in more ‘normal’ times. It was reported that sales from the online Paris Biennale were disappointing, with only 21 lots sold out of 91. A more positive picture was painted by Frieze’s global director, who commented on the “enormous progress in people’s openness and their savviness to looking at art and buying art online.”

But the top-line figures are only part of the story. The market’s focus has been to pull the various players together, and to keep the art trade’s ecosystem moving – no doubt one of the motivations for Hauser & Wirth’s extending a lifeline for a comparatively small enterprise such as the June Art Fair. Some of the collaborative ventures have included philanthropic angles too. A partnership between Sotheby’s and a group of gallerists in Dubai to stage the “This Too Shall Pass” online auction donated 10% of proceeds to the COVID-19 relief fund of the UN High Commissioner for Refugees (UNHCR).

The speed with which some of the players in the art market have shifted operations from the physical to the digital is impressive. The challenges are significant, and come from every angle: operational, logistical, financial, and not least legal. As far as the law is concerned, there are contractual issues to consider with regard to the sometimes complex partnership arrangements highlighted above, for example. The ramifications of online selling need to be thought through too, with those venturing into this territory for the first time needing to look again at their standard sales terms. Issues as varied as data protection law, copyright and consumer legislation will also require consideration.

What’s more, these issues arise at time when the regulation of the market is in sharper focus, possibly than ever before. We have analysed in some depth on this blog the impact of anti-money laundering regulations, newly applied to the UK art market as of January this year. The likelihood that the operational burden of this new regime may be coupled with a direct financial burden in the form of an economic levy comes as unwelcome news for the sector. A government consultation about a proposed ‘economic crime levy’ closed in October, and the result is awaited with some trepidation. On the basis (broadly) that those who contribute towards the risks of money laundering within the UK economy should pay towards the costs of addressing those risks, the Government hopes to raise around £100 million a year from regulated businesses (charges to commence from April 2022 onwards). The details are yet to be decided, but the prospect of an additional financial hit is undoubtedly a matter of concern for many within the art trade.

Other regulatory challenges include, for some dealers, coming to grips with the new environment for the ivory trade, following enactment of the UK’s stringent Ivory Act 2018. Given the Supreme Court’s recent judgment denying a claim for judicial review of the Act, its strict controls will be brought into force when Parliamentary time next allows. Another legislative measure which will tighten the screws on the sector’s operations yet further is the new EU regulation on the introduction and import of cultural goods. It prohibits the introduction of unlawfully removed cultural goods and introduces a licensing/reporting system for the import of certain other cultural objects into the EU. Whilst the details and extent of its implementation in the UK are as yet unclear (Brexit pending), it will undoubtedly have an impact on the trade, and how relevant imports and exports are managed.

Even before the onset of Covid-19, the art trade was facing difficult and trying times. Without doubt, these uncertainties have increased exponentially through 2020, and it would be trite to suggest that the onward path looks much smoother. There are, however, signs of a positively collaborative response to the crisis and a concerted effort among those from different wings of the trade to pool resources, technology, ideas and expertise. If this prevails, the increased understanding and transparency it may engender between art market participants can only help the sector as a whole to come to grips with the changing legal and regulatory landscape which lies ahead.


Image credit: Deddi Rose – CC BY-SA 4.0 via Wikimedia Commons