Why can you buy some artworks for less than $100, whilst others are selling for $10,000, $100,000 or even millions? At the most basic level, the price of art is really determined by supply and demand, a basic economic theory.
An artist’s productivity, their ability to produce finished works equals the volume of supply, whilst the effectiveness of marketing and popularity of the artist will determine the level of demand.
Let’s dig into this topic a little further.
Firstly, despite what many people might think, a lot of full-time artists are not actually that productive. This is not to say they are lazy, far from it. Just like a professional athlete spends a huge portion of their time training and not competing, so an artist spends considerable time developing their skills and new ideas.
It is not uncommon for an artist to only produce 15 sellable works a year. If demand exists for the artist, this alone can create a supply challenge, resulting in the price increasing.
To drive demand an artist needs exposure, and that usually comes in the form of working with a reputable gallery. The bigger and more prestigious the gallery, the more exposure the artist is likely to receive from the right crowd (people who buy art), helping to push up the demand, and therefore the price.
It would be next to impossible to accurately estimate the percentage of aspiring artists vs. those who manage to receive gallery representation, but I’d guess that less than 1 in 10,000 succeeds in getting it.
So how is the market price of a piece of art typically calculated?
Firstly, we need to roughly break artists into two main categories:
- Established artists
- Emerging artists
For an established artist, which includes those who may well have already passed away, they will have an existing market price and/or auction records that highlight past sales. The representing gallery will be able to highlight past sales records and development over time.
In these cases, the price will be determined by:
- The sales records of similar works, both in terms of medium [for example ‘oil on canvas’] and size;
- The quality of the work in relation to other works by the same artist;
- The rarity/prestige of a given work in relation to others. For example, specific works highlighted in a museum or book may fetch a higher price;
- The general demand at the time vs. the supply in the market.
For emerging artists, a representing gallery may still have plenty of past sales to highlight, but usually, it calculates from a mixture of:
- The artists level of productivity, how many good works can they produce per year;
- The size of the work – the bigger the work, the higher the price;
- The artist’s exhibition history and representation.
For emerging artists, the sales price will usually be set by the artist, but often the gallery will provide advice and direction. Many artists will have a simple formula to determine the sale price and ensure its consistent by medium and size of work. For example, an artist selling works in oil on canvas may set their sale price based on a price per sqft to provide complete transparency of pricing against differently sized works.
Being an artist must be good money then?
During my early foray into the art industry, I was perhaps more intrigued by the commercial elements than anything else. I considered $10,000 for a piece of art to be expensive and assumed the margins must be extravagant. Over time as I have seen more art pieces, developed a better understanding of the industry, and talked to countless artists, I have a far better appreciation of the true value and the level of effort involved.
When I consider the price of art now, I like to think about the two core components, the artist’s ability to make a living, and the galleries ability to turn a profit.
Let’s start with the artist’s ability to make a living:
Fact 1 – only a very small percentage of artists will manage to get representation from a reputable and proactive gallery that truly works to promote them to collectors. Without representation, its extremely rare an artist will ever really make it. Few artists are naturally able to sell their own works for a fair price.
Fact 2 – as I highlighted earlier, most artists may only produce around 15 sellable works per year. Even for very popular artists with strong demand, it’s not uncommon that some of those 15 will never sell. It’s never a linear trend where sales are directly following the number of works produced.
Fact 3 – an artist’s emergence, i.e., the point they may start to sell anything of note may occur from around the age of 30+ and nobody can be sure of the absolute longevity of that artist. Like a professional athlete, they probably have a small window to make solid money to live on.
Fact 4 – for sake of argument, let us assume an artist has managed to establish a solid market price of around $10,000 per work and is selling 10 works per year. This is going to create a total revenue of $100,000. In a good situation, the market price will continue to grow every year, but this is never a guarantee.
Fact 5 – an artist may give between 20-50% of the revenue to the representing gallery so that $100,000 just dropped to $50,000 – $80,000 a year before other costs of living and production are considered. It’s not a bad salary, but it’s certainly far from extravagant.
Why should a gallery receive 20-50%?
Running an art gallery is hard work.
Fact 1 – the primary value of an art gallery is their industry expertise, client base, and marketing & sales team. A good gallery will play a pivotal role in an artists career. Non-represented artists may sell works, but usually via online marketplaces or social media platforms at the same low price for the entirety of their careers.
Fact 2 – many galleries plump for locations that provide high foot traffic. This can create significant fixed costs in space rental.
Fact 3 – many galleries, including our own, will attend art fairs both locally and internationally. This allows us to showcase our gallery and artists to a much broader audience, helping to drive demand. The fixed costs associated with these fairs are significant: space rental, travel, and all other components add up. Luo Dan would be one example, we have taken his works to numerous art fairs over the last few years and his exposure and sales have skyrocketed off the back of these.
Fact 4 – sales usually come in peaks and troughs, directly associated with exhibitions timed throughout the year, or art fair attendance. The sales cycles can be long and require significant time investment in proposals and client discussions. It is a relationship-based industry, and relationships can be years in the making.
Fact 5 – sourcing for good artists is a time-consuming process. We spend years reviewing and talking to artists before we consider representing them, and this usually involves significant travel costs. Artistic technique and uniqueness are one thing, but their attitude is a massive part of it, and this requires plenty of face-to-face time.
There are many technically brilliant artists in the world, but most investment in art will continue to route through a gallery. Good artists understand and appreciate the work that a gallery does for them. It’s always a two-way street.
Found the article informative or have additional questions? Please feel free to let me know in the comments below.