How Art Auctions Work | Art Market Explained

Moriah Alise | Dear Glory

9 Aug 202009:56

Summary

TLDRIn this video, Mariah Elise explores the complexities of the art auction market, a $68 billion industry with little regulation and transparency. She discusses the roles of sellers, buyers, and auction houses, and how they navigate provenance, guarantees, and estimates. Elise emphasizes the importance of research and understanding market dynamics, noting the disconnect between artists and auction profits. She encourages a well-rounded perspective on art, beyond just the aesthetic, to appreciate its cultural and economic dimensions.

Takeaways

🎨 The art market is viewed differently by various individuals, with some focusing solely on the art and others seeing it as a speculative market for gaining clout.
💰 The art market is a significant but less regulated sector compared to other industries like entertainment, with a total value of 68 billion dollars.
🔄 The secondary market involves the sale of art that has been previously owned, with provenance playing a crucial role in determining the artwork's value.
🏛️ Major auction houses are responsible for establishing provenance and setting estimates, which are ranges indicating the expected sale price of an artwork.
💸 Sellers negotiate with auction houses for a seller's premium and may receive guarantees from third parties to secure a minimum sale price.
🛍️ Buyers should conduct their own research on the artwork's authenticity and value, considering the auction house's reputation and the artwork's provenance.
📚 Understanding auction etiquette is essential for buyers, including bidding increments and respecting the live auction process.
🖼️ Engaging with the art world on multiple levels, such as visiting galleries and museums, can enrich one's perspective and knowledge of the art market.
🤔 Artists often do not benefit financially from the secondary market, even if their work's value increases significantly at auction.
🔮 The auction market can influence the primary market, potentially affecting the value of an artist's work and the strategies of galleries representing them.

Q & A

What are the two main perspectives of the art market mentioned in the script?
-The script mentions that the art market can be viewed from two main perspectives: one where it is seen as a cultural experience focused on enjoying art and attending exhibitions, and another where it is seen as a speculative market driven by the desire to win at auctions and gain clout through art ownership.
What is the significance of provenance in the art auction process?
-Provenance is significant in the art auction process because it refers to the history of ownership of a piece of art. It can either raise or lower the value of the work depending on who owned it and which institutions have exhibited or loaned it. Provenance provides a record that can add to the desirability and authenticity of the artwork.
What does the term 'seller's premium' refer to in the context of art auctions?
-The 'seller's premium' is the fee that the auction house charges the seller for the service of selling their artwork. It is a percentage of the final sale price that the seller agrees to pay as part of the auction process.
Why might an auction house offer a guarantee to a seller?
-An auction house might offer a guarantee to a seller to assure them of a minimum sale price. This guarantee can be sold to a third party who assumes the risk if the piece does not sell or does not meet the guaranteed price. It provides security to the seller and can attract them to consign their artwork with that auction house.
What is the role of the buyer in the art auction process?
-The buyer's role in the art auction process involves researching the artwork, understanding its provenance, ensuring its authenticity, and bidding according to auction etiquette. Buyers should also be aware of the auction estimates and be prepared to make informed decisions during the bidding process.
Why is it important for buyers to do their own research on a piece of art before bidding?
-It is important for buyers to do their own research on a piece of art before bidding to ensure they have a comprehensive understanding of the artwork's history, authenticity, and value. This helps them make informed decisions and avoid potential issues with the purchase.
What is the impact of auction results on the primary market for contemporary artists?
-Auction results can significantly impact the primary market for contemporary artists. If an artist's work sells for a high price at auction, it can increase demand and prices in the primary market. Conversely, if auction prices drop, it can devalue the artist's work in the primary market.
Why might an artist not benefit financially from their artwork selling at auction?
-An artist might not benefit financially from their artwork selling at auction because once the artwork is sold, the artist no longer owns it. Any profits from subsequent sales at auction go to the seller, not the original artist, unless there are specific agreements in place for royalty payments or similar arrangements.
What is the role of the auction house in the art auction process?
-The auction house plays a central role in the art auction process by sourcing and vetting the artwork, setting estimates, curating the auction, and managing the sale. They also provide a platform to reach a broad base of collectors and ensure a good sell-through rate.
What is the significance of the reserve price in an art auction?
-The reserve price is the minimum price at which a piece of art can be sold at auction. If the bidding does not reach this reserve, the artwork will not be sold. It protects the seller from selling the artwork for less than a predetermined value.

Outlines

00:00

🎨 The Dual Nature of the Art Market

The paragraph discusses the multifaceted nature of the art market, highlighting both its cultural and speculative aspects. It points out that while many appreciate art for its cultural value and the experience of exhibitions, others view it as an investment opportunity, focusing on auctions and the potential for financial gain. The speaker emphasizes the importance of understanding the complexities within the art market, including the secondary market and the lack of regulation, which can lead to a lack of transparency. The paragraph also introduces the concept of 'provenance' and its impact on art value, as well as the role of auction houses, sellers, and buyers in the auction process.

05:00

🔍 Navigating the Art Auction Landscape

This paragraph delves into the intricacies of art auctions, focusing on the roles of sellers, buyers, and auction houses. It explains the process of sellers choosing an auction house, considering factors like seller's premium, the house's reputation, and guarantees. The paragraph also discusses the importance of buyers conducting their own research on the art's authenticity and provenance, and understanding auction etiquette. Additionally, it touches on the impact of auction results on the primary market for living artists, noting that artists often do not benefit financially from secondary market sales. The speaker encourages a well-rounded approach to engaging with the art world, including visiting galleries and museums, and using resources like Artsy to stay informed.

Mindmap

Keywords

💡Art Market

The art market refers to the global trade of fine art, including the buying and selling of original artworks. In the video, it is described as a speculative market where people buy art not only for appreciation but also for gaining clout and as a form of investment. The script highlights the complexity of the art market, emphasizing that it's not just about the love for art but also involves financial transactions and strategic buying and selling.

💡Auction

An auction is a public sale where goods or property are sold to the highest bidder. The video discusses art auctions as a significant part of the art market where artworks are sold to collectors and investors. Auctions are highlighted as a place where the secondary market for art operates, influencing the value and provenance of the artworks.

💡Provenance

Provenance in the art world refers to the history of ownership and the background of an artwork, which can affect its value. The script explains that artworks with a well-documented provenance are often more valuable, as their history can either raise or lower their worth depending on previous owners and institutions that have exhibited them.

💡Seller's Premium

The seller's premium is the fee that the seller pays to the auction house for selling their artwork. In the video, it is mentioned as a key consideration for sellers when choosing an auction house, as it determines the cost of selling a piece and is negotiable. The premium is part of the financial dynamics within the art market that artists and sellers must navigate.

💡Guarantee

A guarantee in the context of the art auction is a commitment by the auction house to the seller that they will receive a predetermined minimum price for their artwork, regardless of whether it sells or not. The video explains that auction houses may sell this guarantee to a third party, which assumes the risk if the artwork does not sell for the guaranteed price. This concept is central to the financial arrangements within the auction process.

💡Estimate

An estimate in the art auction context is a range of prices (low and high) that experts predict an artwork will sell for. The video script uses the term to illustrate how auction houses provide a price range for potential buyers to gauge the value of an artwork. Understanding estimates is crucial for both buyers and sellers to make informed decisions at auctions.

💡Buyer's Research

Buyer's research is the process of investigating and verifying the authenticity, history, and value of an artwork before purchasing it. The video emphasizes the importance of conducting thorough research by buyers to ensure they are making a well-informed purchase, as once a bid is placed, the buyer is committed to the transaction.

💡Auction Etiquette

Auction etiquette refers to the set of rules and behaviors expected from participants during an auction. The video script mentions that bidders should be aware of these etiquettes, such as not bidding in a way that slows down the auction process. Understanding and adhering to auction etiquette is essential for a smooth and successful auction experience.

💡Authentication

Authentication in the art world is the process of verifying that an artwork is genuine and not a forgery. The video script stresses the importance of ensuring that a piece of art is authenticated before purchase, as it directly impacts the artwork's value and the buyer's confidence in the acquisition.

💡Reserve

A reserve in an auction is a minimum price below which a piece will not be sold. The video explains that if an artwork does not meet its reserve, it will not be sold even if it does not receive bids above the reserve price. This concept is important for both buyers and sellers to understand, as it affects the final sale outcome.

💡Artist's Perspective

The artist's perspective in the art market, as discussed in the video, refers to the artist's financial and creative interests in their work. The script points out that artists often do not benefit financially from the secondary market sales of their art, which can be a contentious issue. This keyword highlights the video's focus on the broader implications of the art market on the artists themselves.

Highlights

The art market is seen by some as a speculative market focused on gaining clout and making financial gains.

There is a polarity in the art world, particularly in auctions, where buyers and sellers may win, but artists often do not benefit financially.

Art is valued not only for its cultural and aesthetic significance but also as an investment and status symbol.

The art market is a $68 billion industry, which is relatively small compared to the entertainment industry's $684 billion.

The secondary art market involves the resale of art, where provenance can significantly impact the value of a piece.

Auction houses play a crucial role in the art market, providing a platform for the sale of high-value art pieces.

Sellers consider the auction house's commission, reputation, and audience when deciding where to sell their art.

Auction guarantees are agreements where the auction house assures a minimum sale price to the seller, even if the piece doesn't sell.

Buyers should conduct thorough research on the art they are interested in, including its provenance and authenticity.

Auction etiquette is important for buyers, including understanding bidding increments and the flow of the auction.

Artsy and similar platforms provide a way to engage with the art world on multiple levels, including auctions and direct purchases.

Artists typically do not benefit financially from the secondary market sales of their work, which can be a point of contention.

The auction market can influence the primary market, potentially affecting the value of an artist's work.

Galleries have a responsibility to protect artists and may adjust pricing strategies in response to auction market fluctuations.

The auction house's role includes sourcing art, curating auctions, and maintaining a strong collector base to ensure high sell-through rates.

Understanding auction terminology and market dynamics is crucial for both buyers and sellers in the art market.

The art market is complex and requires a well-rounded perspective to navigate successfully.