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November 07, 2008

Art Recession Datapoint

Donald Pittenger writes:

Dear Blowhards --

I was chatting up the owner of a Santa Barbara area art gallery this afternoon and turned up the following tidbit regarding one of the effects of the latest recession.

It seems that some customers are trying to bypass galleries by dealing directly with the artists. Buyers would save most or all of the markup and artists would get as much or more than they would have otherwise. (This assumes no change in the gallery-market value of the art. Changes in that and auction prices are a subject for another day.)



posted by Donald at November 7, 2008


I discovered a slightly higher amount of "for sale by owner" ads - vs. the realty brokers of lately. And that the conversational tone of the latter group had turned to the better. They even started to call back when they said they will!

Capitalism is good for the soul.

Posted by: Tatyana on November 7, 2008 7:37 AM

This reminds me of home buyers avoiding banks by signing "contracts for deed" directly with the buyers during the era of seventies stagflation.

Posted by: Lester Hunt on November 7, 2008 9:23 AM

Over nearly four decades as a non-artist working professionally in the arts, and especially in my role as a consultant/advisor to artists, this phenomenon has been perennial. Tougher times make it more prominent, but collectors making an end run around galleries in order to save on the purchase price ... and artists encouraging studio sales in order to pocket a greater share of the purchase price ... goes on all the time.

My simplest advice to artists is DON"T DO IT! My more nuanced advice to artists is that if they already have a gallery representing them then getting a reputation for underselling the gallery is a good way to lose that representation. Why should a gallery spend time, money and effort promoting and exhibiting an artist if the artist is unfairly undercutting the gallery by selling out of the studio?

And you can forget the notion that this "assumes no change in the gallery-market value of the art." Art prices are extremely difficult to determine absent a regular market. In other words, if an artist begins to offer works directly from the studio at a given price, that price very quickly becomes the market value for the artist's work.

Like real estate, automobiles and certain other objects, sales of art objects are very often negotiated. These negotiations begin with the retail value. Some exceedingly lucky artists, virtually always through the adroit marketing skills of a strong dealer, can see particular works sell above the list price. Most of the time discounts of various sorts are offered, whether the sale takes place in the gallery or the studio.

If a gallery shows itself unable to make sales for an artist, but that artist is capable of selling their own work directly from the studio, the artist should obviously do so. However, they need to begin all negotiations from the same retail price as the gallery and (ideally) not offer a discount that the gallery couldn't meet if they choose to. One way of looking at this is that the artist selling from the studio now needs not only to pay themselves for their art, but also pay themselves for their efforts as a salesperson. Depending on contracts between the artist and the gallery an artist might also give the gallery a reduced commission when they sell work from the studio to collectors who essentially come from the gallery.

There's actually a lot more to discuss with this topic, but I'll wait and see what other comments there are before tossing in any other thoughts.

Posted by: Chris White on November 7, 2008 9:30 AM

CW -
Is there a standard commission for art gallery sales, like the 6% for real estate, or does it vary?

Posted by: Peter on November 7, 2008 10:24 AM

The gallery standard is usually a 50/50 split. Often on works by well known artists above a certain price point (ballpark $50,000) the gallery takes 40%. This is part of what makes it so attractive to artists to think that cutting out the gallery will double their profits. The cost of operating a gallery ... having someone available during regular business hours to deal with possible buyers, installing and displaying works, advertising, holding openings, sending out invitations, etc. does not always enter many artists' thinking when they consider why the gallery is getting half the price.

When I ran a gallery my standard consignment agreement with artists was structured as follows: The gallery agrees to make every effort to sell the work(s) at full retail price. The artist agrees to allow the gallery discretion to offer discounts. The artist will receive 50% of the actual sales price or 40% of the retail value, whichever is higher. The gallery shall be entitled to a commission of 20% on any sales made outside the Gallery that are a direct result of gallery involvement.

Most artists considered this a better than average deal. I also have had situations where an artist, being instrumental in making a sale through the gallery that might otherwise not have been made, gets (or should get) a 10% sales commission. Many galleries give 10% to the actual sales person who closes the deal. If the artist does so, I believe they should get compensated for that.

My stance is not typical of all galleries, many of which are a bit less concerned with their artists' interests. I always felt the goal was to create a long term, mutually beneficial, business relationship, so the better all parties felt about things, the better for everyone.

Posted by: Chris White on November 7, 2008 11:31 AM

The gallery problem, as I call it, is the greatest reason for the decline of visual art in the US and the world.

Gallery commissions used to be about 1/3rd. Now they run up to 1/2, and some galleries are now taking 60%. Its insane. Artists usually have to do the framing and shipping on their end too.

So how does it work out for the artist? Lets say a piece would retail for about $5000. The gallery would get half. Then the government would get 30-40% of what's left, plus the costs to ship and frame. So out of that %5000 sale, the artist would only clear about $1300. That's only about a quarter! How do you live on that?

So this is the reason for the rise in modernism--it takes very little time to paint these paintings. Same thing for the superficial, simple subjects of today's realism. You can't spend much time on a painting because you may not sell it and it just doesn't pay.

Galleries are also notorious for dictating subject matter and styles to painters. See, the dirty secret is that galleries don't do so much active selling as they do passive selling. They sit around a lot, and if your work doesn't sell itself, too bad for you! If your work is different, they won't really promote it. They try to sell into an existing genre, or into what's trendy. They only really promote established artists because they don't want to take the chance on the unestablished. So as a result, all the work looks the same and newer artists are forced to paint like the established ones to get into the market. It chokes off creativity.

If an artist makes sales on his own while having a gallery, and the galleries find out about it, they then blacklist the artist and won't carry his work. He made the great sin of selling a work without paying them a commission. The idea is that if an artist can sell his won work, then why does he need a gallery? Well, its the gallery that is working for the artist, not the other way around. Its the artist that pays the commission, so the artist is supposed to be the boss. Not really! The galleries see themselves as the employers, and the artists, their employees. Its all backwards. That's why the visual arts suck, because the non-talents are in charge.

I understand how difficult it is to run a gallery. But the only reason they exist is because many buyers are too lazy to go to an artists studio and buy the work from the artist. Galleries are unnecessary, as are critics. When the quality of the work was much higher, the buyers went directly to the artists, and it was the artists who were in charge. If the bad economy weeds out the crappy "endless-repeater" artists and the crappy dictatorial, money-grubbing galleries, and gets the buyers to the artists stuidos, I say hooray! Screw the money grubbers. They ruin everything.

Posted by: BTM on November 8, 2008 2:44 PM

Are there lazy, greedy galleries? Of course, there are always lazy, greedy individuals in any endeavor. Just like there are lazy, greedy artists ... and bakers ... and plumbers.

The experience of anyone who has owned or worked in a gallery is that about fifteen minutes after the "Gallery" sign goes up the first artist arrives looking to show you his work. The entire art enterprise is about numbers. There are thousands of artists for every gallery. And each of them is producing quantities of art objects they want to show and sell. Unfortunately, the number of collectors eager to part with their cash for the privilege of owning art is nowhere near as high. This gives the advantage to collectors, then to galleries and lastly to artists.

While in artist cooperative galleries it may be that "it's the gallery that is working for the artist," in most commercial galleries that description is far from accurate. Dealers, most obviously, are working for themselves. Secondarily, the gallery works for the collectors. Galleries want (sometimes desperately) to find and establish relationships with those who will buy art with some degree of regularity. Good galleries also want to have long term, mutually beneficial relationships with their artists.

I have NEVER known a successful gallery that sells "passively" rather than "actively." This misimpression may come from the fact that "active" efforts to sell art are rarely going on in public, in the middle of the gallery, during regular exhibition hours.

To assume that the aesthetic shift toward Modernism is due to the economics of how much time and materials it takes to make a given art object is a debate worthy of a thread of its own. I'll take the position that this idea is woefully misguided.

Posted by: Chris White on November 8, 2008 4:55 PM

Lazy galleries? Yes, of course, but those soon go out of business, as well they should. However, a gallery where a staff is doing sales, then they should be hopefully, working their tales off to create new sales, or finding new ways to import and keep new clients. I constantly have people walk into the gallery where I work, and are stunned by what they see as high prices. What they neglect to understand are all the aspects of what it takes to run a gallery: the rent/mortgage; paying of sales staff and janitors; commissions to said sales staff; upkeep; electricity for lighting; advertising and marketing; fees to credit card companies; local and state taxes; breakage; you name it - the list goes on.

And galleries are more often than not, willing to make a deal, within reason. Often, I wish to aask of someone who offers around 60% of retail price if he goes into a restaurant, and says: I'll give you $300 for that $500 bottle of Margaux, or How about if I give you $18 instead of $30 for that steak?

Why should galleries be expected to take a loss in this manner? Do Saks or Bloomingdales accept less than the asking retail price? No, they don't. They might offer a sale, but that's completely different - it's a stated price.

And while we're at it, does anyone have any response to the merits of offering commissions to sales people? Or should a gallery pay a higher salary and offer a year-end or quarterly bonus for sales? Or should sales commissions be pooled, which often allows for lazier sales reps to sit back and let others do all the work for them?

Posted by: Toby Rowland-Jones on November 24, 2008 1:46 PM

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