Sample Art Paper on Why can art sell for millions?

In 2017, at Sotheby’s New York auction house, it took an estimated 10 minutes for a 1982 painting featuring a black skull on top of a colorful background to hit headlines across the globe[1]. Sold a price of 110 million dollars this masterpiece by Jean-Michel Basquiat became their highest prices painting in an action after ousting the previously held record of 105 million dollars fetched by Andy Warhol’s “Silver Car Crash (Double Disaster)” back in 2013[2]. Art pieces have become sored in value since the turn of the century with art auctioneers such as Sotheby as well as rivals Christie have been reporting high gains due to sales[3]. Subsequently, as for Sotheby the increase in revenues are reflective of the share value in the stock market. In 2017, Sotheby reported a 12% increase in consolidating sales estimated at $ 596,786 a factor that was a result of multiple high priced sale of art pieces[4]. With years of a perpetual boom there have been a number of questions that have been asked about the high value of art pieces such as, who are the responsible parties who have made it possible of a painting to be sold for 110 million dollars in an economy that seems to be against frivolous expenditures.

Discussion  

For the last two and a half decades, fine art pieces such as paintings, sculptures, as well as artistic jewelry have been fetching a high price in the market. Subsequently, art dealers have been racking up significant profits in the process. Sotheby a renounced global art dealer has been in the headlines due to some high profile sales over the years and this has been reflective on their yearly earnings.

Figure 1. Revenue of Sotheby’s worldwide from 2006 to 2017 (in million U.S. dollars).

Source: https://www.statista.com/statistics/273017/revenue-of-the-auction-house-sothebys-since-2006/

Figure 1 above is a graphical representation of Sotheby’s worldwide revenue from 2006 to 2017 (in million U.S. dollars). Form the results presented it is evident that there is a significant increase in revenue, which comes because of increase sale of, priced fine art pieces[5]. The organization earned an estimated 989.39 million U.S. dollars in revenue up from 805.38 million in 2016 a surge influenced by Jean-Michel Basquiat painting sales as well as the two diamond earrings sold the previous week at 54 million[6]. After the sale of Jean-Michel Basquiat skull the company’s share prices went up due to an estimated increase in annual profit for the company[7].

Why can art sell for millions?

Art pieces in today’s economy accredit their high prices from three major factors namely; Influence of past critics and dealers on artwork, Influence of art collectors in expenditures, and the expansion of the fine arts market.

The Influence of Art Critics

From an untrained eye the Jean-Michel Basquiat may be considered expensive for a graffiti looking skull; however, just as the era before his work, art critics played a significant role in determining whose art was considered a masterpiece and whose was not. Jean-Michel Basquiat work was different from another artist as his work was considered the first among few to incorporate the punk culture of the 1980s and impressionism of the 1960s[8]. His premature death in 1988 at only 27 years old also made his art a rarity in homes or galleries across the world and thus highlighting high value.

Currently, there is a plethora of art magazines as well as writers who review art; however, with the advent of the internet as well as social media the art of critic from before is considered lost. Subsequently, today’s artists have not been supported by critics as the likes of Jean-Michel Basquiat a factor that takes away the premise of rarity as well as uniqueness. In an economy where art critics in form of magazines or writers are primarily supported by art galleries for advertising, it is hard or today’s artists to fetch high prices from such individuals considering a conflict of interest[9].

The Influence of Collectors

In the world of fine art, collectors are arguably the single most significant force that attracts high prices. Without collectors, gallerists would not exist because exhibitions would not have value; artists would be working in craft fairs, and art dealers such as Sotheby would have nothing to sell[10]. Collectors are willing to pay a high price to have a masterpiece either to complete their personal galleries or to highlight the versatility of their practice. The Jean-Michel Basquiat piece was bought by Yusaku Maezawa, a  Japanese billionaire who began collecting art pieces a decade ago and had previously paid for $ 57.3 for another Jean-Michel Basquiat painting[11]. It should be taken to note that this was the previous highest paid price for a Jean-Michel Basquiat painting. His Tokyo apartment is a testament to an art collector’s passion and willingness to pay high prices for a masterpiece considering he owns Richard Prince’s “Runaway girl” bought for $9.6 million displayed on the hallway, as well as Roy Lichtenstein and Christopher Wool pieces costing about $13.9 million in his living room[12].

Most collectors of art pieces are highly educated and risk takers. The study shows that 75% of the individuals interested in the collection of art are highly knowledgeable about the aesthetics behind the piece of interest. These individuals understand the history behind the creation of a piece and thus attach value as well as the need to own. Additionally, collectors are known to be risk-takers. It is clear that art collectors such as Yusaku Maezawa have a clear drive to spend large sums of money on paintings; however, the risks involved are exponential. In 2006, Steve Wynn an art collector and the proud owner of Picasso’s 1932 ‘Le Reve’ painting accidentally elbowed his painting 24 hours before settling for its sale which was estimated for 139 million US dollars[13]. The sale of art pieces at high prices is dependent on the condition of the piece itself and a simple abnormally may see its price drop[14]. With such high risks, there have been questions as to why collectors are willing to pay such a high price at high risks. The collectors are willing to pay high prices because of two main reasons the first being the increase in the value of art pieces over the years[15]. For instance, the Steve Wynn bought the ‘Le Reve’ at a cost of $47.2 million in an art auction in New York in 1999. In only seven years, it had gained a value of 139 million and after skillful repair, the ‘Le Reve’ was sold for 150 million dollars. According to Dr. Clare McAndrew, an art economist over the last two and a half decades, the revenues in the fine art industry has been on a steady growth. In a 2012 published report, she indicated that approximately $27.2 billion worth of art was sold in 1900 through art dealers and auction houses. As of 2007, this figure had gone up to $65.8 billion. In 2012, the value was estimated at $56bn, which despite the reduction in value is expected to bounce back over time.

Expansion of the fine art market.

The business of selling art is currently global, unlike previous years. The US and Europe were known to dominate the fine art industry; however, over the last half a decade, Asian art investors have been known to make extravagant purchases on art pieces. For instance, in 2017, Asia dominated 41% of all art sales in the global market; additionally, China represented 25% of all global sales being topped by the US[16].  Though risks of owning such mater pieces are high, the augmentation of value is usually worth the investment. Another reason why collectors pay a high amount of money for art pieces is based on their personality. To collectors, owning a coveted piece is a sign of accomplishment as well as wealth.

Concussion

In summary, art pieces have continued to highlight a boom in the sale of masterpieces and there is a clear indication of an increase in market value in the future. The sale of Jean-Michel Basquiat piece from 110 million dollars is a clear indication of the high investment in the field that has grown to four times its size value in the last three decades. Three factors continue influence the prices of these art pieces namely, influence of past critics, the increased number of art collectors and present art dealers, as well as the global expansion of art sell from a former centralized in US and Europe as before.

 

 

 

Bibliography

Findlay, Michael. “The Value of Art: Money.” Power, Beauty 47 (2012). Retrieved from; https://news.artnet.com/market/defining-the-value-of-art-27673

Globe Newswire. Sotheby’s Reports 2017 Full Year and Fourth Quarter Financial Results. CNBC online website. 2018. (Internet source). Retrieved from; https://www.cnbc.com/2018/03/01/globe-newswire-sothebyas-reports-2017-full-year-and-fourth-quarter-financial-results.html

Kräussl, Roman, Thorsten Lehnert, and Nicolas Martelin. “Is there a bubble in the art market?.” Journal of Empirical Finance 35 (2016): 99-109.

Lauren Thomas. Sotheby’s shares jump after record $110.5 million painting sale. CNBC online website . 2018. (Internet source). Retrieved from; https://www.cnbc.com/2017/05/19/sothebys-shares-jump-after-record-110-point-5-million-painting-sale.html

Motoko Rich and Robin Pogrebin. Why Spend $110 Million on a Basquiat? ‘I Decided to Go for It,’ Japanese Billionaire Explains. New York Times Online website. 2017. (Internet Source). Retrieved from; https://www.nytimes.com/2017/05/26/arts/design/110-million-basquiat-painting-yusaku-maezawa.html

Steptoe, Javaka. Radiant child: The story of young artist Jean-Michel Basquiat. Little, Brown Books for Young Readers, 2016.

 

[1] Thomas, Lauren. Sotheby’s shares jump after record $110.5 million painting sale. CNBC online website (internet source).

[2] . Ibid 1

[3] Michael, Findlay. “The Value of Art: Money.” Power, Beauty 47 (2012).

[4] Globe Newswire. Sotheby’s Reports 2017 Full Year and Fourth Quarter Financial Results. CNBC online website. 2018. (Internet source).

[5] Michael, Findlay. “The Value of Art: Money.” Power, Beauty 47 (2012).

[6] Globe Newswire. Sotheby’s Reports 2017 Full Year and Fourth Quarter Financial Results. CNBC online website. 2018. (Internet source).

[7] Thomas, Lauren. Sotheby’s shares jump after record $110.5 million painting sale. CNBC online website (internet source).

[8] Javaka, Steptoe. Radiant child: The story of young artist Jean-Michel Basquiat. Little, Brown Books for Young Readers, 2016.

[9] Michael, Findlay. “The Value of Art: Money.” Power, Beauty 47 (2012).

[10] Michael, Findlay. “The Value of Art: Money.” Power, Beauty 47 (2012).

[11] Rich Motoko and Pogrebin Robin. Why Spend $110 Million on a Basquiat? ‘I Decided to Go for It,’ Japanese Billionaire Explains. New York Times Online website. 2017. (Internet Source).

[12] Ibid 11

[13] Roman, Kräussl, Lehnert, Thorsten and Martelin Nicolas. “Is there a bubble in the art market?.” Journal of Empirical Finance 35 (2016): 99-109.

 

[14] Michael, Findlay. “The Value of Art: Money.” Power, Beauty 47 (2012).

[15] Roman, Kräussl, Lehnert, Thorsten and Martelin Nicolas. “Is there a bubble in the art market?.” Journal of Empirical Finance 35 (2016): 99-109.

[16] Roman, Kräussl, Lehnert, Thorsten and Martelin Nicolas. “Is there a bubble in the art market?.” Journal of Empirical Finance 35 (2016): 99-109.