The art gallery: a cut-throat business

Commercial galleries should start taking their cue from the business world, argues Jonathan T.D. Neil

By Jonathan T.D. Neil

Still from Eastern Promises, 2007, dir David Cronenberg

During the past few years we have seen a number of art market commentators raise the alarm over midlist art-gallery closures. (By ‘midlist’ I mean neither the megagalleries nor the scrappy newcomers, but the standard single-location shop with 15–20 artists on the roster and more than a few years in the trenches.) Economist Clare McAndrew and collector Alain Servais are just a few of the well-informed handwringers taking to their keyboards to call out the ‘threats’ to the gallery ecosystem coming from the ‘superstar’ and ‘winner-take-all’ artworld economics that favour the big, well-capitalised megagalleries. Market jeremiads all wag a finger at art fairs, which are indispensable sales and networking platforms that galleries can ill afford to do without, even as many galleries can barely afford to do with. And there are macroeconomic devils: income inequality, the disappearing middle-class art consumer, increasingly expensive real estate in the highly desirable global metropoles, to name just a few.

That there is some sort of crisis or existential threat facing the contemporary art gallery and its business model smacks of histrionics, however. Changing collector tastes and habits, new technology and a truly global marketplace are all conspiring to create new opportunities as well as challenges for gallerists. Because this is business, though, the responses will necessarily fall on one or the other side of the cost (saving) versus revenue (generating) divide. And to date, most of the proposals have looked to the cost side of the ledger only.

For example, the shared-services model, of which Vanessa Carlos’s Condo initiative is the most visible instance, is a cost-saving strategy. With Condo, galleries gain access to new-to-them but already existing markets of collectors and curators in other cities by partnering with host galleries who share their already-paid-for space and networks. The organisers claim that the cost savings allow galleries to take more risks in presenting more adventurous (read less market-friendly) art, which may be the case, but that’s an expected loss in revenue coupled with a cut in costs, leaving the ledger at status quo ante.

David Zwirner’s proposal that megagalleries pay something akin to an art-fair ‘tax’ in order to subsidise less well capitalised galleries’ attendance at the fairs is also a cost-side strategy: higher costs for Zwirner (and Hauser & Wirth, and Pace, etc) equals lower costs for others (watch the video here). Never mind that art fairs such as Art Basel already utilise cost differentials to subsidise their special presentation sections (Art Basel in Basel will extend this progressive taxation system to the central Galleries section next June).

One imagines that Zwirner’s proposal simply signalled to the fairs that they can and should be charging more for their prime booths. Zwirner’s cost-side proposal is the fair’s revenue opportunity. It will do nothing for most midlist galleries’ revenues and can only be positioned as a revenue-generating opportunity for first-time attendees whose presence would be made possible by the Zwirner tax.

That there is some sort of crisis or existential threat facing the contemporary art gallery and its business model smacks of histrionics. Changing tastes, new technology and a truly global marketplace are all conspiring to create new opportunities as well as challenges

There are other familiar but less well publicised cost-side strategies of which galleries have availed themselves, including costsharing for legal, accounting and logistics services that are duplicated across businesses and for which syndicates can exercise more sway in price negotiations. But cost-side strategies can only take a gallery business so far. Travel far enough down the path of cost-cutting and service-sharing and the signposts start pointing to ‘austerity’ and ‘precarity’ as much as they do to collaborative utopias and mythologies of the commons.

Of course revenue isn’t easy to come by. And real solutions for how to generate more of it for galleries have been few and far between. One of the more creative proposals on this side of the ledger was suggested some time ago by Servais, who looked to professional sports, FIFA’s transfer-fee system in particular, as a model for how smaller galleries – the farm teams – who foster not-yet-superstar artists could be remunerated when those artists achieve superstar status and jump to a megagallery (presuming those farm-team galleries don’t already have silent, or not-so-silent, partnerships with the big players, as many do).

Practically speaking, anyone familiar with the free-agency landscape of professional sports knows what those contracts look like: lengthy and costly; and anyone familiar with the primary market for visual art knows that it never met a contract that it didn’t roll its eyes at between handshakes. It’s a trust system, but more Eastern Promises than Airbnb.

The pro-athlete comparison suffers from an even more serious conceptual error, however, which is that athletes are, at bottom, performers; they’re not paid-for products, as most artists, and all galleries, are. When an artist goes mega, they aren’t courted with multiyear, multimillion-dollar contracts that just need signing. They’re courted with the promise – speculative though it may be – that their work will now be made available – as if it weren’t before – to a new class of collectors with a different kind of purchasing power. The medium is the merchandise, not how the artist makes it. Which also reveals the less lawyer-intensive method by which farm-team galleries may share in the riches: hold inventory. When an artist makes the jump, likewise do prices for their work. Everybody wins. It will be objected however that this requires capital. And indeed it does. It also points to the biggest blindspot of the gallery model today, the one that is holding back the evolution of the midlist gallery and ‘right-sizing’ the larger primary market ecosystem: consignments.

The conventional practice by which an artist gives work to a gallery, which then sells it and keeps 50 percent of the revenue, may prove expedient for getting an exhibition-making operation up and running and attracting attention, but the economics of this model leave galleries at the mercy of just about every other player in game. If the gallery holds no inventory, it cannot benefit from increasing demand for its artists’ works, except by taking on further consignments at some future date. The metaphor of the artist/gallerist ‘marriage’ and the vaunted idea that gallerists ‘manage’ their artists’ careers to avoid mercenary market behaviours are really attempts to hedge the risk that those future consignments never materialise. In the interim, collectors are free to sell, and do, often against a gallery’s wishes. Rights of first refusal, sales contracts prohibiting resales, blacklists, all of these things are coercive behavioural practices symptomatic of a model in need of retooling.

A number of gallerists I have spoken to have discussed building their own art funds, in essence third-party-backed inventory, in order to ‘compete’ with their collectors. Call it a ‘capital fund’. What comes with it is the return of the dealer model that launched the modern art market and that most of the best gallerists have always maintained. Jeffrey Deitch can afford to put on cutting-edge shows and take risks in the gallery, so the story goes, because he is dealing Impressionists out of the back office. Many a gallerist will tell you that it’s the secondary market that keeps the lights on and the staff paid.

The conventional practice by which an artist gives work to a gallery, which then sells it, keeping half the revenue, may prove expedient for getting an exhibition-making operation up and running, but this leaves galleries at the mercy of just about every other player in the game

So why not bring the secondary market closer to the primary, and disaggregate the exhibition function from the dealing function altogether? Love him or hate him, Stefan Simchowitz has built a successful business model around just this kind of strategy. The social media posturing, promotion and press coverage are brilliant marketing, for him and ‘his’ artists, but it’s not the core business, which is dealing, to put it plainly. For Simco, supporting artists means buying work. After that, gallery shows, production funds or institutional contacts and exhibitions arise as much out of self-interest as ‘support’ for the artist; and that’s OK, because each party’s interests are well aligned.

Capitalisation and disaggregation point to a different industry that could prove useful to moving the contemporary art gallery’s business model away from consignments. A few weeks ago I moderated a discussion between an artist and a venture capitalist who had come together to discuss the cultures of art and tech and related matters. That conversation was illuminating for a host of reasons, but it was the parallels between the venture capital firm and the contemporary art gallery that struck me as salient. Midsize VC firms typically invest in about 20 ventures, with the full expectation that two, maybe three will carry the day and generate the desired returns. Most midlist galleries will recognise these numbers.

Similarly, VC firms invest in founders. Building a new venture is undeniably a creative practice. The values of the VC firm will necessarily be reflected in the founders it chooses to fund and the visions in which it chooses to invest. VC firms, the good ones at least, understand this, and they are committed to funding the visions that stand a chance of creating transformative change. The best VCs want to see culture changed for the better. They are committed to the advancement of their fields, to making a difference that makes a difference. Replace ‘founder’ with ‘artist’ and ‘vision’ with ‘art’ in the above and you have a wholly unobjectionable description of what galleries think they do – except with galleries, it’s all venture and no capital.

Capitalisation and disaggregation point to a different industry that could prove useful to moving the contemporary art gallery’s business model away from consignments

There was one further attribute my VC interlocutor said was necessary for a founder to gain investment, and that was a plan. A founder’s vision, the strength of her ideas for how to make something new, is a necessary but not sufficient condition for attracting capital support. Founders also need to demonstrate that they know how – that they have the know-how – to get from idea to actuality. How many gallerists require their artists to have a plan for their work or careers? How many even hazard the question?

Very few, because broaching such questions transgresses the still closely held belief in the ‘artist’ as an avant-garde figure, one who is of but not within the dominant mode of her society, and whose works stand in opposition to that society, or outrun it. At best the idea of an artist bearing a strategic plan smacks of crass ambition and professionalisation – that system of norms and mores by which we workers must abide but from which artists should be blessedly free. Professionalisation is the answer to the question, recently posed by the artist Martha Rosler, ‘Why are people being so nice?’ – ‘niceness’ being just one more neoliberal imperative that needs resisting.

Were contemporary art galleries to follow the VC model, they would require of their artists a plan for how each creative practice would develop, who its audience would be, to which markets it might appeal and what institutional relationships would be important to develop or even necessary to the advancement of the work. Given such a plan, with its benchmarks for recognition and success – only in the artworld is there cynicism enough to denounce such values – a gallery would then invest in the work, by buying it. If, for whatever reason, the desired outcomes don’t materialise, the investment ends. Artist and gallery move on.

What is more, now freed from being a de facto sales representative of one’s work, which the consignment model all but mandates, the artist can adopt whatever stance towards society she wishes (provided that stance is part of her plan). In this light, professionalisation, even the friction-free social intercourse subtended by our being ‘nice’ to one another, now appears, for the artist at least, as a feature of the consignment model’s minimise-risk, minimise-capital strategy, rather than as an unfortunate bug.

I have no doubt that my proposal for what we might call a ‘venture gallery’ will be met with the requisite amount of disgust from an artworld establishment that – still, today – cannot stomach the language of investment and returns, of capital and risk. As the recent Banksy stunt demonstrates, the artworld loves nothing more than to hate the market, to laugh at its supposed humiliations. So what I have suggested here will be regarded as yet another gross overreach of market thinking into a precinct of value that must be defended from capital’s coercive march through our imaginations.

To this I would simply state: galleries are businesses and always have been. This is their native discourse. If business is bad, change the conversation. 

From the November 2018 issue of ArtReview