Hello, I'm Josh Baer and welcome to the Baer Faxt Podcast. In this mid year review episode, Will Yang and I talk about what's been going on with the art market in 2023. Is this a slowdown, a major correction, or not? I'll compare our current situation with some insights from the art market's real crash in the 90s when I closed my gallery. I'll also share my takes on the current art business news and my recent trip to Asia.
Josh, when we talk about the first half of 2023, what will be the first thing coming to
your mind? The first thing that comes to mind is people are comparing it to 2022 and 2021. So I think whenever you're comparing something to a big high, anything that's retraction from that. is assumed to be a big low, and I think we're just at the 80 90 percent level of a high. So I think that's still a stronger situation than people think.
My second point is, this is really the first summer that the art world has really had off, because we were on a, uh, 7, 24, 365 schedule through the last three summers with COVID. And now people I think are really ready for a little bit more of a break. So that's sort of like a, another slowdown thing that I think is more an illusion than a big reality. Do
you think when people are going to, uh, their summer holiday was a little bit pressure for the second half of this year or they're optimistic?
I think they're just taking a breather from even thinking about it and we'll come back at it in September a little bit more and then November and the art fairs in the fall will really be the indicator. We don't have enough data right now to really say where we are. I think it's a little bit more doomsday than it might be. At the moment in the discussion,
I'm looking at the numbers that Christie just released recently about two weeks ago of their first half of 2023. Their total sales globally is a 3. 2 billion and compared to the same time in 2020. That's about 23 percent down. And I actually look at the numbers from last year. Salisbury had their record selling total 8 billion in 2022. I know you wrote about and we talk about those numbers are total revenues. They don't publish profit, but do those number mean something?
And in the 23 percent down for Christie compared to a year ago, what does that tell
us? Tell us that not enough rich people died.
Okay, can you explain
a little bit more? Because it's anecdotal. If suddenly, uh, one of the top five collectors passed away and their heirs decided to come to market, you could get another billion dollars from one collection put into the market. And suddenly we would have been at four billion instead of three billion. So I think you have to see longer Data points rather than anecdotal. Occasionally you'll see one of the auction houses saying we beat the other side by 100 million of sales during the year.
That could be one painting. So it's not a business that's selling hamburgers that if you are off 12 percent in hamburger sales, well, you can't make it up with somebody being hungry. Tomorrow. So it's a different industry. The question again, you raised about profitability. That's an important one. And they're not telling
us for a market observer or somebody who just came in with a financial background without knowing the profit, if they wanted to observe a little bit more, what are the things they should pay attention to?
Well, there's a great statistic that Guillaume Cerruti, the head of Christie's, talks about, where you combine the percent sell through rate Of a sale with the pre sale estimate of the low hammer. And if that gets over 200%, that's a successful sale. So I would ask them, what was that number for the first half of the year? And that would give you a sense of how successful they're doing.
In the past six months, you were in London and in New York covering the auctions. What did you see in the auction rooms? Especially, this is kind of like a first season, really, after the pandemic.
The May sales suffered a little bit from expectations of consignors when they made deals in January and February. So many auctions are put together three to four months before their, their deals are put together before they go to market. So the ability to be nimble. And to adjust the estimates or the terms of deals are a little bit restrictive sometimes to the deals they made.
I would say the art galleries, private dealers in the art fairs, they're able to change their pricing and their deal structure 24 hours before they go public with anything. So that's a huge advantage. They have is to adjust to the current market conditions on a moment's notice. And the auction houses suffered this year a little bit from the perception that sales were off because the deals they put forward in January didn't look quite the same in May.
I remember you wrote before and you have said that everyone's a genius when the market's hot. But the real pros shine during a slowdown.
It's easy to buy things. You walk into the Gulfstream store and you say, here's 80 million, I'll give it to you. You walk into Cartier and you say, here's 800, 000. You walk out the door. You walk into, uh, you know, a gallery, an auction house. They say it's available. You say, here's 80, 000. Buying in general.
Pretty easy and if you're just looking at comparable prices, you're seeing them rise So you think I'm a genius Why don't I buy ten more and then you discover the hard part of the art business is selling art not buying art and It comes down to your piece. So people have made fortunes and lost fortunes In this business. So you need to understand that art is non liquid.
What advice would you give to those looking to sell an auction in this buyer's
market? Well, a friend of mine who's a dealer and ran an auction house said to me, if you're a seller, you're a seller. So be willing to adjust your desires based on the realities of today. It means lower your deal, take an offer that's pretty good. As they say, bulls and bears make money, pigs get slaughtered. So, if you've got a deal that's close to your ask, I say, take it.
Once you've decided to sell, go through till the end, because it generally is going to take you five years to try to start again to sell the same thing.
After the break, 90s. Later on, Josh and Lou Yang discuss how the art business of today is adapting to the market slowdown. Don't transact without the bare faxed. Subscribe to the Fairfax newsletter to receive the key developments in the art world. And op-eds from Josh Bear in your inbox each Thursday plus special auction editions direct from the sale room. The only report on who bought what and who tried to but didn't get it. Head to thebearfax.
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You have witnessed upside down, so nothing surprises you. Um, what you see happening right now, maybe give us a little bit reference, what you have seen in the past, which you'd see kind of similar.
I think the art market was so close to completely going bust worldwide in the early 90s that all you have to do is see the Pace Gallery had to merge or was sold to Wildenstein and that Pace became Pace Wildenstein meant they were in trouble and if such a top gallery at that point that shows where we were 30 years ago wasn't just, you know, um, young whippersnappers like me. It really went through the art market like a, uh, like a global pandemic, like a virus.
Who would think that could ever infect the art world?
So which
year was that? I think it was early 90s. So you had Japan fall off the map because they were causing inflation for the art market because it was all part of a corruption scheme to get payoff for real estate loans in Japan. So you put that factor there. You put, um, Wall Street being under threat. You put, um, the, what else was going on there. AIDS was certainly becoming a very powerful problem in the art market. And two of the biggest art collectors in contemporary art both died within a year.
Frederick Roos of Sweden and Thomas Amann of Switzerland. For me, they were my Two of my biggest clients, suddenly they're dead. That's going to hurt your business. And there were a lot of galleries, big clients. Well, a single new person can make the art market. If Jeff Bezos decides he wants to spend five billion dollars on art next year, which he could, that would affect it. If the Sheikah and, and Cutter decided she wasn't buying art next year, the art market could absorb their stepping out.
Was
that around the time that you had to close down your
gallery? Yes. So it was all part of that and everybody was struggling, just about. But interesting, that's also the time that new galleries open. So that's the same coming out of it. That's when David Werner opened. That's when Hauser and Wirth opened. So Crisis can be opportunity, and it was a period that they could start with less expectations and grow into the next wave. So it was also, uh, a golden age of young dealers coming in, particularly. Those two galleries.
How long did it take for, you know, everybody to recover? Or what kind of process did it take in the new gallery back then? Like you mentioned, uh, David Zohner. Uh, how did they start to take the opportunity to turn the crisis into opportunity?
Well, they were able to grow organically without having to look at what the other guy was doing. Like, oh, they did a party for 50, 000. I have to do one. They could stick to really. The nuts and bolts of showing art and talking about art. Then there was the hiccup 2001 with like a hiccup in terms of the market with 9 11 and that froze everything and then there was a hiccup in 2008 with Lehman Brothers and that froze everything and those Corrections were were shorter than people thought.
And then COVID, everybody thought in March of 2020, we might all be out of business. That didn't take so we've had Enough volatile threats that the art market has survived since the last, I would say, pretty much collapse, which was 30 years ago. So I don't see a collapse happening, and people who live through that are always looking around the corner a little bit more to see things can happen.
Because art always exists, right? When art exists, the art
market exists. Art can exist without the art market. Art market can exist without art. Yes.
After the break, we'll discuss current art business news in the context of the market, including Frieze's acquisition of the Armory Show and Expo Chicago, Gagosian Gallery, and even the Barbie movie. Don't transact without the bare faxed. Consider bundling your newsletter subscription with access to our auction database. The only platform that lets you know who bought what and who tried to, but didn't get it. With over 12, 000 data points going back to 1994, head to thebearfacts.
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Now I want to talk a little bit about the recent news in the art
market. You mean that Barbie movie opened today? That's the big news. Performance art is back in a big way. I think if you count Barbie as performance art, that the total value of the art market this year is about to go up about 500 million just this weekend. I know you have tickets, and you'll be there tomorrow. There was a VIP preview at Gagosian Gallery last night. 25, 000 a ticket to see Barbie. Everything was pink. Everything was pink. The champagne was pink.
You know, Larry was dressed in pink. It was a great evening for the art world. And it wasn't even a charity event. Well,
how about another news? Um, Frase has acquired the Arborist show in New York. And in process, uh, buying Expo Chicago, two of the largest and the longest running fairs in, in US. I wonder what was your first reaction when you
saw the news? I think my first reaction was, huh? Because Freeze has a fair in New York and the Armory Show is a fair in New York. And what's the strategy behind that? So I think that's yet to be articulated. I think the strategy of Expo Chicago being sold Makes sense because we're doing just one project a year.
It's an inefficient setup for them, and so their cost of marketing and sales and other things are decreased by spreading that across many other art fairs that they can shrink their operating costs So I think we're early into the, um, decision making of Endeavor. I would say this is a low value acquisition on their side of a company that's got, I don't know, a billion dollars worth of companies and assets.
So a five, 10 or 20 million deal has some other ramifications that they see brand building for the whole company more than the profit and loss they might take out of it. Those are my first thoughts. Yeah,
the news came out, um, like a month after we released our two episode on our affairs. One of the main topics that we cover was, you know, international art fairs versus regional in terms of the development of art fairs globally. Do you see this is a new trend compared to, you know, past few decades that when you have been witnessing the development of the
fairs? I see a different trend. I see the trends towards more mega businesses. So in the same way that galleries have become mega galleries, the same way that you see, well I'm sure you'll ask me about Pariton selling a share to private equity, you're seeing businesses that want to increase in verticals and increase in horizontals coming together. So I think we'll see More consolidation of that. Will Gagosian Gallery wind up being part of some other luxury, um, company?
I think there's a chance of that, certainly, as they've gone more corporate with the board of directors, in a more corporate environment. I'm sure they're looking at the Perrottin deal, saying, how does that relate to us?
So I think In the context of art fair acquisitions, I think in terms of media companies acquiring other products, in terms of fintech companies coming into the space, in terms of Christie's, for instance, spending money to invest in art related technologies that we're going to see more complex businesses than just mom and pop businesses that we always had. Artforum was a mom and pop magazine. Now it's part of Penske. Pace was one gallery, now there's 700 galleries.
So I think we see more and more consolidation into a few winners and broad parts to the same business as what's going to be going forward for the next three to ten years.
But obviously only a certain number of large galleries can afford to do that or have a resource to do that, right? And what does that mean to the middle sized galleries or smaller ones, the young
galleries? I think they're going to wind up being more mergers, where they can take, of their 20 artists each, combine their staffs, work with 30 artists. Instead of two registrars, they have one. Instead of having two PR contracts, they have one. So I think as people... get a little bit more exhausted trying to run their own modest sized business together. We'll see more and more of them consolidating on their own and having more, um, one plus one equals three for galleries too.
And the relationship between galleries and artists, that's another topic I want to ask you.
Artists become rather fungible for galleries when they become bigger. They write up together, they write down. I wonder when artist cooperatives are sort of going to come back, but not in a non profit way, but in a for profit way. It's like, why do they need, you know, to give 40 or 50 percent up? To the galleries, maybe they can work together in some sort of way and work with galleries to sort of do that.
There's been some attempts with that in terms of them owning their own inventory, but I see that that's Another possible route that artists might start to take.
But, you know, artists are not famous, the most famous for people who can manage and organizing things in terms of a boring a business, right? Who do you think will be the kind of ideal person or organization, um, might be able to launch that?
I think that only works when it's private and secret. So I don't think you'll see these kind of situations as much as they'll be behind the scenes. We'll see. I think it's also part, you can't totally separate that out from the digital, um, NFT, blockchain, all those other issues. Sort of implying that there's a way and need for the artist to have a little bit more say. In the game.
So I think as much as we talked too much about NFTs and relations and blockchain to money, there is something there about community and reaching a younger community. There's a younger community of collectors. I had a call from some 24 year olds from college who started a new business to do auctions and blockchain this and NFT that. Their point was collectors their age don't want to work the same way that collectors their grandparents age want to work.
Apparently these young collectors don't even want to have the art. They like having wallets, digital wallets. They don't live in big spaces. The notion is they can't or don't even want to have in front of them the painting, the sculpture, so much as they like to own it. They like to have the digital certificate for it. The NFT goes with it. But their experience with it is less personal. Which I find weird.
So I think that there will be, you know, people use the word disruption, which I think is maybe next to curating the worst word used in the art market. But I think there will be, um, new ways of communicating and doing things at the same time. So OGs will continue to do what we do in the same way because there's, you know, trillion and a half dollars of art already out there that needs its own existing structure.
Join us after the break for the final part of our episode, where Liu Yang asks Josh about his recent travels throughout Asia. And what's next for the market there? Don't transact without the bare faxed. Consider bundling your subscription with our Art Advisory Membership Program, offering on demand access to our diverse team of international specialists for a low annual fee. Valued by both collectors new to the market and experienced players like galleries and even other advisors.
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Speaking of, uh, uh, the young collectors, I remember reading Christie's half year report, they said there 31% of, uh, their clients, um, for the first half are the first time new clients. And among that 31%. I think if I remember correctly, 38 percent are the young collectors.
True, but people are living longer too. So if you factor in that people are making it more to 80, 90 or 100, you know, how much is their buying power? And my question would be to parse that out. I'm sure you'll ask me about Asia, that a lot of that's probably coming out of Asia. More heavily new buyers and online buyers. Let's
talk about Asia. I think that's definitely something new for lots of a first time for Josh for the past six months. Right.
Oh man, I was in Asia in the eighties. Come on. Everybody makes it like I've never been there. It's like, oh man, I was there before you were born. Asia is not the elephant in the room, but it is certainly critical to what's going on. And if you ignore it, you ignore it at your peril.
I know, you know, Asia is not new to you. Um, but being there, I remember January when Tobias went to Singapore, you flew from New York, I flew from Germany. And I remember receiving the message when you were landing, like, wow. And then in March, when you were landing in Hong Kong, was like, you know, bigger wow. Uh, anything? The unexpected or something that you thought that might look like and then but turns out to be very different from what you
pictured. It's certainly always more so as a New Yorker, we're kind of nonplussed. Hong Kong was just city after city after city. From the airport or in the plane and you're not even in Hong Kong. Um, what, what I've been hearing about from some of my clients who've been going there for a long time in their own industries is there's a lot of cities in Asia with 10, 20, 30 million people that we've never heard of the cities.
I think when you learn a little something, you start to know what you don't know a little bit more clearly. So I don't know a
lot. Well, you definitely know durian and live octopus and, you know, eating hot pot in the middle of night in Kowloon side of Hong Kong, right? Snake soup
was particularly good.
Do you remember what you said to me, um, when you landed in Hong Kong? One of the first thing you said, cause that was, uh, shortly after, uh, China lift, uh, Hong Kong, um, particularly lifted the travel restriction for foreigners going there. Um, I remember how much, you know, how impressed you
were. It's hard to know what's really going on because I think, particularly in Hong Kong, people have to be cautious about the government, the relationship of the economy to the colonial past and PRC. There's a lot going on there that's understood and not talked about at the moment. At the same time, look at all those skyscrapers. Look at this industrial thing. Look at this mix of cultures. Look at the vibrancy and the energy that's waking up there too. It's like, okay, that's, that's a lot.
You can't just pretend that that whole continent doesn't exist in your business anymore.
And they're very different among other cities and countries in Asia. We can't just generalize Asia,
right? Or China, or think of them in a monolithic way. And I wouldn't be doing it without you, Liang, because you can help us navigate that in a way that me, at my age, I wouldn't be able to. I remember there was a, the head of Sotheby's Contemporary Art in Hong Kong now, Alex Brancic, remember talking to Chan Westphal, who was the head of, chairman of Sotheby's Europe, about China maybe 10 or 15 years ago, and she said, I ain't going, but this Alex guy, he's 25.
He's going all the time, and I think she made the right decision for her, and he made the right decision for him. So I think you could start at zero, I'm sitting next to Will, he could be going twice a year for the next 40 years, and find it on his own. At a, at a more mature level, you need to be, um, guided in a really more sophisticated way. Thank you, Will Yang, for doing that. Oh,
you're very welcome. And I really enjoyed our trip to Asia, and I can't wait to go back there with you and then to have more on the ground experience. Um, and speaking about Asian participants, I remember when we were in London in February carving the auction. You know, there's the participation from Asian bidders are quite strong and the ones we just have witnessed and in, uh, last month in London as well. Um, so.
In your experience of going to Asia, your interaction with the Asian clients in Asia or Asian clients in New York and London, do you see any difference or what kind of characteristics among
them? It's all about the Benjamins. It relates to how many people have their money in different places. Clearly, There's getting money out of mainland China for art has become more restrictive. There's a fear that that'll happen in Hong Kong. So the ability for the Asian diaspora. To be as active in the art market is going to require some patience because it's got political headwinds potentially there that are not that stable.
So I think it's a little less stable than it was a year ago and Many Asians thought ahead, and that's why they're in London or Paris or Miami or New York when they can. And just the ability to do business, given the, uh, political environment between the U. S. and China, China and Russia, Russia and the U. S., is making everything a bit fragile. And people have to be a little bit cautious in that way.
Well, I noticed Basel, ground floor, opening day, the audience to me looked to be about 30 percent Asian.
I remember that day, our newsletter, you wrote, Art Basel is back, Art Basel Hong Kong is back, because it feels like the first day in Hong Kong Basel.
Yeah, I felt like I went to the opening of Art Basel Hong Kong in Basel, and that's a good thing because that's about making the pie bigger, um, for the art market, and the art market pie will get bigger. There's still new money coming in. People who collected forever are going to keep collecting. New collectors are going to buy. And it's still going to get bigger. It just maybe needs some price corrections.
I think the question going forward in the next six months is, Are we now coming out of recovery going to work each in our own way, or is there going to be more collaboration going forward to not only be more efficient, but to survive? That's the post COVID recovery to see. A year's a long time in the art business. Let's regroup after another six months.
Thank you for listening to the Bare Facts Podcast, brought to you by the leading news source for the art world since 1994. Our host is Josh Baer. Our executive producer is Luyang Jiang. I'm Will Griffith, our assistant editor. Our content advisor is Boliang Xin. And our editing team is Mona Productions.
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