Why is Artwork So Expensive?
The answer is that most art isn’t that expensive.
Very few living artists are rich and famous, but most artist are not and never will be. It is a hard market to break into, artists need a gallery to represent them. MFAs cost around $100,000. A 2014 study by the artists collective BFAMFAPhD found that 77.6 percent of artists who manage to make a living by selling their work are white, as are 80 percent of all art school graduates. Prices of emerging artists’ works are priced based on size and medium. Larger paintings are usually priced between $10,000 and $15,000; works on canvas are priced higher than works on paper, which are priced higher than prints. If an artist is represented by a well-known gallery like David Zwirner or Hauser & Wirth, the dealer’s prestige can give works a decent price bump, even if the artist is relatively unknown. Regardless of an artist’s or a gallery’s prestige, dealers usually take a 50 percent cut of artists’ sales. Materially speaking, artists only benefit from sales when there works are sold on the primary market, meaning a collector purchased the work from a gallery or, less frequently, from the artist himself. When a work sells at auction, the artist doesn’t benefit at all. In 2011, a coalition of artists, including Chuck Close and Laddie John Dill, filed class-action lawsuits against Sotheby’s, Christie’s, and eBay. Citing the California Resale Royalties Act — which entitled California residents who sold work anywhere in the country, as well as any visual artist selling their work in California, to 5 percent of the price of any resale of their work more than $1,000 — the artists claimed that the eBay and the auction houses had broken state law. But in July, a federal appeals court sided with the sellers, not the artists.
The Art Market for the Rich is Different
Top end of the gravity-defying art market is so high because of the high level of wealth today. The massive amount of money in the hands of a small number of billionaires allows them the privilege to indulge in a highly competitive bidding for the best artworks in the world. This is a concern if you are in the market for a Picaso, Manet, or Raphael but if you are reading this website that is probably not you.
The Art Market is Very Volatile from the top-down
This is really also due to the massive expansion of the art market as a whole, which has over the last 30 years grown in size, range, volume, and yes, cost. According to art economist Dr Clare McAndrew, in a report published in 2012, about $27.2bn worth of art was sold through dealers and auction houses in 1990. By 2007, at the peak of the last boom, this figure had almost tripled, to $65.8bn. In 2012, according to her latest findings, it was still worth a stunning $56bn, despite shrinking slightly compared to the previous year.
The expansion is also fueled by the emerging global art markets. Demand is fueled by emerging economy’s as the top markets are no longer American and European dominated that includes collectors, gallerys, and artists. China has flipflopped with the US for the top position globally for the highest total spending.
The supply and demand model also explains the lasting and increasing value of fine art over time compared to other commodities. Fine art is expensive because of its rarity, the supply of an artists work is limited by the productivity of any given artists, which will naturally decline once they are dead or no longer creating new works. To some extent the historical and cultural significance of a work also will influence the value of a work. Questions of authenticity will affect the value of a work.