3 Key Challenges Preventing the Art Industry from Attracting New Buyers

November 10, 2021

Over the last few years, the art market has undergone something of a Renaissance, and one quite separate from fifteenth-century genius. A combination of the digital space, an increase in exposure to art, and investors seeking new markets has resulted in an art market that is more open and accessible than ever before. At the same time, however, experts have reported stagnation in the market; the number of artworks trading each year has decreased over the past decade, and auction houses and galleries are faced with the challenge of not only thriving and engaging prospective buyers but simply staying alive long enough to cultivate new collectors.

In order to better understand the ways in which we can help the art industry recover, it is important to have a solid understanding of the issues and challenges facing the market. In total, there are three broad areas that are causing a sticking point.

Speed and Turnover

Over the last 25 years, the structure of the art market has changed and, in particular, the relationship between the auction house and the dealer. This is a relationship that is constantly evolving in tandem with the constant competition that occurs between the network of auction houses. In particular, the last quarter of a century has seen an increase in the commodification of contemporary art, largely fueled by auction houses. This is a concern, as well as a stark change.

Up until the mid-80s, the resale value of contemporary art was negligible. Living artists simply did not make good investment pieces – if a collector purchased a piece, they could expect the value to depreciate until they eventually sold at a loss or minimal profit. Much like purchasing a new car directly off the forecourt, contemporary art was not a source of income. Things have changed in recent years – buying the work of the right artist while they’re still small allows investors to make big bucks if they “flip” the piece, resulting in a very fast turnover of pieces at increasingly high prices. This has resulted in an increase in volume and production in an attempt to meet demand at least partially because artists are aware that being in the right place at the right time, with the right number of pieces, can be extremely lucrative.

While this may be perceived as a good thing by artists, the same cannot be said for the wider art market. Just as with mass production, a larger number of pieces does not necessarily translate to higher overall quality. Instead, there are a number of artists positioning themselves to be the “next big thing,” resulting in poor quality pieces or worse, mere tricks or gimmicks, in a desperate attempt to connect with an audience and raise the value of their work. When this happens, the art market becomes saturated with poor quality “shock” pieces, which have little to no longevity or long-term value, but function well as a short-term investment pieces. The focus is on feeding the insatiable appetite of the audience, and not on producing quality art, or even making a valuable statement or comment.

In addition to a faster turnover, there is also the issue of speed. We live in a world of instant gratification, where speed is expected, admired – revered even. We can communicate with people halfway across the world at a touch of a button, order and receive our packages within the same day – or even the same hour – and carry out life-changing transactions in the blink of an eye. The art world has become focused on speed – on the ability to travel from one place to the other, on how quickly information and money can be transferred, and on how rapidly a sale can be made. While there are certainly advantages to this, a relentless focus on speed also has downsides. An increased focus on speed diminishes the opportunity to reflect and genuinely enjoy a piece of art, inhibits slow, leisurely research, and obstructs meaningful exchanges with a peer, colleague or observer.

This breakneck pace is detrimental to both artists, and the art market. Artists are pressured to continue creating, rather than take the time they need to reflect and develop. Not only does this result in poor quality work, it can also lead to artist burnout. When it comes to collectors, there is a growing tendency to see artworks as mere commodities, rather than purchasing something to be kept and enjoyed for a number of years. Rather than being motivated by the ability of an artwork to hold value, there is a focus on how much a piece can appreciate.

Exposure And Criticism

While the rise of the internet and social media have unlocked amazing new opportunities for new artists, increased networking can also have a negative effect at the same time. Visual platforms such as Instagram allow any artist to share their work as soon as it is created, sometimes reaching a global audience in seconds. This also means that the same image can be shared and examined hundreds, if not thousands of times. It does not take long for a brand new artwork to become tired or dated, and this can have a serious impact on its resale value.

Part of the reason many artworks hold and increase their value is due to novelty – a one-off piece, or an item from a limited run will always fetch a higher price than a mass-produced piece. While this is still the case, it is indisputable that a piece that has been shared far and wide is highly unlikely to command the same high price as one in a pre-social media artwork marketplace. In an increasingly connected world, novelty is a factor that can easily be lost, and this can have a detrimental effect on the value of all art, both in terms of monetary value and with regards to its artistic status and merit.

This is a tricky challenge to overcome, but one that could be helped by the creation of one-off pieces, a push back to galleries and auctions, and by reintroducing a sense of mystery and mystique to artworks and the art world as a whole.

Lack of Transparent Pricing

Another key challenge facing the modern art market is a lack of transparency in pricing. In days gone by, this was simply attributed to the nature of the market – it was an investment opportunity reserved for the wealthy elite, who had no reason to look at price tags before making a purchase. But as access to the art world has expanded, the lack of pricing transparency has become a roadblock. Studies suggest that most collectors will feel uncomfortable at the prospect of asking for the price, and would rather assume that they simply cannot afford it. This can result in many potential collectors and investors being priced out of the market, simply through a lack of willingness to inquire about a price tag.

In order to overcome this, there is a need for the art world to become more open and transparent about price tags, making them easily visible. Destigmatizing price could enable and encourage a whole new generation of collectors, while also broadening the spectrum of availability to a wider audience.

Final Thoughts

The art world is one that is constantly growing, changing, and evolving. There’s no reason to believe that is something that is likely to change. With new challenges constantly appearing, artists, curators, collectors, and those connected to the art world must be able to adapt and grow, reacting with new innovations and ideas. Failure to do so is likely to result in stagnation, an art market that is not worth investment, and more worryingly, a halt in creative endeavors.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.