How Do We Put a Price on Art? Podcast

Who decides the value of a piece of art? And how do they come to their conclusions?

In May, Andy Warhol’s ‘Shot Sage Blue Marilyn’ sold at Christie’s for a record £158 million, making it the most expensive painting of the 20th century – but it is merely the biggest wave in an international tsunami of art sales.

Jelena Sofronijevic speaks to Mary-Alice Stack, Chief Executive at Creative United, and Erling Kagge, polar explorer, former politician, and author of A Poor Collector’s Guide to Buying Great Art, to discuss placing a value on creativity.

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[00:00:00] Jelena Sofronijevic: Hello, and welcome back to the bunker daily. I’m Jelena Sofronijevic. An artist is someone who produces things that people don’t need to have. So said, Andy Warhol, an artist well known for his obsession with fame and celebrity. And in May, his ‘Shot Sage Blue Marilyn’ sold at Christie’s for a record £158 million, making it the most expensive painting of the 20th century.

But ‘Blue Marilyn’ is merely the biggest wave in an international tsunami of art sales. The global art market reached record levels in 2021, with over 2 billion sold in two weeks in New York alone. So as Art Basel, an international set of simultaneous art fairs opens today, who decides the value of any individual artwork?

Can we make the art world less murky and open to all? To discuss all of this, I’m delighted to be joined by two special guests. Mary Alice Stack is chief executive at Creative United, a UK social enterprise that runs the own art scheme. Hello, Mary Alice.

[00:00:58] Mary-Alice Stack: Hi 

[00:00:59] Jelena Sofronijevic: And Erling Kagge is a polar explorer, author, publisher and former politician. He is the author of ‘A Poor Collector’s Guide to Buying Great Art. Hello, Erling.

[00:01:09] Erling Kagge: Hi there. 

[00:01:10] Jelena Sofronijevic: So Erling, was Warhol, right? What gives art its value?  

[00:01:15] Erling Kagge: I think in general, Andy Warhol was right in terms of art and the art market. And, uh, and today we see the result, he is the world’s most expensive artist.

[00:01:27] Jelena Sofronijevic: And Mary Alice, who decides the market price of individual artworks? Is it the buyers? Is it the galleries themselves? Is it the fairs? 

[00:01:35] Mary-Alice Stack: Well, the price of an individual work of art, of course, initially has to start with the artist themselves. And over time, typically an artist will become known by a gallery. They may start with one gallery and transfer to another over time.

They may begin to develop a public visibility that will allow them to stand the demand for their work. And so price is a very difficult area to analyse, but essentially you’ve got to start off with the maker, then a gallerist, or a dealer might decide on behalf of that artist, how to position that work, how to price it and to make sales.

But it’s really not an easy thing to analyse who’s controlling what at, at any given time, because it’s all very dependent on how the artist sees themselves, how they’re seen by the public, how the market has responded to that work over time. So it’s, quite a difficult one to analyse.

[00:02:33] Jelena Sofronijevic: It makes me think of the likes of Francis Bacon and Banksy, both destroying their own artworks at their times. But what kind of things determine the price? Is it to do with the size or the number of the certain kind of painting?

[00:02:47] Erling Kagge: Yes, it can be, but you know, what’s interesting, I think, with the artists, that definitely does not relate to the cost of making the art piece. Sometimes it does, but in general to make art is very reasonable.

And in that sense, it’s a little bit like perfume. It doesn’t cost anything to make, but you can get fantastic prices. But of course, you know, you need to break in the art market, you need a great gallery for that, for sure. And then you need to be shown eventually at museums and institutions. And as an artist, you need confirmation all the time, or the market needs confirmation all the time.

That’s why you see quite often artists have this sudden rise, you know, we talk about Basel… many artists are experiencing suddenly lots of people who like to buy a few pieces, to buy one particular artist and this success maybe lasts for half a year or two or three or four years, and then it’s over and then the market needs a reconfirmation of the same artist. 

And usually that doesn’t happen. So, you know, if I had been an artist, I would have been super careful about my market position and super careful about not being hyped. But of course, artists in general, like no, it’s art market that art in general, is not so part of the art market. 

[00:04:13] Jelena Sofronijevic: Mm. Now, before Warhol, the record was set in 2015, when Pablo Picasso’s ‘Les Femmes D’Alger’ sold for 115 million. At the time, the auctioneer predicted that the record would last for at least a decade, but that was broken obviously just seven years later, has the art market accelerated in recent years. And if so, why?

[00:04:34] Erling Kagge: It certainly has. And it’s because so many more people have so much more money. And when you eventually have everything you need in life and few of these people, of course, having fantastic summer houses, winter houses, etc. Then you need, you know, to spend your money on something, even, you know, something even more you don’t need, really need, and then you start to buy art. It’s kind of like conspicuous consumption, that you also show everybody else that you can splash so much money on such a piece.

So I think it’s, you know, it’s investment. I also think it’s very much about showing off and it’s important to be aware that many of these people who buy art in that league, they have usually not worked for their money, but it’s quite often people who have ripped off their own people, who have spent this amount of money on their art.

[00:05:39] Mary-Alice Stack: The problem with focusing on that very high end part of the market, is it really isn’t representative of normal people at all, or the vast majority of artists who are, practicing.

So it’s a distortion, it’s the things that make the headlines. But in fact, those mega sales are so far out of the scope of the vast majority of people. It gives a false impression that buying and collecting art needs to be the exclusive pastime of super wealthy people and very elitist.

And only, for those who are within certain circles. Now, it’s not to say that those, those elite circles don’t exist. Of course they do. But, part of what my job is at Creative United and the role of our Own Art Scheme is to stop people thinking about it like that. And to say, look, there are thousands, hundreds of thousands of artists producing fantastic work, which is not in the many millions of pounds.

It can be really very, very modest. And the price of a piece of work isn’t necessarily reflective of its quality. It’s reflective of the market, which is constructed in a very opaque and, obscure way that is not easily understood or accessible to the majority of people.

[00:06:56] Jelena Sofronijevic: Absolutely. We’ll come on and talk more about accessibility and art in a little while, but demand for 20th century contemporary art I’ve noticed has never been higher, in particular.

Why do you think that is? Is it in part to do with COVID? Perhaps the rise of cryptocurrencies and other ways of purchasing that art? 

[00:07:13] Erling Kagge: I think it has to do with the stock markets, have been going up dramatically in value. Real estate has gone up in value. Interest rates are super low.

So, this is reflected very much in the art market. Then again, today we see interest rates are going up. The stock markets are very unstable. It has become absolutely insane in the market. And I think it has gone too far, too soon. It may turn around again and people may have a hard time getting rid of all this super expensive art. Then again, it’s not bad news, because fantastic art is being made everyday.

[00:08:09] Jelena Sofronijevic: Mary Alice, Christie’s chairman Alex Rotter, proclaimed that he was very proud of having sold the Andy Warhol painting, calling it a big achievement. I thought that seemed a bit strange given that they’ve not made anything in the process of this except for money. And I noticed that Warhol’s final price includes about $25 million in fees.

Can you tell me who are the key players who are involved in the sale of an artwork and a little bit more about commission? 

[00:08:35] Mary-Alice Stack: Well, it depends very much on which strata of the art market you’re looking at, but at the level at which these auction houses are working, you know, they will tend only to take into a sale an artist whose work has already got an established market price. And so they’re competing against themselves. The auction houses and the reason why Christies are so proud of themselves is because they’ve delivered an exceptional return, which tells them and their clients that they’re at the top of the tree right now.

It’s self aggrandisement, because it’s in their interest to stay at the epi-centre of the market that they’re trying to drive. So, in the auction space, that’s the case, but in terms of the construction of the market, who gets what; the artist themselves, obviously Warhol’s been dead a very long time.

He’s not necessarily the recipient of any of the proceeds. But it’ll be the person who, the title to that piece, the owner, it’ll be the auction house. It may be that there are intermediaries involved, as well. So, it really depends on where the origin of the work is. If it’s a primary sale, it’s being sold for the first time, then obviously, the artist gets the bulk of the sale proceeds, usually around 50%, at least. And then if the work moves on and it sells a second or third or fourth time, there is something called the artist resale right. Which gives a living artist, or the estate of that artist, a percentage of the proceeds in a secondary or tertiary sale.

But it’s a little bit difficult to make a standard assessment of what all sales look like, because it, it just depends on the particular circumstances.

[00:10:19] Jelena Sofronijevic: And just sticking with the auction. In 1958, the Goldschmidt sale attracted great media attention. One journalist at the time reported that as prices soared, it was sometimes hard to remember that the whole process had anything to do with art.

Do you think that art has become more of a financial commodity over time? Or do you think it has always been appropriated as a financial commodity, Mary. 

[00:10:44] Mary-Alice Stack: It’s definitely become a commodity in contemporary art, particularly. I think if you go back 30 years or more, the contemporary market wasn’t anywhere near as strong as it is now, that’s a phenomena that’s occurred in the recent decades.

And I think it’s part partially driven by contemporary artists, themselves becoming more visible and the contemporary collectors. I’m thinking particularly, you know, people like Charles Saatchi, back in the early nineties, his kind of his move to start collecting the YBA class of artists, that kind of put it in people’s minds that this was something, this was an emerging market.

And it’s continued to build. And I think, what you mentioned about NFTs, whether that is kind of popularising art as a commodity, driven by people who aren’t necessarily perhaps that interested in the art itself, but they’re interested in what that commodity might do over time.

And I think, perhaps it’s always been within the DNA of collectors to be acquiring things that will retain their value. But the escalation in the market is definitely a changing driver, where I think people are, it’s not about the appreciation of the object, so much as the understanding of what the price of that object might do over time.

[00:12:09] Erling Kagge: I very much agree with the Mary Alice, and I think it’s like now we not talking about art. We talk about the art market and of course, you know, the auction houses, etc, it’s all about art market. It’s not really about art.

[00:12:26] Jelena Sofronijevic: I noticed that the American record was set by John Michelle Basier for £90 million for a sale at Sotheby’s in 2017.

How are social inequalities around things like race and gender and ability reflected in the art market? Do you think we can take an intersectional look at pricing art?

[00:12:45] Erling Kagge: I think it’s a good question, because until recently, female art, or art made by women, were absolutely underpriced. And also in terms of colour under priced. People prefer white men and women from usually a fairly privileged background. Today it has changed dramatically. So, when I started buying art, collecting art, I bought a lot of art made by women, because it you get more quality for your money. Today, it’s about to change. Uh, fortunately of course. So today, you see all institutions and also collectors are kinda chasing all this art made by artists that they’d been kinda avoiding until recently.

So the market in this sense has dramatically changed and also not only the market cause, so also the museums and the market quite often goes hand in hand. So what’s getting expensive, the museums also need to show. So it’s part of the same thing. Both European museums and American museums are competing for art they didn’t wan to buy at all 10 years ago.

[00:13:57] Jelena Sofronijevic: Does the value of art change in different contexts, then? How does the monetary value change when it moves from a commercial gallery to a museum, or a public institution?  

[00:14:09] Erling Kagge: Again, you know, as I said, every artist needs confirmations through his or her career, and then you need to be shown at museums and eventually you need to have be show at great museums and have retrospective shows.

So, and that of course increases the value of the art. That’s why it’s so, a tighter needed relationships between galleries and the curators. And that’s why, of course, all the galleries are paying all these art first and dinners for curators to keep them, you know, within.

[00:14:44] Jelena Sofronijevic: Mary Alice, you mentioned about access earlier. How does our media focus on these big sales and artists reinforce cultural exclusivity and this division between high and low culture?

[00:14:56] Mary-Alice Stack: Yeah, I mean, it is a problem because, I mean the media, as we all know, it’s a very powerful mechanism through which certain perspectives can be amplified and certain perceptions of value can be presented, not necessarily with the balancing aspects of what else is going on. I think it’s a real problem that people’s understanding of what is of value in the contemporary art space is perhaps what they’ve heard through the media. And what we try and do at Creative United is to try and give people access points, so that they can develop their own understanding and their own route through the market. They can define that for themselves, rather than relying on what’s reported.

So I think it is a problem that the media takes what is sensational and presents that, the thing that’s sold the most, or the biggest extremes of the market are what are reported, and the novelties of the market are reported, rather than the things that really define the market and define artists, you know, why do people become artists?

And what is it they do day to day is not necessarily what is reported in the media, although it does create an opportunity for engagement and interest, so I’m not saying it’s all bad, but I think people need to be able to see it in the every day, as well as in the exceptional.

[00:16:29] Jelena Sofronijevic: I’ve been to a few art fairs in the run up to this recording, and they’re huge and overwhelming and very seductive if you’re the kind of person that has the money to be purchasing these artworks. Do you think, Mary Alice, that people always know what they’re looking for when they go to these kind of spaces?

[00:16:46] Mary-Alice Stack: Do they know what they’re looking for? Probably not. I mean, I would have to say, I think an art fair is, in my experience, probably the least best place to make a decision about buying something. It’s convenient because everything’s in one place or you’re seeing a huge amount of work at the same time.

So, it has sort of convenience factor about it, but really when you’re making decisions about buying a piece of work, the noise and the confusion of everything else that’s going on around you is not helpful to really connecting with the individual piece, I’d suggest. But there have been art fairs that have done an amazing thing again, over the last 20 years, the emergence of the art fair as the primary point of connection between collectors, galleries, curators, and artists. It has done a hugely important thing in terms of bringing the market to the people, in a much more condensed and very dynamic and exciting way.

So they can be quite thrilling, but it can also be very, very overwhelming. And I wouldn’t necessarily say that would be the place that I would want to make my purchase decision, but I might want to use it as a place to discover some interesting new artists and their current work.

[00:18:02] Jelena Sofronijevic: I appreciate that. And also it’s interesting because commercial galleries are free spaces to go to, but they remain very exclusive and intimidating. And in some cases, practically, just quite hard to access because they can be easy to pass by in the street. How can we make it more common for people to buy and own art and access it in the first place?

[00:18:24] Erling Kagge: I think it’s getting more and more common, in the last few decades, it has been. Art has become much more integrated in life. You see it in public places. You see it in offices. When I grew up, here in Norway, we all had posters walls, and then we start having more exclusive prints. More and more people are starting to have some paintings.

And so I don’t think they ever seen in the history, that art has been so much integrated in life of so many people. And I think that trend will keep on developing. I’m not, as I said, I’m not so certain about the art market for the years to come, but I think more and more people who like to have beautiful, maybe challenging art in their homes that they can grow with. Not in the sense that everybody have it, but I think more and more people will appreciate interesting art. 

[00:19:26] Mary-Alice Stack: I think there was a time when galleries really did feel like the preserve of the moneyed classes. It was really quite difficult to cross the threshold if you didn’t feel confident to do so, you might not feel very welcome.

There might be a sense of, you know, if you need to ask the price, you can’t afford it. So pricing transparency has been a big, big issue for quite a long time, where we’ve certainly been advocating that in order to be open and accessible to people, you must be clear about how much something is being offered for, otherwise people can’t judge for themselves, whether this is a space, an opportunity, that’s right for them, or they need to be able to have the information that they need to make informed choices. So I think that sense of the unwelcoming gallery has become much less prevalent. And my experience is that more often than not now, galleries are really wanting to bring diverse audiences in.

They’re wanting to show more diverse artists, they’re interested in a dialogue with the public about contemporary work and why it’s interesting and important. What those artists are trying to say through their work. And that dialogue is always the starting point. I think what galleries and artists probably don’t enjoy so much is, if people aren’t willing to have to ask the questions and have the conversation, then kind of, where do you go with that?

Because they’re not just in the business of selling products, you know, it’s not just products. So, they really want to be able to feel confident that the perspective buyer is really understanding of the value in that work, beyond the price itself. Because when you sell a piece of art to a buyer, they become the custodian of that piece of work forever, or until they sell it on.

So that placement of that work into the hands of a custodian, of the buyer, is a really important thing. And I think people maybe, sometimes don’t realise that. That when they say they want to buy a piece of work, they’re actually taking on the responsibility for that piece, in a funny way. It’s not a throwaway thing.

It’s something that they should be looking after and cherishing and enjoying for the long term. And that’s part of the process that a gallery is there to support. And an artist wants to know that their work is going to a good home, if you like. 

[00:21:46] Jelena Sofronijevic: I understand that. I think that there are still so few galleries that will show their prices and I myself feel quite conflicted about this, because on the one hand, showing the price would improve public knowledge and access to the value of art.

On the other hand, you could argue that it’s just reinforcing consumerism and this almost acquisitional approach to art that ignores its intrinsic value. How does pricing impact smaller artists and galleries? 

[00:22:13] Mary-Alice Stack: Well, a gallery is there on the whole to sell work. Let’s not pretend it isn’t there to sell work.

That’s the business model, is that they select the artist. They present the work, they help promote that artist and build their reputation. And sales is all part of that process. Museums aren’t there to sell work. They’re there to present work in a non-commercial environment and they too, have an equally important role in helping us understand the value of the visual arts and culture in society.

But being transparent about pricing, if you are in the business of selling art, is really important. And, whether you are selling luxury goods, whether you are selling items that are relatively cheap, no matter what it is, a customer has the right to the information they need to make informed choices. And, you know, there is this tension.

We talked about it earlier, between the market, as distinct from the art itself. What we’re trying to do here is to create a society of customers who understand the intrinsic value, and are also prepared to put their money on the table for a piece of work that they love because they want to acquire it and to have it and enjoy it for themselves, for the long term.

[00:23:29] Jelena Sofronijevic: So who is buying and collecting art in the UK at the moment? Has that changed over time?

[00:23:34] Mary-Alice Stack: I mean, it absolutely has. I’ve been working on the Own Art scheme for nearly 20 years now. And, we’ve definitely seen the diversity of buyers and collectors changing. More people who perhaps have never bought a piece of art before are reporting that they’re using the scheme. About a quarter of the buyers that we support each year, say they’ve never bought a piece of art before. So that’s 2000, 3000 and more people who are joining the art market. So I think it is diversifying. I dunno what it’s like in Norway or maybe it’s diversifying there as well.

[00:24:10] Erling Kagge: Yes. Fortunately we have the same experience in Norway and I think that’s goes all over the Western world and also beyond.

[00:24:20] Jelena Sofronijevic: Do you think that art holds its value in that sense? Is it really a safer investment than housing, for instance, which it’s often compared to as an asset when it comes to things like inflation.

[00:24:31] Erling Kagge: I think it’s certainly not a good investment financial wise. In general, most art, as you soon buy as Mary Alice said, the artists get like 50 percent. So when you walk out the gallery and bought something for £2000, in one way, it is worth £1000. So this idea that art should increase in value is pretty naive. As we talked about the art market, you know, the top end of course, that could be investment wise could be, could be a good idea, but in general, art does not increase in value. It’s rather opposite. It’s really hard to sell art. It’s kinda easy to buy and hard to sell.

[00:25:16] Jelena Sofronijevic: And Erling, one immediate impact of the crisis in Ukraine was to draw attention to Russian money in London. And in particular, the art market as a means of dirty money laundering.

Are those kind of instances quite common, or are they something that’s limited to the sort of elite world of art?

[00:25:33] Erling Kagge: I wouldn’t say it’s common, but of course at the high end, the most expensive end of the market, if it’s not common, it kinda happens all the time. And of course the whole market, it’s a great way to do monitor laundering, but you know, at the older end of the market, like £10,000, £2000, a hundred thousand pounds. It’s not so much of that stuff, but of course in NFTs, it’s for sure a lot of money laundering.

[00:26:01] Jelena Sofronijevic: So we can still picture that traditional auction room we were talking about earlier with these self-congratulatory collectors. When they applaud themselves when a piece sells for a high price.

But do you think that’s where most sales are happening now? You mentioned NFTs, for instance. 

[00:26:16] Erling Kagge: Yeah. It’s I think the most expensive art is being sold, like you mentioned the auctions in New York, not just in May, but kind of the ‘Olympic games’ of selling art is going on at Art Basel today. That’s where all the top galleries and also all the top collectors and quite a lot of the most expensive art is being sold this year. So, for most people, for most collectors, this week is super important. 

[00:26:47] Jelena Sofronijevic: And do you think that buying art in these sort of weeks contributes to its commodification much like buying property is a second home for rental rather than as housing or as an asset?

[00:27:00] Mary-Alice Stack: Well, like Erling has explained, when people have huge amounts of wealth and they look around to see where they’re going to put their money and they look for the most stable investments and the investments that give the greatest returns and certainly in the art market, you can see the accelerating prices and consistently accelerating prices in some cases is very attractive, but the opposite is also true.

As Erling has also explained, that a lot of artists who are maybe not the kind of blockbuster names, you know, not Andy Warhol, but artists who are hoping to reach that status over time. That’s a highly risky investment as well, if you put your money into an artist who’s not yet kind of become part of the established Canon, and you could well end up with work that is… you can’t achieve the same price for when it resells and art often also, you know, there’s a very dangerous maneuver that people make where they try and sell, flip, the work too quickly. You acquire it and then it reappears on the market again within two to three years. And unfortunately that can really destroy the reputation of an artist where works are represented too quickly. So it’s a really long term strategy to acquire work for investment.

It’s not a world that I’m in, sadly, I’m not buying works for investment. I’m buying them because I care about the work. I really love the work and I’m not intending to resell, but clearly where you’ve got people with huge amounts of money that they need to make the best choices they can about what to invest in.

And, and a bit like houses, you know, art like bricks and mortar, has proven to be a very effective investment for some people, at the right level. But it’s a hugely difficult market to play.

[00:28:49] Jelena Sofronijevic: Do you think that these big sales then make a difference to the art world, or do they just make a difference to the art market?

[00:28:57] Mary-Alice Stack: There is a connection clearly, because the market is part of the infrastructure around which artists exist, but they aren’t in control of the market. I mean, it’s sort of fascinating speaking to so many artists over the years that actually, once the work has left their control, once it’s been sold, and even before that, they don’t really feel that connected with the market at all.

So I think most artists will tell you that they couldn’t care less about what was going on in the auction room and in the sale rooms, because it’s sort of, it’s not their world. It’s being run by other people, motivated by other things and what matters to them is the is the creation of the work in the first place. And, you know, I think that they’re connected, but I’m not sure that the sale rooms and the fairs are really dictating the future of art. At least I hope they’re not, but they’re a necessary part of the way that the arts economy works.

[00:29:55] Jelena Sofronijevic: Arts and culture account for a sixth of jobs in London and 80% of the city’s tourism. It’s also very important across the whole of the UK, but you’re right in that we still seem to be very disconnected from arts and culture and see it as something that’s quite high brow and exclusive. Why do you think that that is?

And, and do you think that we struggle to see art as a profession, perhaps, compared to other European countries?

[00:30:23] Erling Kagge: I think a challenge for art, is it’s quite often hard to grasp. It’s difficult to appreciate art. Of course everybody can appreciate a beautiful painting in the field, but quite often to understand and to appreciate art’s, it’s a challenge.

It’s also about making life a little bit more difficult than it has to be. So I think, you know, that’s one reason why art is not more ntegrated in society, but still I think the good news is that it’s getting more and more integrated in the daily lives.

[00:31:00] Mary-Alice Stack: Yeah, I think it’s true that our education system and the way in which people understand the role of artists in society has not been through a very good time in recent years. I think actually the experience of the COVID pandemic has been quite interesting in creating a more sensitive society that says, actually we do care about artists and we do care about culture and the opportunity to experience creativity when that was all stripped away by COVID.

I think suddenly there was a bit of a resurgence and a recognition that artists have an important role to play. And I hope that we’ll begin to see changes in our education system, that really reinforce the importance of becoming an artist, whether that’s a visual artist or any other creative profession, they are essential to a healthy culture.

And, we will be a very much poorer nation if we didn’t have more artists. And I hope that many more of them will come through in the years ahead. 

[00:32:04] Jelena Sofronijevic: Mary Alice Stack, Erling Kagge. Thank you very much for speaking to me today. 

[00:32:08] Mary-Alice Stack: Thank you.

Erling Kagge: Thank you.

[00:32:10] Jelena Sofronijevic: Listeners, remember there’s a new bunker daily every Wednesday, Thursday and Sunday with start your week on Mondays.

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The bunker daily was written and presented by Jelena Sofronijevic. The producers, Jacob Barch, bold and Alex Reese. The Lou producer was Jacob Jarvis. And the audio producer was me. Jay Bailey group editor, Andrew Harrison, and them tune by Kenny Dickinson. The bunker is a pub master’s production.