Wednesday, August 4, 2010

Creating a market for art

How do objects produced in a single region graduate from being viewed as mere collectibles to sought after works of art? The short answer is a market is created that says those objects are meaningful and thus valuable. The market originators are academics who extol the virtues of the objects, citing history and singular vision. Then the auctioneers expound on the qualities cited by the academics, and the gallery owners and journalists soon follow suit. The Harvard Business School publication Working Knowledge interviewed one of its own, assistant professor Mukti Khairi, who studied how a market is born. Khairi focused on India's modern art market, which did not exist before 1995. I was particularly interested in the Khairi interview because I've had first-hand experience with India's new modern art scene. My wife is from India and on our last trip to Kolkata, I visited a residential flat that had been converted into a gallery. I was especially taken with a large block print that mixed the past and present. When I asked the woman the price, she quoted me 3,000 -- as in dollars not rupees. Shipping would be extra. I passed, but left impressed that India's art was commanding Western prices. One of the catalysts of India's new modern art market is an online gallery, Saffronart, from which I plucked the images above. The bronze head is just 10.6 inches tall but priced at a lofty $45,000; that's more than 2 million rupees. The acrylic painting is a more affordable $1,011. Here's an excerpt from the Q&A with Khairi:

Q: What were the key steps in how the Indian modern art market went from essentially a nonexistent category to one where individual paintings were being sold for millions of dollars?
A: The market for modern Indian art was created in three broad steps:
                  Redefinition of the category: As mentioned earlier, art historians and academics began the process of redefining and reinterpreting 20th-century Indian art in modernist terms, emphasizing its originality and describing its aesthetic value. This in turn implied that the art had a higher economic value than what had been ascribed to it before then.
                  Creation of valuation metrics: This part of the process took place among the commercial players in the ecosystem. In order to generate trade in the art, auction houses translated the academic discourse into simple, straightforward constructs that not only explained the new category to stakeholders, but also enabled comparison and consequently valuation of the art works. We found evidence of four main constructs being used in the auction texts: explications of the originality of the modern Indian aesthetic, emphases on artist careers and specific influences on them, the use of artistic movements and schools of art within the Indian context to define relative value, and finally, descriptions of the internationalism of Indian artists in order to establish their legitimacy in the art world. These constructs provided metrics that helped stakeholders understand the art, compare different art works by the same artist or art works by different artists, and judge and evaluate them on a common basis, and thus generated a valuation system, which is crucial to enabling exchange in a market setting.
                  Broad acceptance and understanding of the category: These constructs used in auction house texts helped define the value of modern Indian art, and as public documents, these texts helped disseminate the same valuation system among broader audiences. Museums and galleries in the West began to take notice of the new genre, holding retrospectives and special exhibitions, which established modern Indian art as a legitimate category of fine art. Newspapers and magazines (both general interest magazines as well as dedicated art publications) in India and abroad began to write not only about the auctions, but also about the art itself, usually using language and constructs similar to those used in the auction texts.
As this understanding spread, the value of modern Indian artworks increased significantly. The average price of a work at auction went from approximately $6,000 in the first six years of auctions to approximately $44,000 in the next six years of auctions. A couple of paintings broke the million dollar barrier, and several others sold for hundreds of thousands of dollars. These rapidly rising prices provoked greater coverage in the press, which in turn expanded the circle of stakeholders that converged on the understanding of modern Indian art generated by the auction house texts. As a result the market for modern Indian art converged on shared expectations of value among buyers and sellers.
Consequently, we found that pre-auction estimates of the value of a given work made by auction houses became narrower, more precise over time, suggesting growing certainty about the valuation that could be expected. We also found that the difference between the auction house's estimate of an artwork's value and final hammer price paid by the buyer decreased over time, indicating convergence and intersubjective agreement over the value of works among buyers and sellers, which in turn indicated that the market for the category was established.

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