Why the Art Market is Moving towards a Consumer Model

With the advent of new digital art forms and new ways to experience art digitally such as virtual art spaces, ideas about how we value art and how we signal our love of art are dramatically changing. Technological innovation isn’t simply changing how art is created, presented, distributed and sold; it is fundamentally redefining how we experience and appreciate the beauty and meaning of the works we fall in love with.

Digital Art and the Value of Scarcity

During a lively panel discussion this past June, courtesy of Christie’s 2019 Art + Tech Summit opportunely titled “the A.I. Revolution”, Kelani Nichole, founder of TRANSFER Gallery, had this to say about the nature of digital art (which is inherently open and easy to both distribute and edition) and the importance of scarcity as a fundamental value for traditional art collectors: “I believe that what the market is lacking is something about value, and the reason that’s a challenge, and the reason we only see these focused leading art collections, is because quite frankly, this new generation of art bumps up against something that the art world foundationally is based upon, which is scarcity, and these are non-scarce, distributed artworks.”

Considering what this might mean for the secondary art market down the road, Kelani opined later during the discussion: “I foresee a world in which a secondary market thinks about value in a very different way, and its not about that kind of scarcity and limited access that a room like this provides, but perhaps a secondary market where the number of times a work has been copied, downloaded or shared, it rises in value, the more people it has reached”. This viewpoint is clearly at odds with those of the traditional art establishment which prizes scarcity as an essential property of a work of value for collectors. I’m not sure if many listeners in the audience that day sympathized with Kelani’s remarks, but I believe she is on to something. Her views about the coming shift in values within the art world are worth considering as the impact of technology on the everyday business of creating, selling and distributing art continues apace. Nor is she is a lone voice in articulating such views.

Dematerialization of Art

Jason Bailey of the art website Artnome for example, who also participated in the 2019 Art + Tech summit, also envisions a similar world where the value of art is quantified quite differently from prevailing art market economics. According to his 2019 art market predictions: “I predict that digital transformation of the art world will lead to the beginnings of the dematerialization of art (as is already happening with books and music). And I argue that rather than a rise in the commoditization of art, we are actually seeing the early beginnings of a move away from ownership by traditional definitions….I think we are seeing some early signs that art consumption is shifting away from physical ownership, as we saw with books and music, and toward the experiential, ushered in by the digital.” Bailey cites the rise in social media consumption of art and the sharing of art selfies as evidence of a values shift towards sharing one’s passion for and experience with art over physical ownership. There are in fact signs that increasing demand for digital artworks that can be easily consumed and shared over social media is impacting artistic production and incentivizing artists to cater to this demand. A gallery owner I spoke to recently told me that some artists she knows and works with are creating digital art purely for social media consumption, or optimizing their existing work for online sharing.

In other words, the impact that digital transformation is having on the art world extends far beyond the virtue of broadening access to art per se. There is also a subtle yet pervasive effect taking place on how we consume, value and appreciate art that isn’t ultimately predicated on the need or desire for physical ownership. Digital art as a discrete new art form, as opposed to physical art that is digitized for online consumption, is inherently incongruous with scarcity as a driver of value, and it inversely creates value from being liked, shared, copied and propagated across a large audience. As Bailey succinctly puts it: “Physical possession of works that are created digitally provides no real advantage”. Just as owning CDs, DVDs or books offer little benefit to the owner (besides perhaps the sentimental aspect) if the very same songs, movies or stories are available via subscription services like Spotify and Audible.com, the same holds for digital art that in theory can also be licensed and made available for download via an online platform.

If the consumption of art through digital transformation and innovation is being redefined by a shift in favor of openness, global distribution and sharing rather than scarcity and physical possession, then the apropos question is: how will the market continue to support artists and pay for their work? Several alternative business models are already emerging that could help to address this problem.

One idea is for consumers to support the artists they love through a partial ownership model, where a percentage of the profits from the sale of an artwork is returned to the originating artist. A good example of this approach is Dada.nyc, a platform that supports collaborative art created digitally on their web site. Dada.nyc uses blockchain technology to enforce intellectual property protection for artists and to securely track transactions so that every initial sale or subsequent resale of artwork results in an automatic partial payment to the artist.

Another suggested approach is to support artists through a crowdfunding model, where consumers can choose to fund creative projects by the artists they wish to support. Bailey is a vocal advocate of this approach, stating in his 2019 art market predictions piece that: “we will soon see a combination of the proven distribution and consumption model of Instagram paired with patronage models like Patreon and Kickstarter.”

Using VR to Make Art Globally Accessible

The application of Virtual Reality (VR) technologies to democratize access to art collections or various works virtually also presents some interesting possibilities for new revenue streams for artists. New VR experiences that provide remote access to artworks using a VR headset, such as the Virtual Reality Kremer Museum featuring a collection of Flemish and Dutch Old Master paintings, may arguably require the permission of an artist to feature their work as part of that experience. Since, even if the artist sold (or loaned) their work to the museum or gallery sponsoring the VR experience, they typically still reserve the copyright to that work. Obtaining their permission to display work within a VR experience could be made subject to licensing or royalty fees paid to the artist. In some cases, these VR experiences will also require a subscription to a VR platform, as with the Mona Lisa VR exhibit presently at the Louvre, which is available through HTC’s digital subscription service, VIVEPORT. Artists could receive a small portion of such subscription revenues in return for their permission to include their work in the VR experience.

As technologies utilized by artists and art institutions continue to develop and evolve, and as the art experiences of consumers grow ever more immersive and interactive, the licensing or subscription model to fund new works is also more logical in a practical sense, because the platforms and tools used to deliver these experiences are ever-changing. Some VR pieces are created such that the VR experience is the art form, like the experience of inhabiting a virtual prison or third-world city, as opposed to the experience of simply seeing an artwork virtually. It may not make sense to “sell to own” this type of VR experience if it resides on a technology platform or tool soon to be superseded by more advanced technology. Far better to move to a licensing model to open the work up to a global audience via a subscription service which continues to make the work available using the latest and greatest technologies as they emerge.

These alternative business models may not appeal to the traditional collector or investor interested in owning art as a financial asset, where the scarcity model and physical possession in some form is a must. A probable outcome in the foreseeable future may, therefore, be an art market encompassing multiple business models that collectively better cater to a range of art consumers with differing values, goals and priorities. This could be welcome news for a market that from a pricing perspective today, strongly favors a select few with the means to trade at the very top. As the 2019 Art Basel market report recently declared: “One of the defining features of our present-day market is the top-heavy nature of the art trade, with a small number of business and artists at the very high end dominating values, despite the fact that most of the transactions and the majority of businesses are at the middle and lower end”. The prospect of a very different art market in the future where multiple business models co-exist may help to curtail this worrisome trend.

By Doron Fagelson,
VP Media & Entertainment at DataArt

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Doron Fagelson is an Engagement Manager in the Media and Entertainment Practice at DataArt.

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Doron Fagelson

Doron Fagelson

Doron Fagelson is an Engagement Manager in the Media and Entertainment Practice at DataArt.

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