14 June 2019
By Marianne Magnin, Arteïa UK Managing Director
Co-written by Theodore Albano, Arteïa UK Managing Assistant
We now live in a globalised world environment and this has resulted in a tremendous influx of capital to many fields. When it comes to the refined art world, at no time in history have the prices of sales reached such soaring heights, while simultaneously resulting in a calcified, top-heavy stratification. The top three markets for art, the USA, China and the UK amounted for 83% of the $67.4bn that changed hands in 2018. This was generated by a staggering 310,685 different art businesses. In comparison, Google, one of the wealthiest company in the world, topped at $132bn in 2018. This number is only growing, with art market traffic perhaps amounting to $100bn by the year 2025.
Yet despite this monumental total, the art market is an exceedingly top-heavy one. Just 0.2% of artists with works worth more than $10mil. represented a disproportionate 32% of all public sales. In the auction sector, post-war and contemporary art holds the largest percentage of sales, at 46%. In addition, this top-heavy nature has resulted in an undeniable blue chip monopoly. 17 of the top 20 best-selling artists in 2008 are still appearing in the top 20 selling artists in 2018 ten years later, with the ubiquitous Warhol, Picasso and Richter at the top of the list.
These disparate numbers have resulted in a tremendous lack of liquidity among the vast majority of artists on the primary and secondary markets. While the worth of alternative assets has boomed in the past two decades, raising from $1tn in 1999 to $6.4tn in 2017, art is vastly underrepresented. Art sales only represent 0.1% of the combined wealth of high net worth individuals, defined as those with financial assets over $1mil. Only 35% of HNWIs are active in the art and collectibles market; about 80% of whom mostly buy works that are below $50,000.
In addition, while art has become an important asset class, art works as a whole still remain in a somewhat misunderstood and undefined place. Among these high net worth individuals, 86% of them have never sold an artwork, which shows that the predominant mindset of collecting artworks is more that of an investment of passion and personal interest than necessarily a traditional investment. Remarkably, of these collectors only 32% feel that a return on investment is important in relation to their art collection, which again shows the diminished value of mere capital when it comes to building an art collection. 40% of collectors in this wealth range do not have an estimate of the value of their collection. Furthermore, the majority have not discussed their collections with a financial advisor. Thus, much of the information regarding the asset worth of the art collections is unknown. Bearing in mind that 81% of these collectors plan to leave their collections to their heirs, this will create complex finance issues in the future.
Despite some of this opaqueness among high net worth collectors, the art market is growing substantially. In regards to the British art market, after an uncertain year in 2016, the market no longer seems weakened by the Brexit process and is once again demonstrating excellent health. Fine art auction sales nearly doubled in 2018 compared to the $2.5bn in 2017.
In regards to the organisation and focus surrounding art as an investment class, the strategy is changing. Art is proving itself one of the most stable classes with a strong amount of market resistance. With a massive spike in the collecting of Millennials, especially among Asian buyers, attitudes towards collecting and collection management are shifting. From 2016-2018 Millennials accounted for around 45% of these high-end spenders, which greatly underlines the spending power of this demographic. More and more collectors are also starting to take a greater level of detailed care into the management and care of their collections, opening up the art as more of a valued asset, which noticeably outperformed all of the other luxury class assets in 2018.
As the art market begins to expand, and collector needs and demographics change, art market challenges become more accurate. Whether this be difficulty in valuation, the risk of forgery, the pitfalls of non-transparent practices or resistance to regulate the market, all these problems require transformative solutions to combat them.
Arteïa Collect is the first building block to support Arteïa’s vision to overhaul the art eco-system. It is a state of the art management system, which has been in development for 3 years and launched last October. Designed by collectors, for collectors, Arteïa is an ultra-secure platform and confidential SaaS model. The user-friendly cataloguing system provides inventory, reporting, as well as being able to share and exhibit your collection. It also provides a perfect platform for the financial optimisation of the collection whilst tracking and managing all third-party interactions i.e. valuation, logistical concerns and the insuring of the collection.
Arteïa is keen to develop integrative BtoB solutions with the rest of the art eco-system, but not only. The ability to insert art as one of the portfolio items managed by wealth advisors is what drives our collaboration with Finlight: a smooth and holistic solution to meet the financial needs of HNWIs.
Once one has a good grip of what the scope, status, location, valuation etc. is of one’s collection, it becomes much easier to engage with the external world. Launching later this year and in tandem with the Arteïa Collect system, will be the Arteïa Marketplace (currently at MVP stage as required by FINMA in the context of the ongoing ICO). The Marketplace will seek to combat many of the issues plaguing the art market ensuring a greater level of transparency and liquidity. The Marketplace matches collectors, artists and all other players in the art ecosystem. Powered by the blockchain, users will be able to securely and if required, pseudonymously, exchange and loan art with the use of tokens. Utilizing a private provenance tracker on the blockchain will ensure the veracity of any work exchanged and materially strengthen the due diligence process.
The art market is growing and shifting in new and expansive terms, and unprecedented opportunity awaits those who wish to interact with it utilizing new technology and data.
More information can be found here:
More information can be found out about the Arteïa ICO release, and our strategy going forward at www.blockchain.arteia.com
Asset consolidation processes are always systematically better with Finlight.