WTF is… the Secondary Market?

Throughout the course of NYC’s art fair week, I overheard questions over what art work was being sold, and who it was being sold to. Of course, art fairs exist to sell work, and the work on display is there to be sold. But where do these works come from? This is where the secondary market comes in. Though most galleries simply sell work from the studios of the artists they represent, the secondary market deals in works that have already been sold, at least once. Fairs like the Armory’s Modern section focus heavily on secondary market works, as do art auction houses like Christie’s and Sotheby’s.

The first sale of an artwork, whether it’s through a gallery or straight out of the artist’s studio, is referred to as “primary market.” If you’re buying bleeding-edge work, from the latest solo exhibition, you’re picking up primary market work. But it’s still possible to buy contemporary art that’s not primary market material. The secondary market often comes in when an artist is highly established and desirable, riding a fame-bubble, or simply in the middle of a long, successful career. It’s important to note that secondary market can refer to a work from any era; the term isn’t exclusive to modern or contemporary art.

Why sell a work once you’ve already bought it? Well, there are plenty of reasons. Collectors often sell in order to diversify their collection, trading out an artist they’ve gotten tired of to bring in fresh blood. The work in question may have also risen dramatically in value since its purchase, and could be flipped for maximum profit at a high point in the artist’s career. The goal of selling a work may simply be that: to make money.

Auction houses exist to help circulate the secondary market. With the exception of Damien Hirst’s massive blow-out “Beautiful Inside My Head Forever” sale at Sotheby’s in September 2008, work on the block at auction houses doesn’t come straight out of artists’ studios. It comes from collections, from collectors and patrons who want to pass on their purchases, or maybe flip them for a little more cash. Auction houses profit from this flipping of secondary market artworks, taking commissions based on sale prices. That’s a story for another WTF.

Besides auction house, many galleries are also devoted to secondary market works rather than primary. Prices in the secondary market for established artists are often more stable than prices for emerging or mid-career contemporary artists, and thus present a more dependable profit stream. Contemporary giant Pace gallery is known for doing a brisk trade in secondary market work, as is Marlborough. Most large galleries, even those known for representing living, working artists, make a good sideline profit from the secondary market.

If you’re not an already-famous collector but you’re looking to pick up a major work from a major artist, you’re going to need a boatload of cash, and you’re probably going to have to get on the secondary market. Maybe in this sense, it’s best to think of secondary market works as a kind of previously-owned car lot, but full of art instead of vehicles.

Required Reading:

• While Sotheby’s created a unique auction to deal with Damien Hirst’s primary market art, Christie’s auction house worked through a commercial gallery branch called Haunch of Venison to work with living artists. See how the two processes shake out in this Economist article.