Spurred by the reintroduction of the ART Act (American Royalties Too) to Congress, last night Artists Space hosted a public forum on the issue of artist resale royalties (ARRs). Spearheaded by New York Congressman Jerrold Nadler, the ART Act proposes that artists be paid a 5% royalty each time one of their works is sold at auction. The bill would only apply to works sold for over $5,000, with a maximum royalty payment capped at $35,000.
“Even if the 2015 congressional session does not vote on the bill, or if it fails to pass,” the event’s web page states, “the recurrent interest in the issue of resale rights for artists merits greater involvement and consideration of the issue from those who stand to be impacted most — artists.” Entitled “The Artist’s Resale Right,” the forum’s participants included Theodore Feder and Janet Hicks of the Artists Rights Society (ARS), artists Hans Haacke and R.H. Quaytman, art historian Lauren van Haaften-Schick, art dealer Maxwell Graham of the gallery Essex Street, and Barbara Jaffe, an acting Justice of the New York Supreme Court.
The discussion was organized by a working group of the activist organization W.A.G.E. (Working Artists and the Greater Economy). Lauren van Haaften-Schick, a member of the working group and the evening’s moderator, framed the event as an “open discussion” and a “learning process.” W.A.G.E. itself has yet to take a firm stance on the issue of ARRs. “We’re not committed to any kind of advocacy around it at this moment,” Lise Soskolne, W.A.G.E.’s core organizer, told Hyperallergic over the phone after the event.
The proceedings kicked off with a succinct and engaging introduction to ARRs by Feder, the president of ARS. He has been campaigning for US resale royalty legislation since the early 1990s and ARS is lobbying in favor of the ART Act. For Feder, the bill is a pragmatic and necessary first step toward resolving the “glaring inequities” between artists and auction houses. His most pressing point was that resale royalty legislation is typically reciprocal. As long the US has no resale royalty law, US artists will continue to miss out on royalties that they could currently be claiming on works sold in the European Union or in other countries that already have a resale royalty law, including Australia, the Philippines, and Russia. (The EU standardized its legislation on ARRs in 2001).
Next up was van Haaften-Schick. The PhD student’s presentation detailed the history of legislative attempts at passing a resale royalty bill, and on the California Resale Royalty Act (1976) — the only ARRs legislation to have been enacted in the US. The latter half of van Haaften-Schick’s presentation largely focused on the legacy and influence of “The Artist’s Reserved Rights Transfer and Sale Agreement” (ARRTSA), a legal contract devised by curator Seth Siegelaub and attorney Robert Projansky. The key component of the contract, which was designed to address the relationship between artists and collectors, stipulates that the artist must receive a 15% royalty on any profit made whenever her or his work is resold. Graham later discussed the legacy of the “Projansky contract” (as it’s referred to by legal experts), tracing its origins to the early concerns and activities of the Art Workers Coalition (of which Hans Haacke was a member). In 2014, Graham organized The Contract, an exhibition in which all the works on sale required the buyer to sign an ARRTSA contract. Van Haaften-Schick proffered the question of whether private contracts such as ARRTSA might be a better solution than the ART Act, since they allow artists to contractually establish their own financial terms with collectors and dealers.
Indeed, ARRTSA is regularly touted as a non-legislative solution to the issue of artist resale royalties. Haacke has been using the contract since the early 1970s and refuses to sell his work to any collectors who reject its terms. On the subject of the ART Act, the artist told the audience that “regulation is something that [he’s] nervous about.” Asked whether collectors had been difficult about signing the contract, Haacke conceded that his years of teaching had enabled him to be “stubborn” with its application, since his employment afforded him financial security. In an interview published by Hyperallergic this morning, Haacke confirmed that he would be pleased if the ART Act came to pass, despite taking issue with the specifics of the bill (namely, that the proposed royalty of 5% is far too low).
The audience was palpably divided between those who wanted to hear more about the specifics of the ART Act and those who were generally curious about ARRs. A few attendees complained that the evening’s discussion was too broad, a somewhat unreasonable complaint given the event’s billing as an open forum. However, there were indeed moments when the discussion lagged. Quaytman opined that ARRs might actively encourage artists to produce “market-friendly” work (i.e. Zombie Formalism), a remarkably trite concern given that the heart of the debate is whether artists have a right to share in the financial gains that collectors make from their work (short answer: they absolutely should). When van Haaften-Schick began to detail the legal minutiae of various legislative bills, the audience became unsurprisingly restless and inattentive. The complexity of ARRs legislation has undoubtedly been a barrier in what should be a national debate, particularly given the widespread revulsion caused by the art market’s excesses. The packed crowd at Artists Space last night seemed to suggest that the issue is starting to gain real traction.
“I think we definitely achieved a lot in laying the groundwork for future discussions,” van Haafften-Schick told Hyperallergic. “It’s important to stress that the vast majority of previous recent public conversations have been tailored to the legal community, and working artists have simply not been present in these conversations — I think we have broken ground in changing that.”
Justice Jaffe, who described the ART Act as a “huge progressive step,” encouraged artists to peruse the US Copyright Office’s highly readable 2013 report on ARRs. For the W.A.G.E. Artist’s Resale Rights Working Group, last night was just the first of many more discussions to come. Though W.A.G.E itself has yet to formulate an official stance on ARRs, it has successfully responded to the growing concerns of artists. It’s promising that an organization that has made such strides in advocating for artists’ rights is starting to engage with the issue. “It’s absurd and deeply offensive that artists can generate unlimited wealth for speculators but have themselves been barred from fully reaping the benefits of capitalism’s ‘bounty,’” Soskolne told Hyperallergic. “This is not only blatantly unjust, it also reinforces the claim to exceptionality often made by and for artists, and which W.A.G.E. actively campaigns against.”
The Artist’s Resale Right discussion took place on July 22 at Artists Space Books and Talks (55 Walker Street, Tribeca, Manhattan).
“It’s absurd and deeply offensive that artists can generate unlimited wealth for speculators but have themselves been barred from fully reaping the benefits of capitalism’s ‘bounty,’” Soskolne told Hyperallergic. “This is not only blatantly unjust, it also reinforces the claim to exceptionality often made by and for artists, and which W.A.G.E. actively campaigns against.”
I’ll admit to not being well versed in this subject, but this doesn’t seem absurd to me at all.
First, an artist whose work has appreciated substantially should be able to produce more work to sell at newly inflated prices. In this way, the fortunes of collectors and artists are very much aligned. In fact, collectors who support an artist’s practice by buying their work enable artists to benefit from capitalism’s “bounty” more than anyone else. Legislation like this seems to benefit the artists who are in least need of support. It would seem to make more sense if royalties went into a general fund that supported the practice of art as a whole.
Second, all this talk of “unlimited wealth” for collectors and speculators misses a significant point. Namely, that the vast majority of art depreciates substantially after it’s purchased. It’s only a small minority of artists that go on to be auction house darlings. Will artists compensate collectors or speculators if work work is sold at a loss? If so, I could get behind this legislation for at least being symmetric.
Artists should sell their work for a price that reflects future prospects for appreciation. If the work falls in price, as most work does, the collector should be happy to own a work they love and the artist glad to have pleased an appreciator of their work and received financial compensation for their efforts. In the unlikely event that an artist’s work appreciates in value, the collector is a winner and the artist should be able to reap the rewards of a flourishing career.
Art does not depreciate after purchase. It is valued at its last sold amount. Of course, that is neither here nor there when trying to get someone to buy it. But for insurance value purposes or as a value for assessing one’s assets that is its value.
A couple points I think you should consider –
1) Musicians, playwrights, screenwriters, writers, commercial photographers, directors, etc all receive royalty payments for subsequent use and sales of their output. Why should visual art be any different?
2) One shouldn’t conflate the auction market with the gallery market. As Maxwell Graham, an art dealer, pointed out at the discussion, artworks, typically, when they appear at auction sell low at first, then exponentially increase in price with subsequent trading. This means the artwork begins to be traded rather frequently, popping up in auction every couple years. In other words, very early on this is not just some supporting collector making it rich. That collector has already sold the work for a small increase, usually only a couple thousand dollars over what they paid for it originally. My point is there are other players involved. In other words, each person in the chain benefits except the artist.
3) The U.S. Copyright office has recommended potential alternative avenues to simply a percentage of a resale to be paid to artists. They recommended a fund for non-profit institutions to acquire work with as well as a fund to distribute a standard fee to be paid as an ‘exhibition fee’ to any exhibiting artist at a recognized institution.
4) Would an artist need to be consulted about the sale of their work to compensate someone for the loss of value if it was sold below it’s original price tag (a rare occurrence, art is usually just not sold)? In what other field does anyone compensate a seller of an item if does not sell at a gain? I know that some auction houses do give guarantees, but I can’t think of any other examples.
Accounting and insurance hocus pocus aside, the objection is that collectors are reaping huge rewards from investing in art. That’s simply not true for the vast majority of collectors who would suffer significant losses if they were to try to liquidate their collection. There’s a huge selection bias in terms of what we hear about vs the underlying reality. Works sold for millions are splashed across the pages of the WSJ, but work that’s become worthless in monetary terms goes unmentioned.
1) This is a fair point. However, in the examples you mention, works are played to an audience and generate a revenue stream or are for commercial purposes. That’s generally not true for individual artworks. If someone were to charge admission to see a Koons sculpture or use it in an advertisement, I think it would make sense for Koons to receive a royalty.
2) Again, this “chain of people benefiting” assumes that artwork prices keep going up. Most don’t. There’s mostly a “chain of people losing” which the artist is insulated against. I wish buying art a auction was a fool-proof money making scheme, but it’s not. It’s a risky, speculative business, and the recent bubble in a select few artists warps our view of the true risks involved; risks that the artist doesn’t take.
3) This seems pretty sensible.
4) I agree that having an artist compensate collectors for losses is not workable in practice. I’m just highlighting the asymmetry of the proposal. The collector can either win or lose, but the artist can only win under the proposal. It’s no surprise that artists would support such an arrangement. Additionally, when considering a collector/speculator’s profit, shouldn’t we also consider the opportunity cost of capital invested in the work? Expected return on risky assets? Inflation? Storage and insurance costs associated with the work? The “profit” in many cases may be much smaller than it seems, or even negative in truth.
It is indeed hocus pocus. But it does have actual applications – collections can be used as leverage and insurance payments for damaged artworks. But this is really besides the point.
Focusing on the depreciation of art’s value, I think, is also besides the point. All proposals focus on the sharing of some portion of the increase in value. I think it is important to emphasize that both collector and artist lose if the art does indeed depreciate in value. The same argument you propose for the benefit given to an artist by large sums paid at auction for their work also holds true for the negative effect that below asking price sales or the non-sale of the art enacts. It is risky to invest in art, it is also risky to be an artist. Arguably the latter is a far more precarious position.
Your arguments put a tremendous weight on the capital (and the owner of that capital) that is put forward for an artwork and not so much the artwork or the artist. A Hirst, Warhol, or any other artwork sold is sold as an asset with cache given by the artist’s notoriety and/or the specific work’s history (such as Guernica, which has both). The seller is benefiting from the artist’s reputation and labor. Furthermore, as it is understood that any artwork bought can be sold later for a higher price, at least in theory (as opposed to a car for instance), then I don’t see why the same rules applied to other professions with their shared profits in the increase and repeated sales of their work should not apply.
I agree that costs for storage, conservation, etc. can deplete profits of a work and should be considered. But this also applies to the artist and galleries that represent them. They also accrue costs related to the art. Would you be willing to include the costs of production and the years of storage preceding a sale? Or storage after a sale? Many collectors leave artworks, sometimes for years, at galleries after paying for them.
All in all, I fail to see any truly significant asymmetry in the proposal. Your focus is on the collector and does not consider any of the risks, problems, or hard work that the artist, or their galleries, undertake which have a more profound effect on their initial climb in auction sales than anything done by the collector.
” I think it is important to emphasize that both collector and artist lose if the art does indeed depreciate in value. The same argument you propose for the benefit given to an artist by large sums paid at auction for their work also holds true for the negative effect that below asking price sales or the non-sale of the art enacts.”
I feel like you’re simply arguing my point here. Namely, that an increase in an artist’s prices benefit both artist and collector. A decrease in prices is negative for both. This seems symmetric and fair.
As for a collector benefiting from the labor and growing reputation of an artist, this is true. But the artist benefits from the collector’s capital which is essential to pursuing their practice and building their reputation to begin with. In effect, the collector has invested in the artists career, and hopes to make a return on that investment (provided that’s the motivation of someone who will eventually sell at auction). An artist is of course free to make a similar investment in themselves, namely by retaining art works in their personal collection rather than selling them into the market. Again, this feels fair and symmetric to me. With respect to royalties, the collector could even flip the script. He could argue that because he invested in the artists career before she was famous, he deserves royalties on her future sales!
Outside the art world, this arrangement would feel very odd. Imagine a homebuilder who sells a house for $500k. Later that house sells for $1,000k. Would it be right for the homebuilder (and perhaps the architect, interior designer, and landscaper) to demand royalties on the future sale? I would think not. The initial sales price is considered fair compensation for the labor and product rendered based in the current reputation of the builder and the quality of their work, whether the price happens to rise or fall later. This get’s even more strange in service based professions. A young legal associate charges $50/hr for his labor. As his reputation grows, he’s able to charge $500/hr. Should the legal associate demand royalties from his initial clients, arguing that he was exploited and they benefited disproportionately from his talents? Again, I’d argue no. The initial clients took a chance on a young lawyer. His exceptional work allowed him to raise his prices later, but the client would have suffered the consequences if an unproven lawyer had bungled their matter.
Indeed. For all my belaboring, your points are very valid. The art market is a peculiar beast, compared to other markets. Even music is far closer to other markets than art. But, I believe, this is what makes it so appealing as well as necessary. The important point I was trying to make was that at the very least, the artist, collector, and gallerist (an entity usually dropped from this discussion but an important element and a much longer debate) have a common interest and share in it all. For if art were to be no different than any other commodity or investment, then why bother? Artists and collectors would be better served looking into other means of making money. Your points about the general loss of capital over art I think speaks eloquently to this. But a collector can be involved with the creation of a potentially deeply relevant piece of cultural matter (or detritus maybe) not to mention directing these currents with their investment. In this regard, I think that a small percentage of future sales kicked back to the artist in some form is not only fair but necessary as a means of guaranteeing its status. I agree with you and think that some other form than just compensation to the artist is maybe better, even though I am an artist myself. I’m not particularly thrilled with moneys going to museums as museums typically only buy art from galleries and artists that are dominating the market these days. But maybe a health care fund for artists or a retirement account or the general exhibition fee are all very appealing ideas.
I largely agree with all of this. I have the rather charitable view that most collectors, especially those not saddled with “advisers” or looking to buy their way into a social scene, purchase art because they love art, artists, and the process of making art. It would be nice if a culture of kicking back a portion of profits to the artists developed around the art market, even if not legally mandated. At the very least, it would be nice to see funds go back into the art world, through purchases of more art, especially from the talented and unheralded.
The case for royalties on contracted/commissioned Artworks is quite a weak one IMO, and the same argument can probably be applied to any contracted/commissioned work such as Architecture or product design. In the case of non-commissioned Fine Art however, the case for Royalties is very strong.
To answer your points:
“First, an artist whose work has appreciated substantially should be able to produce more work to sell at newly inflated prices.”
This is broadly true, but artists will still only see a fraction of the sums that are being made by their works which, in the current market, are rapidly traded at auction many times over – unless of course they start buying and selling their own pieces (and assume the roles of collectors/dealers), which is hugely problematic.
As Ed pointed out, the US Copyright Office suggested the idea of creating an escrow account to collect a portion of artist royalties. The idea was that the funds would go towards museum acquisitions – an excellent suggestion given that museums can barely keep up with market prices. A previous attempt at U.S. royalty legislation – The Equity for Visual Artists Act (2011) – proposed this.
“Artists should sell their work for a price that reflects future prospects for appreciation.”
– I’m not sure how one could estimate this. The idea that art tends to depreciate is absurd – markets ebb and flow, and interests in artists or movements are always changing.
“This is broadly true, but artists will still only see a fraction of the sums that are being made by their works”
This might be true if an artist toils in obscurity their whole career, only to see rapidly appreciating prices toward the end. However, that’s almost unheard of in today’s art market which tends to fetishize young artists, who have plenty of time to monetize their success.
“The idea that art tends to depreciate is absurd – markets ebb and flow, and interests in artists or movements are always changing.”
As an experienced collector, and someone fairly in touch with the secondary market, I can tell you that’s it’s sadly far from absurd. I’ve seen estimates that 90% of art will never sell for more than it’s initial primary purchase price. I’d guess that number is closer to 95%+. Again, watching Sotheby’s sales gives a very skewed impression of how the art market works. These sales select art market winners, not the vast majority of monetary losers. Most artists, even ones represented in New York galleries, have little to no secondary or auction market. That means their liquidation value is essentially what you can get on Craigslist for it (or what the dealer will buy it back from you for – good luck with that). Buying primary market art, especially priced in the $2,000 to $20,000 range is more akin to buying a lottery ticket than buying Apple stock. A small minority will pay off big, the vast majority will be something nice to hang on your wall, but never worth anything to speak of, and probably liquidated at an estate sale for $100 by your heirs. In other words, from a financial perspective, the artists who makes a sale at $5,000 is likely getting a much better financial deal than the collector. If the artists work eventually sells for hundreds of thousands of dollars at Christies, that a high class problem for the artist.
As to how to price work to reflect future prospects for appreciation? That’s easy. It’s simply the market clearing price; the same way it is for all risky assets, from equities, to real estate, to classic cars, to collectible antiques.
Speaking as a professional artist, living in Australia (which has a resale royalty – really its a tax/levy rather than royalty), I completely agree with you. The ARR (artist resale royalty) has dampened first sales, especially at prices above AU$20,000. ‘What if I really needed to cash it in’ is a factor in buyers’ minds when first buying art for larger prices.
The cost of selling art is intrinsically much higher than selling shares or houses or any other form of investment. Therefore anything that adds to the transaction costs will and does have a very negative effect.
The levy applies to loses and is not a % of profit; it is a fixed 5% of gross sale price. Therefore it is, in practice, frequently 100% or more of net profit. And it is still due on loses; a significant disincentive and punitive treatment on buying and selling art. Most art never resells; it it does it is in garage sales, remainder bins and you’d be lucky to get AU$1,000 at most. The ARR is a benefit to the top 100 artist but the costs and risks are borne by every artist and art buyer. It is a reactionary, unfair piece of the worst sort of privilege.
This is troubling news as both EU and American entities published research saying that there was no evidence to suggest that an ARR agreement detrimentally effected sales in any form. During this event, this was presented. It would be great if you could offer some linked relevant data to this effect.
Arts Economics ,Dublin based and well respected,, late last year published a detailed study of the UK, EU and US resale markets. Its somewhere on their website http://www.artseconomics.com
( if needed I can get the exact URL).
As you know US resales are growing very well -about 25% year on year . In the UK the segment of the market directly effected by the ARR: Modern and Contemporary Art, has shrunk by about 2% P.A , but in contrast the UK market for ‘old masters’ i.e art not effected by ARR has been stable or grown a little.
The rest of the EU market is stagnant, the introduction of the ARR into the UK definitely did not result in sales moving back to ‘Paris’.
As for Australia, detailed official information about the impact or even the operations of the ARR is very hard to get.
Despite the scheme being mandated by law,semi-compulsory for artists and subsidized by the taxpayer , $2.25 million to set up costs. We had to get Senator Gary Humphries to place questions on notice in our Federal Parliament in order to get some detailed information and exact figures on the operations of the scheme.
The Australian Parliament website seems to be currently down but if you Google ” aph Resale Royalty Scheme Question No. 2677″ it should turn up.
In Australia the ARR, initially mainly impacted on sales of indigenous art- indigenous art was often purchased up front in remote places and then on-sold to retail outlets in the cities and therefore it was much more exposed to the impact of the resale levy.
The introduction of the ARR was in June 2010, in the next two years indigenous art sales tanked, dropped by about 70% to 100%. And there is little evidence of any recovery. For example auction turnover fell from about $25 million p.a to about $6 million in 2013-14. This is a far bigger drop than that experienced by non-indigenous art and artists (who have ‘only’ experienced drops of about 40% in sales).
Frankly a levy that does not allow for costs and applies to loses must have an impact on at least some potential buyers if it did not, that would be a ‘water flowing uphill’ phenomena in need of an explanation, no?
John Walker – as a piece of legislation the ARR has often been linked to the evolution of the market and often been pointed out as the cause of decline in many countries who are implementing it.
Indeed, artseconomics has many studies that identify ARR as an element that could reduce the competitiveness of the UK market, especially in comparison with countries that aren’t implementing the Resale Right. Also on the page are the previous TEFAF studies which will give you a lot of data that, viewed in the long run prove that ARR has no impact whatsoever over the market.
A very unfortunate event was the correlation between the implementation of the ARR (2001/86/EC) around the year 2010 across the EU, and the huge market slump that occurred in 2009, with ups and downs until 2013, across the board. Many studies of artseconomics in this period are pointing to the ARR as the main cause of the UK losing market share to countries that aren’t implementing it.
However data from 2014 strongly contradicts these claims: when refering to auction sales, modern art has increased by 5% compared to 2012 and by 2% over 2013. In 2014, 48% of the all Auction sales were Post War and Contemporary Art. The global art market also reached its highest recorded level.
The UK had a 17% increase over the previous year after quite a few years of stagnant growth, now being the second market in size after the US. TEFAF press release for 2015 has these numbers.
As an umbrella organisation we have Collecting Societies across Europe as members and from the data received, as a broad average, many living artists receive around 300-400 Euros in Resale Right royalties. This would amount to a work sold at approximately 10.000 EUR (more or less, depending on the country);
The vast majority of works sold at auction, eligible for Resale Right are below 50.000 Euros, which is very similar to the data presented by TEFAF (around 90% of the prices paid at auction are less than 50.000 EUR and, within this amount a similar percentage is eligible for Resale Right).
The living artists are thus a majority (although it’s true, not a large majority –barely over 50%) that are set up to sharing in to the success of their work in the market place. It is however not surprising in the world of arts.
Another aspect is that the ARR is capped to a certain level so any sale would not attract royalties more than around 30.000 EUR (on average).
There are indeed some well-raised points – especially the value of works sold for the first time. This is definitely a point of interest and it should be further studied. Such a comparison can be made when it comes to auctions and we will include it in our studies on the ARR in Europe.
Regarding the argument that it’s a levy that applies to losses, this leads to the ARR as being the point of contact between the artist and the person who is enjoying his works; if you have solely a financial interest in the work, as a buyer you need to properly assess the investment you’re making. While the business aspect is justified you need to also consider the efforts put into creating the work, both as time invested, materials, education etc.
The on the ground reality of ARR in Australia, it is not good if you make and sell art for a living.
Ed The following are articles I published on Club Troppo, one of Australia’s leading centrist, economics, law and public policy, blogs.
This piece is about ‘who ‘ ARR is realy for:
And this one is about who really gets most of the royalty payments. We did have to use the detailed data obtained by Senator Humphries in early 2013 to interpret the ‘aggregated official data’ of the next year – the figures may be out in exact details, but the general picture is true.
Good evidence that ARR is a anti competitive market “burden”and that economic benefit to artists is not the reason for the endless campaign to get the US to adopt ARR comes from the Agenda document of a Paris conference of EU collection societies and EU bureaucrats – The very same group that have been lobbying for a global ARR for 15 years http://www.unesco.org/culture/copyright/images/IGCXII6.rtf
The conference was essentially about the imposition of the ARR on the UK’s globally exposed art market .
This document acknowledged that “droit de suite [ARR]is not an instrument that would considerably improve the
economic situation of a country’s artistic population. ”
This document also acknowledged that ARR is a “additional financial burden” that would hobble the market competitiveness of art markets exposed to competition with the US, and other, non ARR markets :
“the non-recognition of droit de suite in important art trading countries can, to a limited extent, be decisive for shifts in the art market”. And”The fact that the important American market is not yet governed by droit de suite gives particular cause for concern in that, with harmonisation in Europe and not only Western Europe but also the Middle and East Europe where droit de suite is recognised by the laws, the worldwide art trade might become unbalanced. ”
The documents answer to the anti competitive burden created for the EU market(s) was to spread the pain to all markets :
“Therefore a worldwide harmonisation will help, above all, to more evenly spread the markets’ economic burdens and to reduce the psychological obstacle for recognition of this right. ”
Benefit to artists is not the primary driving force behind all this .
The Australian Federal Parliaments website has archived hansard made prior to end of February 2013,- I cannot find the hansard of the Questions and Answers on notice about the operations of the Australian Resale royalty scheme on their site.
However a copy of it is here http://clubtroppo.com.au/files/2014/04/Senate-Qs-on-notice-answers.pdf
What Senator Humphries immediately identified as very problematic about the schemes design, was the very generous cross-subsidy , of collection society management costs that is intrinsic to all functioning EU ARR schemes .
As I mention above, I myself don’t think giving money to museums is a particularly good move. As it is, museums collect the work of artists that are vetted by the market. So if you’re selling well already, you can make even more money from museum sales than is current. Museums, such as MoMA, demand discounts from galleries because of their reputations to make this happen. Museums could be buying from less market heavies with their short budgets, but they don’t. Although one could stipulate the money could only be used for auction purchases by museums, which could insure some works of potential historical importance wouldn’t just float around in the market forever.
There are other uses though. I like the idea of retirement accounts or some sort of fund for health services as well as the general exhibition payment. Professional artists’ prospects as they age for their health and financial security are very tenuous, even for those who sell well at some point.
I’ll make one point in addition to those I made below. In short, there’s no free lunch. If collectors believe royalties will have to be paid on the back-end of any art sale, they’ll pay less for it to begin with. That’s finance 101. An unregulated painting that would have sold for $10k might sell for $8k or $9k if regulated. A lot of artists would probably prefer to have that money up front rather than the back-end optionality. For this reason, I think the issue is better resolved with contracts on individual works rather than a law binding on all art sales. This gives artists and collectors flexibility in expressing their preferences.
Enforcement is one of the principal downfalls of the contractual approach – http://www.paulsewter.com/part-3-seth-bobs-contract/
If enforcement isn’t possible, then artists are better off in an unregulated/non-royalty market. This is simple to prove mathematically.
Ua() = artisit’s utility function
Uc() = collector’s utility function
NPV(Rn) = expected net present value of all future royalties
The amount a collector will pay in a royalty bound market is x less than they would in a unbound market where x = NPV(Rn).
Since most collectors are more wealthy than the artists they collect from, we can assume:
Ua(x) > Uc(x)
Therefore, we can conclude that a royalty enforced market is actually worse for artists than a non-royalty enforced market, despite it’s superficial appeal.
I agree. Legislation is the blunt tool of taxation, and contracts have serious enforceability issues. But pro-legislation lobbyists make a legitimate claim to royalties for the ‘latent value’ of an Artist’s work. So what’s the answer… In my opinion, the answer lies in the lateral domain of the Free-market – creative solutions that promote interest and engagement rather than trying to tax Art sales.
It’s amusing how people always get the appreciation/depreciation argument wrong when discussing resale royalties for visual artists. Let’s look at a simplified example.
Say I buy a painting for $50,000 from a gallery. Two years later I sell the painting at auction for $150,000. If the ART Act were law, the artist would receive a $7,500 royalty payment (5 percent) from the resale. But what if the painting sells for $30,000 at auction? As the original buyer, I would take a $20,000 loss, but the artist would still collect $1,500 (5 percent) from that sale.
Worries about depreciation are unfounded for an artist, unless the resale at auction is less than $5,000–the minimum amount an artwork would need to sell for to collect a royalty.
What disappoints me about the ART Act is the fact that royalties can only be collected if a work sells at auction. Royalties don’t kick in if a work is resold by a private dealer or at a gallery or goes from one collector to another.
Thanks for commenting. I appreciate (forgive the pun) your disappointment of the bill’s shortcomings. It seems to me that the politicians and lobbyists behind the ART Act are very much treating the bill as a pragmatic first step. It has therefore been diluted in order to gain broader support.
Were the bill to pass, the specific conditions of the Act (the $5,000 minimum, auction only sales) could be amended further down the line. All things considered, the vehement opposition to the bill by the auction houses and those who object to it ideologically, should not be underestimated.
Politicians, lawyers and Artists discuss a red herring… http://www.paulsewter.com/politicians-lawyers-and-artists-discuss-a-red-herring/
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