09 Jan Collector’s Notebook: Demystifying the Art Market
The art world is famously opaque. Let’s face it, obfuscation is, well, arty. And fun. Really fun. This is why I love writing “Collector’s Notebook”: the art world provides an endless well of secrets from which to draw. And the price of art is one of the best.
For the most part, supply and demand determine art prices. From there, adjust for luck and serendipity, sprinkle in a healthy dose of neurosis, and you’re on your way to understanding how artists determine prices. On a more serious note, artists are sole proprietors — they are makers, marketing agents, shippers, contract lawyers, and studio managers. When things are good, they pay down debt, buy frames and more supplies, book trips, and go after more business. When sales are slow, or an exhibition is a bust, they second guess their work, the show, the dealer, and their prices. If things continue in this fashion, they might quietly call good clients and offer a discount.
But discounting art ultimately hurts an artist’s pricing structure. And when collectors ask for bargains, they are unwittingly destroying the artwork’s value and their own investment. This is why collectors must understand the nuts and bolts of pricing art.
An Artist’s Struggle
Pricing isn’t a mystery only to collectors. New artists are also lost when it comes to valuing their work. Among the many erroneous approaches is pricing by the amount of time it took to complete a piece. The problem is that beginning artists are still learning. When comparing the amount of time it takes a new artist to finish a painting versus a seasoned artist whose knowledge base is far vaster and well-honed, the hourly wage starts to look rather naïve. The seasoned artist can complete a work much more quickly with results that will be, in most cases, far more competent.
Supply and demand can be counterintuitive factors for artists as well. High output by an artist isn’t necessarily a good thing. In fact, it tends to hurt pricing because if there’s more available artwork, collectors don’t feel pressure to make a decision.
And then there are the artists who price things based on how much they like what they’ve just finished. The biggest problem here is that artists are notoriously bad at judging their own work. And pricing something higher than other previously sold works guarantees it won’t sell. That piece will sit in the artist’s studio, taunting them with thoughts like: “I’m the best thing you will ever do; you might as well give up now because you’ll never do anything better.”
Professional artists avoid these traps. They know it’s best to sell work at consistent prices, build their collector base, buy more supplies, and get back to work.
“We recommend artists establish a price-per-square-inch formula,” says Nick Ryan, gallery administrator for the William Havu Gallery in Denver, Colorado. He says that for some artists, it also makes sense for the price per square inch to decrease as the work increases in size. And though it isn’t always necessary to use a sliding scale, Ryan has seen artists who avoid this tactic have difficulty selling larger works. “We came up with a similar plan for an artist whose prices were all over the place,” he says. “Having a structure helped resolve that.”
The price per square inch is unique for each artist. What’s most important is that the amount for that artist’s work is consistent. “If pricing is not consistent,” says Ryan, “you can run the risk of undervaluing a piece of art or overcharging a buyer for the same sized piece. Collectors typically remember how much they paid for a piece of art, and if the pricing doesn’t make sense, it can be a turn-off.”
Determining the multiplier when figuring out an artist’s price per square inch is tricky. For new artists, it’s remarkably low, often a dollar or two per square inch. But as an artist gains strength in the market and notoriety, that number needs to increase. The factors determining the price per square inch include awards and honors, prominent exhibitions, gallery affiliations, museum shows, and collections — all things that come with experience and hard work.
Pricing Sculpture: One Artist’s Approach
Sculpture has its own unique set of issues, primarily production and supply costs. Artist Tony Hochstetler uses a pricing method that fellow sculptor Hollis Williford shared with him years ago when Hochstetler was starting out. “The foundry gets a third, the gallery gets a third, and the artist gets a third,” Hochstetler says. Other considerations may cause him to tweak prices, such as higher shipping rates, but for the most part, he sticks with this simple formula.
Hochstetler also sets an amount and stays with it for the sale of the entire edition. “The only time I bump prices,” he says, “is when I get cost increases somewhere in the equation.”
The sculptor also believes it’s important to keep his editions low, never creating more than 21. “I like the small editions because I’m doing much of the work myself. After I’ve waxed and chased all the pieces in an edition, I’m ready to move on,” he says, adding that smaller editions are also more collectible.
Pricing Photography: One Artist’s Approach
The number of editions is also an important factor when pricing photography. Montana photographer Barbara Van Cleve says she’s never released a photograph that wasn’t editioned. “The highest edition size I’ve done was 300, but that covers all four sizes of prints in the edition,” she says, adding that the largest works come in the fewest editions and are more expensive.
When Van Cleve was starting out, she relied on her dealers to help her set prices. As she’s gained notoriety and has had numerous museum shows — the Montana State Historical Society recently purchased her work and archives — she began adjusting prices to match other photographers’ work at the same stage in their careers. “I don’t increase prices regularly at all,” she says. “Only when there is something significant happening in my career” — like a documentary on Van Cleve and her work coming out this year.
This brings us to an essential point for collecting any art: the importance of the work. Beginning collectors often buy subjects that catch their eye and then consider who the artist is. Seasoned collectors search for the artist who will add to the theme of their collection and then determine the exact and best piece they want to acquire. For example, if someone was considering adding a Van Cleve photograph, a piece like Filly Chasing might fit the bill. It shows Van Cleve’s technical skill, but there’s something more, something ineffable about it. “Photographers make photographs of what they know best,” Van Cleve says. “It’s so evident when people who don’t know ranch life try to photograph ranching scenes; it’s not the same. It doesn’t look right.” That wisdom can be applied to all art, no matter the medium.
Artists should also be giving themselves a raise. Painters often increase their prices by 10 percent every one to two years unless there’s a significant economic downturn — then they’ll wait. More than 10 percent can destroy an artist’s market overnight, but avoiding increasing their prices can also hurt an artist’s career. It’s as if they are signaling to the buying public that nothing has changed; there’s no growth here.
Taking a sensible price increase helps support an artist’s name and significance and also allows them a little breathing room to explore and develop new important work. For collectors, these price increases show up as growth in your investment.
As Ryan suggests, artists’ prices must stay consistent across the board. If an artist raises prices for a gallery in Santa Fe, New Mexico, for example, but lowers prices in Bozeman, Montana, collectors and dealers discover this quickly. It calls into question the work’s value and the artist’s integrity.
It’s also best if collectors don’t assume prices have increased to cover commission rates; it’s just not the case. Furthermore, if you are a serious collector, know that discounts are one of those things that shake an artist’s footing in the market. The dealer and artist often split the discount, which reduces the amount the artist makes. Before you ask for a bargain, consider how you might damage the artist’s pricing structure, which ultimately impacts an artist’s ability to keep making art, not to mention your investment.
Setting a Price
Here are a few ways artists determine the value of their work.
- Investigation: Artists will set prices based on market value. They will research comparable artists, considering the style, size, medium, and genre they are working in, as well as the artist’s accomplishments, experience, geographic location, and production rate.
- Commissions: An artist will set a price based on the commission a gallery will take, allowing both to benefit from the sale.
- Demand: Artists keep track of sales to determine how the value of their work has grown over time. If they are selling half of what they made in a six-month period, that’s a good sign it’s time to charge more. Raising prices by 10 to 20 percent is a good starting point.
- Selling Direct: Represented artists will not sell work at a lower cost directly from their studio. It damages the relationships with their galleries, which put time and energy into marketing their artists.x
- Do the Math: One pricing formula artists use is price per square inch: (square inches) x (price based on the artist’s reputation) + (material costs) + (commission percentage)