There’s a funny thing that happens in the private art market that really isn’t very funny when it happens to you. Because the best art is rarely for sale publicly—and because art buying is too much like being on a treasure hunt—it isn’t uncommon for someone to approach a collector known to have work by an in-demand artist and claim to have a serious buyer for it. After some blandishments and extravagant promises, the ‘runner,’ as a person in that position is known in the trade, secures an image of the work supposedly only for that exclusive client.
In truth, there is no client. But the enterprising runner, knowing there’s a hot market for the artist, starts shopping it around to advisors and private dealers. The runner will take it to directors at some of the important galleries that make money from secondary market sales. As the chain of interested intermediaries extends, eventually someone gets the bright idea of offering the work to a collector who has been known to buy that artist’s work before. Lo and behold, the original collector gets a text and an image offering her the work she already owns.
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It’s funny—but infuriating.
Now a group of former auction house heavyweights, including Sotheby’s former Chief Operating Officer, Adam Chinn, think they have a solution to the private market problem. For all of the comedy outlined above, the real problem in the private art market is supply. Anyone selling or buying art right now will tell you the supply side is the constraint. Collectors have few economic incentives to sell—everyone else wants to buy. According to Chinn, there’s $1.75 trillion in nominal art value in the homes and warehouses of the world right now. Some $65 billion of that trades every year. At that rate, it would take nearly 27 years, or almost a generation, for all of the world’s art to turnover.
Art isn’t equities but other financial instruments, according to Chinn, like equities can trade at 120% of nominal value in any given year. If the art market behaved that way, the annual turnover of the art market would be $2.1 trillion which would require hundreds more Christie’s, Sotheby’s, and Phillips to accomplish.
How to increase the trading volume of art without adding to the already bewildering confusion? The LiveArt crew has come up with a plan. Boris Pevzner, who previously built a platform called Collectrium that he sold to Christie’s, and John Auerbach, former eCommerce head for Sotheby’s, Christie’s, Gilt Groupe and others, along with George O’Dell, a 13-year auction house veteran, believe they can increase the signal and limit the noise in private art transactions while also increasing the supply.
The rollout is in three phases. The first phase has been taking place quietly over the past several months after LiveArt purchased an app that is incredibly popular among the art trade. Previously called Live Auction Art, the app allows anyone to follow the sales in real-time on their phone without the heavy tech drag of audio and video. Re-christened LiveArt, the app now includes all for the data from the last decade’s worth of sales at the major auction houses on three continents along with an additional 6 million other records.
Pezvner and his team have applied machine learning to the data and built a visual interface that is available at LiveArt.ai. The database is free to access. That tool is meant to provide price transparency for the private art market using public sales data as reference points. LiveArt has also built a browser extension that will allow their data to appear in a box on screen while the user is watching an auction or browsing an auction site. You’ll be familiar with the technology if you’ve ever used Amazon or several other sites that now offer a similar type of extension.
That’s phase one. Phase two is a free tool similar to Collectrium that will allow the user to upload their art collection and maintain a real-time dashboard of its valuation. LiveArt.ai is rolling that out in an announcement today.
Phase three, coming later this month, will be a marketplace. But here’s where Chinn and company believe they have a secret sauce. Their marketplace will allow owners of art to interact with potential buyers without revealing the work they have to sell. Instead, the buyer and seller can get comfortable on price or interest before revealing the work. If they can come to an agreement, the transaction remains on the platform with buyer and seller interacting anonymously through LiveArt’s marketplace.
Once terms are agreed upon, cash is deposited in escrow with LiveArt; the work is shipped to a Delaware warehouse; LiveArt inspects the work and verifies authenticity and condition. When all the boxes are checked, the art departs in the direction of its new owner and the cash travels by the speed of electrons to the account of the seller. LiveArt won’t provide a warranty but, should a problem arise, the buyer will have access to the seller for redress. LiveArt handles all of the KYC and AML regulatory assurances as well.
LiveArt is also allowing a few primary market artists to offer their works directly on the platform. For example, the Amani Lewis work that appears at the top of this post which is also available as an edition of five NFTs. (The NFT element to the marketplace is probably better addressed at another time and in another post.)
LiveArt charges 10% commission. That’s significantly lower than the auction houses charge. There’s also the greater speed in which sellers can transact. George O’Dell, who is handling the day-to-day work on the platform says the idea is to make it easier for owners of art to capitalize on demand. Right now, if there’s a lot of interest in a day-sale lot, sellers have to wait four months to consign and capitalize on the demand.
LiveArt envisions a world where owners have their art pre-loaded on LiveArt (that’s the dashboard that gives you the mark-to-market valuation (via machine learning)) for your works. With the push of a button, say when the bidding gets fruity at auction, the owner can make the work available to buyers without burning it.
Using the browser extensions, LiveArt envisions underbidders and spectators getting alerts that similar works are now available and what prices the seller might consider.
This is what already happens in the art market through the inefficient runner system. After a sale, there’s a flurry of texts and images flying around the ether as the owners of related works try to capitalize on demand. Some will see this as art speculation run rampant. But Chinn’s point is that the art market is so supply constrained that greater availability of works through more direct sales and lower transaction costs should reduce prices to buyers while increasing revenue to sellers. Everybody wins. In a few months, we’ll get to see how that works in practice.