Felix Salmon

Volcker makes his move

Felix Salmon
Jan 21, 2010 05:37 UTC

Dare I hope? The teaser in the WSJ about a big announcement from Barack Obama tomorrow sounds almost too good to be true. A cap on the size of financial institutions! A ban on risky investments in things like hedge funds and private equity! A real wall between commercial banking and speculative prop trading!

The banks of course will scream blue murder, while at the same time trying to say that those kind of walls exist already. But they can’t have it both ways. I’m also fascinated by the fact that Paul Volcker’s fingerprints are all over this announcement, while the names of Larry Summers and Tim Geithner are nowhere to be seen. Has Volcker done some kind of an end-run round Summers while no one noticed? I guess that things will come into more focus tomorrow. I, for one, can’t wait.


I hope the news is ‘Geithner’s gone’

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How the CFPA would stop neg-am mortgages

Felix Salmon
Jan 21, 2010 04:56 UTC

Beer and Numbers asks for the grounds on which a consumer financial protection agency would ban a particular negative-amortization mortgage. I can think of a few.

First of all, the spreadsheet which BN helpfully provides is, as he notes, extremely misleading: it shows only the minimum monthly payments (and to make matters even more confusing calls them the “maximum monthly payment”). It doesn’t show what happens to the principal amount outstanding if you make the minimum payment. It doesn’t show what happens to your minimum payment if you actually make the minimum payment every month, and then reach the limit of how much your loan principal is allowed to rise.

Secondly, any self-respecting CFPA would insist on big fat warning signs to be plastered all over any negative-amortization mortgage. If you pay less than the interest amount, the amount you owe will rise. If you hit the upper limit on the amount you owe, your minimum monthly payment will be at least $X. This is a product designed for people with lumpy, irregular income, who are able to make large payments a few times per year at least. If your only source of income is a regular paycheck, this product is not for you. If you can’t pay down your mortgage principal, the best case is that you will be forced to sell your house, the worst case is that you will end up being foreclosed on. Etc.

BN dismisses much of this as “treating the lenders like cigarette makers who aren’t allowed to direct advertising to minors”. Well, yes. Most Americans are not financially literate, and they should be protected from harmful financial products just like they’re protected from cigarettes, or even, to use Elizabeth Warren’s favorite example, toasters. If a product is only suitable for financial sophisticates, then either it should be restricted to financial sophisticates, or else, at the very least, it should come with very loud and clear warning signs attached for anybody who isn’t a financial sophisticate.

Yes, there’s something fundamentally paternalistic about the CFPA — but it’s paternalistic in a good way, helping steer people away from harmful financial products. That’s nothing to be embarrassed about; indeed, it’s the main reason to found the CFPA in the first place. It might be a while before neg-am mortgages rear their ugly head again. But if and when they do, let’s hope the CFPA is around to stop them being sold to people who have no business buying one.


My impression was that it was the maximum minimum monthly payment, i.e. the highest the minimum monthly payment was able to go. Hence the reference to “cap” in step 4.

I’d like to have the option of using a mortgage of this sort if I decide to, but if you’re just trying to mandate that it make itself clear, I’m all for that.

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Running the numbers on the NYT paywall

Felix Salmon
Jan 21, 2010 02:54 UTC

Apologies for being something of a one-trick pony today, but reading John Gapper’s column on the NYT paywall makes me realize that a lot of people fail to appreciate exactly what’s at stake here. Gapper seems to think that online subscription revenues can make newspapers profitable again; they can’t. In fact, insofar as the paywall makes any sense at all, it does so only as a tool to boost print subscriptions.

Gapper notes that the Guardian’s parent company lost $93 million in the last fiscal year, despite having a website attracting 35 million unique visitors globally, and 13 million domestically. He reckons that charging some of those subscribers could make the Guardian’s problems disappear:

Outsell, a research group, reported this week that only 6 per cent of US online readers say they would pay online news sites if they charged.

If we are to take the figure at face value (which I don’t think we should), then The Guardian could get 2.1m people to subscribe to it online, making it highly profitable at a stroke.

The logical flaws here are huge. Let’s just count a few:

  1. Gapper is assuming that if 6% of online readers would end up subscribing to some site or other, that’s the same as saying that any given site can persuade 6% of its readers to subscribe. But that’s not the same thing at all.
  2. Gapper is taking a poll of US internet users, who are more likely to pay for things online than other nationalities, and extrapolating the numbers globally.
  3. Gapper is assuming that foreign readers (say, Guardian readers in India) are just as likely to subscribe as domestic readers (Guardian readers in the UK).
  4. Gapper is assuming no overlap at all between the 6% of readers who would pay online, and the percentage of readers who already pay for a newspaper subscription in print form. The NYT has already said that its print subscribers will get an online subscription for free, and I’m sure the Guardian would do likewise.
  5. Gapper is ignoring that putting up a paywall will always reduce advertising revenue, which means that in order for the new subscription revenue to make the newspaper “highly profitable at a stroke”, it would have to not only make up existing losses but also cover the drop in online advertising revenue.

Once you understand what Gapper can do to statistics like these, then, it becomes a bit easier to make sense of something like this:

Rates for online display ads have been falling steadily as competition has proliferated, with most sites now finding it hard to get more than $4 per 1,000 impressions on their pages (or $14m for the 3.5bn hits on all US newspaper sites monthly).

I have no idea where Gapper’s getting his $4 CPM figure from, but it’s clearly much closer to being a minimum than an average. Papers might find it hard to get more than that, but you can be sure that the NYT, for one, is succeeding all the same. In fact, the WSJ reports today that nytimes.com is pulling in $100 million in revenues annually — more than you might think the US newspaper industry as a whole was making, if you read Gapper too literally. Indeed, in the third quarter of 2009, the New York Times Company made $79 million from its internet businesses, of which $68 million came in advertising revenues. Newspaper advertising was $39 million — and that was in a very weak quarter. On an annual basis, I’d be surprised if nytimes.com didn’t make significantly more than the $100 million that the WSJ is talking about.

It’s also worth noting that Gapper has managed to confuse CPMs — the amount of money that an advertiser pays per 1,000 pageviews — with RPMs, or the amount of revenue that a publisher receives per 1,000 pageviews. There’s nearly always more than one ad unit per page, which means that RPMs are some multiple of CPMs, depending on how much of a newspaper’s inventory is sold.

Gapper, then, is systematically overestimating the upside of subscription revenues, while underestimating the magnitude of advertising revenues. Erick Schonfeld, by contrast, is much more realistic, concluding that total subscription revenues from nytimes.com would optimistically reach only $9 million per quarter, or $36 million per year. With the New York Times Company making the best part of $300 million a year from online advertising, it’s hard to see that the extra revenue boost would really be worth it.

The point here is that with the powerhouse nytimes.com site front and center, the New York Times Company as a whole is a major online media player, serving up billions of high-prestige pageviews and building strong relationships with every major online advertiser and media buyer in the country. Even under the most optimistic scenario, a majority of the NYT’s loyal readers will desert it when it moves to a paywall. And with those readers gone, media buyers are by no means guaranteed to stick around.

Gapper makes great play of the fact that websites can target ads more accurately when readers are registered, but you can’t target ads at readers who no longer exist. And the NYT is a mass-market general news publication: it’s not the kind of place where high-end business-to-business advertisers will pay $90 CPMs to reach C-suite executives. Or if it is, the numbers involved would be so small that they wouldn’t make a visible dent in its overall online advertising revenues.

What’s a realistic number for how many people will pay to subscribe to nytimes.com? David Carr says that the NYT wants to target “10 percent or so” of the 17 million current readers of nytimes.com. That’s 1.7 million people. Subtract the print subscribers who will get nytimes.com for free, and you’re left with 1 million, more or less. How many of those could you dare hope to persuade to subscribe? One third? Once again, just as Schonfeld did, we get to somewhere in the region of $35 million a year, assuming a subscription price of $100 each per year. For a company with annual revenues in the billions, the hit to the value of the brand alone has to be bigger than that.

There is one other dynamic at work, here, however, and that’s the price of the print subscription, which has proved to be surprisingly inelastic: David Carr in fact lauds the way in which “The Times has shown a great ability to leverage prices once they have custody of a consumer”. But pushing existing consumers to the limit of what they can pay only makes it that much harder to attract new ones.

The NYT aspires to be a national paper, which makes sense, since it either already has or is never going to get most New Yorkers as print subscribers. But the annual subscription rate, if you live at say 1600 Pennsylvania Avenue, is $769.60, and it’s really hard to get people to pay that kind of money, in the middle of a recession, for a newspaper they’ve lived happily without for all their lives, and which they can get online for free.

So I see the decision to implement a paywall not as an attempt to build a significant revenue stream for the website alongside ad revenues, but rather as an attempt to shore up — and maybe even increase — the print subscriber base. Even a Monday-Friday subscription, at $384.80 a year, brings in much more money than any online subscription ever will. Yes, it probably costs more than that to print and deliver the paper. But for the time being at least, print advertisers are still willing to pay top dollar for a full page in the physical New York Times. And so long as that’s the case, the NYT will do anything to keep its physical circulation numbers as high as it can — even, it seems, if that means dealing a serious blow to nytimes.com.

Update: Gapper responds with a 950-word blog comment. Good for him!


In the end, the failure of paywalls is a distraction. It’s just another experimental drug for a patient that died years ago. The reality is that all mass media/mass marketing business models – from magazines to broadcast TV – are no longer viable, and newspapers are just the first to go: http://digitalthinking.posterous.com/the -great-paywalls-of-news-corp

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The legal and necessary bank tax

Felix Salmon
Jan 20, 2010 21:00 UTC

John Carney has a post up today saying that the bank tax is unconstitutional; it’s incredibly unconvincing, not least because he ignores the fact that the tax is required by law. Far from being an ex post facto appropriation, it was entirely foreseeable — and necessary — from the day the TARP bill was passed.

His other criteria for the tax being unconstitutional don’t pass much muster either. It’s severe, he says, just on the grounds that it’s a tax which raises revenues. Well yes, that’s the whole point. But it’s not confiscatory: if the banks are paying $145 billion in bonuses this year, they can pretty obviously afford a tax designed to raise $90 billion over ten years.

Is it targeted with punitive intent? Maybe — but no more than any other Pigovian tax which seeks to tax what you want less of. Are taxes on cigarettes targeted and punitive? Does that make them unconstitutional?

And no, the tax is not unavoidable: if the banks decided to fund themselves entirely through deposits and equity, as many smaller banks have done through the ages, then they would have to pay no tax. It’s only when they lever up with wholesale funds that the tax becomes payable.

The tax will not, in and of itself, solve the problem of banks being too big to fail. For that reason, some have attacked it as being inadequate. But it’s a key step in the right direction, and not only constitutional but a very good idea.

Update: Carney responds, at very great length.


Taxing the banks is a no-brainer. They are given a license to create money, then charge people for its use. This is, IMO unethical and immoral in itself. The bankers have way too many “rights” as it is. The depositors should have rights, too, such as 100% reserve margins at savings institutions so they are not exposed to all of the banking and finance games and schemes unless they wish to be.

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The economics of the NYT paywall

Felix Salmon
Jan 20, 2010 17:37 UTC

Preston Austin has managed to squeeze the economics of a NYT-style paywall into one tweet, but it’s compressed, so let me expand it into slightly more than 140 characters.

The way that it seems the NYT paywall is going to work, visitors to nytimes.com will have a free allowance of n articles per month. To read the n+1th article, they will have to pay a subscription fee F. After that, they can read as many articles as they like for the rest of the month.

If a visitor to nytimes.com normally reads N articles per month, then the key number in their mind will be N-n. If reading that number of articles is worth more to them than F, they’ll pay the fee. If on the other hand N-n is small, or perceived value-per-article is small, then they won’t pay. Specifically, if the average value to the reader of any given article is v, then they’ll pay the fee when v(N-n)>F.

It does get a bit more complicated than this. For one thing, there’s the day-of-the-month issue. If you run into the paywall towards the end of the month, that’s a clear signal from nytimes.com that you’re not a particularly heavy user and therefore not the kind of person who’s likely to get a lot of value out of subscribing. Or, to put it another way, it’s a signal that this month at least, N-n is going to be low. In general, the NYT is unlikely to make much money from people paying the full fee F to read just a few extra articles at the end of the month.

On the other hand, as Jim Surowiecki says, consumers tend to like bundling. From a purely economic perspective, there’s no point in subscribing to nytimes.com before you reach your limit of n free articles. But from a more behavioral perspective, it takes a weight off your mind when you know that you’re a subscriber: you don’t have a little voice in the back of your head asking “are you sure you need to read that?” before you click on any link to nytimes.com. In general, the mere existence of the paywall will make life happier for subscribers than non-subscribers, who will always feel somewhat constrained in how they use the site. For some people, the peace of mind associated with being a subscriber will in and of itself be worth F, even if they don’t read n articles per month.

More generally, it’s pretty clear that v is higher for subscribers than it is for non-subscribers. The value of reading any given article lies not only in the content of that article, but also in the ability to read the non-article components of the web page, to be able to follow links from that page to related or unrelated stories on the rest of the site, and in general to feel at home while visiting the website as a whole.

In his defense of the the meter system, David Carr writes:

By building a metered system, the executives have installed a dial on the huge, heaving content machine of The New York Times. Access can be gradually ramped up or down depending on macro trends in the market.

The implication here is that when advertising is strong, access can be ramped up, and when advertising is weak, it can be restricted, in an attempt to maximize subscription revenues.

I suspect that the main dial here is going to be n rather than F: it’ll be much easier to change the number of articles that people can read for free than it will be to change the price of a monthly or annual subscription. In a way, the best of all possible worlds, from a revenue perspective, would be to launch the new system with great fanfare and a low n, as well as a low annual-to-monthly subscription ratio. Then, when the low-hanging fruit has been picked and you’ve locked in a decent number of subscribers, quietly dial n back to a very high number, so as to minimize the pain caused to non-subscribers, and maximize total advertising revenue.

On the other hand, the experience of the FT suggests that there’s a strong temptation to go the other way: it has been dialing down n to a very low level, as it becomes increasingly addicted to online subscription revenue. It’s a bit like the airline fallacy that charging to check bags increases revenues: it doesn’t, but executives, especially at public companies, have a tendency to look at short-term revenue line-items rather than the bigger picture.

Finally, as John Gapper notes, there’s another calculation going on here: at the margin, implementing an online paywall is a good way of preventing print subscribers from cancelling their subscriptions on the grounds that they can get the same content online for free. (Print subscribers to the NYT will get online access for free, rather than having to pay extra for that, as they do at the FT.) Rather than saving the cost of a print subscription, P, they will now only save P-F. That’s an argument for a high F, of course — but the higher you peg F, the harder it becomes to convert the millions of visitors to your website into paid subscribers.

The NYT is therefore going to have to work out how to maximize revenues in a highly complex and dynamic system: the level of F which maximizes online subscription revenues won’t be the same level of F which maximizes print subscription revenues. And the NYT will also have to think long and hard about how transparent it wants to be about the level of n.

My prediction is that when the NYT paywall arrives, n will be in the 15-20 range, and F will be set somewhere around $15/month and $99/year. What that will do for the NYT’s total revenues, however, I have no idea.


Nice prediction on cost. The only place you were off is that there is no annual subscription.

Today, in their quarterly posting, nytimes reported 100,000 subscribers, which if it held up would be more than $5M per year (minus loss in advertising).

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The NYT’s paywall

Felix Salmon
Jan 20, 2010 15:06 UTC

It’s official: the NYT is putting up an FT-style paywall; the paper’s Richard Pérez-Peña fills in a few of the gaps.

Starting in early 2011, visitors to NYTimes.com will get a certain number of articles free every month before being asked to pay a flat fee for unlimited access. Subscribers to the newspaper’s print edition will receive full access to the site.

The NYT has decided to take a full year to make sure it gets the technology right: it certainly doesn’t want to run into the issues it faced during the TimesSelect fiasco, where its subscription database was separate from its online-user registry, making it hard to give free access to newspaper subscribers.

I suspect that what’s going to happen now is that as the moment of truth approaches, bloggers will increasingly search around for the NYT’s replacement as online paper of record: the way that blogs work is that they’re backed up by links to reliable sources, and a link is worthless if the person clicking on it risks running straight into a paywall, unable to read the information in question. The NYT’s journalism might well continue to be reliable, but its website won’t be, any more. (For the record: I feel very comfortable in saying that Reuters stories are just as reliable as those of the NYT, if not more so, and that if a link to a story works for you, it will work identically for anybody else in the world.)

The NYT story makes it clear that the only thing which seems to matter here is money, as opposed to brand value:

The approach the company took is “the one that after much research and study we determined has the most upside in both” subscriptions and advertising, Mr. Nisenholtz said. “We’re trying to maximize revenue. We’re not saying we want to put this revenue stream above that revenue stream. The goal is to maximize both revenue streams in combination.”

This is, of course, exactly the approach that the NYT’s management would take if it felt that it was managing a company in terminal decline, and wanted to squeeze as many dollars out of it as possible before it dies. Successful media companies go after audience first, and then watch revenues follow; failing ones alienate their audience in an attempt to maximize short-term revenues.

It’s worth noting too that this move comes in the wake of the botched dismantling of the International Herald Tribune’s website, and its reincarnation as the New York Times Global Edition. The NYT here seems to be voluntarily giving up on all its readers outside the US, who can’t be reasonably expected to have the ability or inclination to pay for web access. It had the opportunity to be a global newspaper, leveraging both the NYT and the IHT brands, and has now thrown that away for the sake of short-term revenues.

As for the question of the NYT’s ability to get this transition right, technically speaking, I’m not optimistic. The NYT website is gorgeously designed, and easy to navigate: the company’s web team is strong. But as the IHT and TimesSelect messes showed, the NYT is less good at making big changes to site architecture, and it’s far from clear why they’ve decided to go their own way, rather than sign on with Journalism Online, especially since the NYT internal memo says that they will “continue to discuss alternatives with a broad range of prospective collaborators with regard to bundled offers and other aggregation opportunities,” whatever that’s supposed to mean.

The wishful thinking in that memo makes it clear just how desperate the NYT seems to be:

In 2010 we will continue initiatives such as Times Open, Times Topics and our work to develop more active communities and more fully integrate the real-time Web. We will continue to develop new online products and offerings as part of our effort to enhance the user experience for our readers and advertisers.

Our strategy is to build the metered model while we remain focused on making NYTimes.com more compelling, interactive and entertaining, providing many more reasons for online audiences to visit our site and stay longer. In the weeks ahead, we will be adding resources to achieve these critically important goals.

Needless to say, it’s almost impossible to build “active communities” behind a paywall. And no one is going to pay an online subscription fee just because there’s a beefed-up Times Topics section. In fact, the whole concept behind Times Topics is being broken by this paywall: they’re meant to be a landing page for people searching for information on a certain subject, linking to many NYT articles on that subject. But now those searchers won’t be able to read those articles, unless they’re already subscribers. As such, a project which was meant to bring nytimes.com into the same space as Wikipedia will now become largely irrelevant.

There’s also no mention of what’s going to happen to the NYT’s many blogs, and on this front I think no news is bad news and that they, too, will be part of the metered system. Suffice to say that the number of successful blogs behind a paywall is, at present, exactly zero.

All in all, this is a sad day for online journalism and the open web, and from here on in I’m going to be linking less to NYT content; if I do link, I’m going to quote its articles at greater length. I don’t want my future readers, once the paywall is up, to be incapable of of understanding what I’m talking about unless they cough up serious money to the NYT.


Well this is all a bit self-serving isn’t it? A blogger with no responsibility for generating the money to pay him and who admits that the value of his blog is predicated on links back to good (and expensive to produce) journalism criticizes an organization that has to pay its staff for charging for the product that they produce and upon which his blog has hitherto relied. And furthermore, he recommends his own employers’ content which, where it is not charged for (and lots of Reuters content is), is a cross-subsidy for other media services which do have to make a profit. It seems to me that you all want good free content and therefore explicitly accept the advertising driven model without realizing that dependence on advertising is a threat to the quality you once respected. If you won’t pay for properly verified and investigated content, and are happy to accept the vagaries and problems of the blogosphere, then fine. But don’t criticize people for trying to make the money to pay their staff with.

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Felix Salmon
Jan 20, 2010 05:41 UTC

Have you ever wondered what happens when you put lightly-sparkling box wine in the microwave? — YouTube

The iVictrola — YouTube

Barney Frank rolls over and plays dead — Spectator

More than you ever wanted to know about stray dogs in Moscow — FT

Elizabeth Warren asks us to call and email the Senate Banking Committee to save the CFPA — New Deal 2.0

Offline book “lending” costs U.S. publishers nearly $1 trillion — Hellman

Hubris in Haiti: Wyclef Jean’s History of Overselling Yele’s Ability to Help — Gawker

Roddy Boyd fights back at Patrick Byrne — TBM

The old GM, like AIG, is trading at puzzling levels — FT

Has SocGen lost $2 billion on TCW? — Reuters

Why a NYT paywall is a bad idea — Buzzmachine

NY financiers to reap $64 bln in bonuses in 2010 — Reuters

The NYSE(!) says I’m wrong re Haiti, but agrees with my central point about earmarks vs unrestricted funds — NYSE

El-Erian is right: the bank tax is perfectly defensible, but doesn’t address core issues. (Not that it’s meant to.) — FT

David Carr with a glowing first review of Sarah Ellison’s WSJ “mother of all tick-tocks” — NYT

How do I know Citi’s results are bad? The headline leads with a non-GAAP metric I’ve never heard of, “managed revenues” — Citi

I don’t think this slideshow is the Bloomberg Way — CJR


JPM sometimes uses “managed revenues” too. As far as I can tell it means “made-up non-GAAP revenues”. It’s fine with me if you want to use non-GAAP numbers for your own information, or if you want to lobby for GAAP improvements, or even if you want to disclose supplemental information and explain how you derived it. But this line is a particular example of how if you read most large bank disclosures you will have almost no idea how much money they made or how they made it. So it goes.

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Using Tyler Cowen to help Haiti

Felix Salmon
Jan 20, 2010 04:52 UTC

Can someone press-gang Tyler Cowen into being a key part of the US government’s response to Haiti? Cowen knows and loves the country, and his ideas about how to help — as well as his grasp of the magnitude and complexity of the problem — have been consistently one step ahead.

In a failed-state system it’s important to get past “let’s give money”, or even “let’s give unrestricted money”, or, for that matter, the wildly ambitious and improbable $10 billion plan of Jeffrey Sachs.

Cowen seems to have his feet planted much more firmly on the ground. He was an early proponent of granting Haitians Temporary Protected Status immediately, and today came up with a list of 13 ideas: his trademark mix of the serious with the not-so-serious shouldn’t detract from the fact that some of them — like repealing tariffs on Haitian sugar and otherwise encouraging what’s left of the Haitian agriculture industry — are smart and timely. Certainly repurposing Guantánamo to help Haiti seems to be a better idea than using it as a prison for captured refugees.

It’s worth noting that few of the ideas that Cowen talks about are his own: rather, it’s his omnivorous reading habits and aggregation skills which are coming into their own in the wake of this crisis. Governments and aid agencies have a tendency to become set in their ways, treating each problem as a variation on the last, and often feeling threatened by, or dismissive of, outsiders with bright ideas.

I see Cowen as being a kind of anti-Larry Summers in the internal government debate about what to do about Haiti. Rather than being the person who throws cold water on promising ideas, he’s the person who holds them up with enthusiasm, finding people who can navigate and solve any flaws in the initial concept. He’s even in the DC area already. Let’s make full use of him!


Can we give Tyler his own branch of government and talk show as well? The man is an intellectual swiss army knife.

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The uncollectable artwork

Felix Salmon
Jan 19, 2010 20:44 UTC

A Tool to Deceive and Slaughter is an artwork by Caleb Larsen, currently for sale on eBay. If it hasn’t sold in the next couple of days — the minimum bid is $2,500 — it will go back on eBay. On the other hand, if it does sell, it will still go back on eBay. That’s what it does, as clearly explained in the legal contract accompanying the work:

Artist has created a work of art titled “A Tool to Deceive and Slaughter (2009)” (“the Artwork”) which consists of a black box that places itself for sale on the auction website “eBay” (the “Auction Venue”) every seven (7) days. The Artwork consists of the combination of the black box or cube, the electronics contained therein, and the concept that such a physical object “sells itself” every week.

This is clever, I like it a lot, and not in particular because of the insidery nod to Robert Morris. Many artists have tried to remove their art from the commercial aspects of the art world — by making it free, for instance, or by putting on performances, or creating public installations. This one does it by making an artwork which is so commercial that it can’t be collected. You could buy the piece today, and it might be worth $100,000 in a few years’ time. But you wouldn’t own it in a few years time, and you would have personally gained only a tiny fraction of the increase in the piece’s value, if anything at all.

One of the smart things about the way the piece is structured is that its owner has to sell it, even if the price is lower than he values it at. Let’s say I think this is a wonderful work, worth $10,000. If I win it for $2,500, I have to relist it at a price which “may not exceed current market expectations for the Artwork based on the current value of work by the Artist” — and which in any case can only increase once per quarter. Given that the amount I paid is pretty much by definition the current market value of the work, that’s the amount it’s going to get relisted at. And since I’m not allowed to bid on the work once I own it — that would violate eBay’s “shill bidding” restrictions — anybody else can pick it up for $2,500, a massive discount to where I value the work, leaving me to pay all the eBay fees.

Right now, the piece is on show at the Lawrimore Project in Seattle, in an exhibition devoted to the work of the up-and-coming artist Caleb Larsen; it’s quite easy to see the market value of Larsen’s work going up or down from its current level. I hope that future iterations of the auction will include the prior auction history of the work; it’ll be interesting to check in on the box once in a while, to see how it’s doing, price-wise. I certainly hope it’ll stay on eBay for years and decades to come.



I think you’re misreading the conditions. By my reading, at each change of ownership, the new owner may establish a new value for the artwork. If the artwork does not sell in a particular quarter, the owner may revalue it.

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