I had a very interesting lunch with Jen Bekman of 20×200 last week — a woman who has just raised $825,000 in venture funding to help expand her project of bringing art to everybody. “I want anyone who’s educated and even remotely affluent to feel self-conscious if they don’t have an art collection that they can talk about,” she says, and to that end she’s selling limited-edition art starting at just $20 for an 8″x10″ C-print in an edition of 200. (Hence the name.)

The editions are limited not because that makes them more likely to rise in value, necessarily, but rather because it helps to infect her buyers with the collector bug: they are incentivized to buy now, before an edition sells out; they get an experience which only a small number of other people will share; and they feel as though they’re part of a select group of people who are supporting a particular artist. (The artists get 50% of all 20×200’s revenues, and retain copyright in their work.) What’s more, a lot of young artists today come to prominence with one high-profile image; limiting the editions that flow from that image helps to push artists to create more new work.

More generally, limiting editions helps to brand them as being non-generic: artisanal, rather than mass, culture. While 20×200 is certainly curated by Bekman, it also has a broad enough range of art that it allows her buyers to exercise their individualism and feel that they’re buying something uniquely suited to themselves and few others.

And yes, there is a chance of price appreciation too. 20×200 features a lot of artists, and it’s statistically probable that eventually one or two of them will become art-world stars; at that point, their early work will be worth much more than $20 or $50 or $200. And the biggest pieces — Bekman sells 30″x40″ prints for $2,000 and occasionally goes even bigger than that — could conceivably become seriously collectable.

But like any good gallery, 20×200 is all about getting enjoyment out of what you’re buying, rather than speculating on future price appreciation. Most art doesn’t go up in price, and certainly not small works on paper which, due to the limitations of digital printing, are unlikely to last out the century. The thing I really like about 20×200 is that it’s both elite and accessible: it’s not a free-for-all like art.com, without a curatorial sensibility, but at the same time it’s not a forbidding white cube either.

Jen has a real retail sensibility: she’s got big plans for the post-Thanksgiving rush, and she’s more than happy to recommend prints which go with the sofa. Most art is decorative; there’s no shame in that. She’s not even particularly high-end, as retail goes. She’s just trying to persuade the woman with the $2,000 handbag that $500 is not an excessive amount of money to pay for a print. It’s a struggle, sometimes, but she’s going about it in a great, accessible manner. I wish her — and her investors — all the best.

Last year, I applauded Eli Broad for not donating his art to Lacma, and instead keeping it in his own foundation, whence it could and would be lent out around the world. I even suggested that it might make more sense to donate art to the Broad Foundation than to a museum:

Museums tend not to spend any time or effort lending out the works they’re not showing: if they’re asked they might say yes, but they’re not proactive about it. So while they might claim to be driven by the desire to show art to the public, in reality they only really want to do that within their own four walls.

Broad’s new foundation, by contrast, will exist with the stated purpose of truly maximizing the public exposure that its art receives. That’s a proposition which could be very attractive to collectors wondering what to do with their legacy: they provide the art, and Broad will take care of all the paperwork and relationship management. So if you’re buttering up a gallerist, maybe the best thing to do is no longer to hint that you’re thinking of donating your collection to a museum: better that you hint that you’re thinking of donating your collection to Eli Broad.

Of course, this was the charitable view of Broad. The uncharitable view was that he was just another collector with a big ego, who wanted to keep his art for himself and his own greater glory. Now comes the news that he’s playing off Santa Monica against Beverly Hills and a third LA location to build a huge new public monument to himself:

The conceptual drawings for the Beverly Hills museum, delivered to city officials last month, show a much bigger project than the original proposal: a 126,600-square-foot, three-story building with the footprint of an arrow pointing east.

Of that, a museum of about 43,000 square feet and an adjoining 6,100-square-foot outdoor sculpture court would occupy the top floor, compared with the first proposal’s total 25,000 square feet of exhibition space. An additional 67,000 square feet would provide an “archive” for the art not on display and offices for all three Broad foundations — for art, education and medical research.

Inevitably, any museum of this size will overshadow the part of the foundation which exists to lend out unexhibited art. That idea was potentially very powerful and new, but it seems that Broad has retreated to the more boring and old-fashioned paradigm of simply exhibiting his own art himself. It’s now pretty clear where Broad’s priorities lie, and I have no faith at all that his foundation will do something game-changing. A shame.

Nouriel Roubini says the federal government has to be much more aggressive on the unemployment front:

There’s really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.

I’m sympathetic, but I’d note that the low-hanging fruit has already been picked, when it comes to “labor-intensive, shovel-ready infrastructure projects”, with the first stimulus, and I’m not sure that there are actually any left. Instead, might I suggest arts subsidies?

Talk about alternative asset classes: Venetia Kapernekas, a New York art dealer, has traded her claim to part-ownership of two Damien Hirst works in return for custody of her 8-year-old daughter. Need I add that one of the Hirsts is entitled “In this terrible moment we are victims clinging helplessly to an environment that refuses to acknowledge the soul”?

(Via Maneker)

Law firm Heller Ehrman spent millions of dollars putting together a corporate art collection during the biggest bull market the art world has ever seen, before going bankrupt at the end of last year. Now that art collection is being auctioned off:

The largely contemporary collection is expected to fetch between $610,000 and $1 million in a slow art market, according to bankruptcy papers and the auctioneer hired to conduct the sale…

Martin Gammon, director of business development for Bonhams, acknowledged the art will be going on the block at a time when “the art market is somewhat down from its highs of 2007.” But he said he expected the Heller auctions to be successful.

“In this particular instance, the pieces are post-war and contemporary, which has seen some deflation, but most of that speculation took place at the very high-end of the marketplace, pieces that were selling for hundreds of millions of dollars,” Gammon said. “This is all, I would say, very well selected and well curated material.”

Peter Benvenutti, the chair of Heller Ehrman’s dissolution committee who is now at Jones Day in San Francisco, said he expected the auction to generate “a small fraction of the original cost” of the art, which he said was substantially more than $1 million.

Anybody who claims that art can ever be a good investment should bear this in mind. If anything could have turned a profit, it would be contemporary art which was bought a decade ago and which is being sold now. But no: this collection is worth much less, at auction, than the amount that was paid for it.

If you buy art — especially works on paper — from an art gallery at full retail price, then your chances of being able to ever sell that art at auction for more than you paid are slim indeed. When people talk about art as an asset class, they’re not talking about the kind of art which you see hanging on law-firm walls, or even in suburban homes. They’re talking about a tiny subset of the art world, which you’re not invited to except as a sucker. Caveat emptor.

(Via)

Given that the government (despite my urging) isn’t going to significantly increase its arts funding, creative types are naturally going to look online for alternative sources of funds. And a new model is springing up across the web which I like a lot.

The way it works is that projects get posted on a website, and individual funders can pledge money towards them. Once a certain total amount is pledged, the money is released; often the funders get some kind of material recompense as well, like a print or a CD or even a share of the eventual proceeds.

So far Kickstarter, Funding the Arts, and Trust Art all seem to have adopted more or less this model, although in the case of Trust Art the creatives have to be invited to participate, which makes it less democratic. I’m sure there are others out there too.

The key difference between this model and fundraising 1.0 is that funders pay nothing unless and until a certain total is reached. In that sense, it’s a bit like Lending Club: if someone’s asking to borrow $5,000 and I offer to lend that person $50 of the total, that money won’t be lent out until other people club together to raise the other $4,950.* The result is that the people asking for money have an incentive to keep their asks and their budgets low, and that individuals offering a small amount know that they get to keep that money until the project is genuinely going to get off the ground.

I’m not particularly familiar with any of these websites, but it would make a certain amount of sense for one such site to be the clear leader in the field, with many more fundraisers and funders than the others. Everybody’s better off with one eBay than with a thousand smaller, competing auction sites. But I have no idea how any one of these sites might be able to set itself off from the rest and become the default place to donate and raise money for the arts.

*Update: Turns out this isn’t actually true: if you don’t “raise” the full amount you ask for, you have the option of taking only the amount that you did raise, or alternatively of trying again from scratch a second time. About 85% of qualified Lending Club loans are fully funded, 8-10% are partially funded, and the last 5-10% either don’t take the partial funding or relist.

Luc Renneboog and Christophe Spaenjers of Tilburg University have done their own analysis of the art market, and conclude:

Our art index has underperformed stocks since 1951 and bonds over the last quarter of a century (but at a higher risk). Moreover, there are high transaction costs associated with trading art, which reduce the reported returns. When considering the low profitability and the high riskiness of art investments, one can only conclude that art should primarily be bought for its beauty.

This study shows art returning 4.03% between 1951 and the top of the market in 2007. That’s low, in comparison to other findings in the literature:

The returns on art calculated in this study are lower than the outcomes in the often-cited studies by Goetzmann (1993) and Mei and Moses (2002), even though our time frame includes an extra boom period. We argue that this can be explained by the fact that our dataset has a much broader coverage than the ones used in earlier papers, and therefore not only captures the (re)sales by top artists at big auction houses.

I think this works more generally: if you could somehow include in the survey all the art that anybody ever buys, the aggregate returns would certainly be negative. Most art is bought in the primary market and is never sold, mainly because it never can be sold. To all intents and purposes, it has zero monetary value the minute that it leaves the gallery or artist’s studio.

The greatest investors in art never bought art as an investment. If you take the set of all art collectors, statistically speaking some small proportion of them will see their collections grow substantially in value. Those collectors are deemed in retrospect to have had a “great eye”. But people who buy art as an investment are almost certainly going to be disappointed — and even more disappointed if they get someone else to buy art for them.

The only time it makes sense to think in such terms is in terms of asset allocation and risk profile: if a large proportion of your net worth is tied up in art, that should be taken into account when constructing the rest of your investments and your estate planning strategy. But don’t think that art has any real chance of growing substantially in value.

The latest chapter in the Brandeis fiasco is that president Jehuda Reinharz is resigning, just one year after signing a new five-year employment contract. The official letters don’t once mention the name “Rose”, which is insane: how can Reinharz say with a straight face that he “will leave the University in good condition with a strong foundation on which to build in the future”, even as there’s still enormous uncertainty over the question of whether the university will have to sell millions of dollars from the Rose’s art museum just to make up its funding shortfall?

Reinharz explicitly denied, in an interview with the Brandeis Hoot, that his decision had anything to do with the Rose — while admitting that PR surrounding his resignation would be handled by the same crisis-management firm that was hired after the Rose news broke and the university’s own communications officers utterly botched the way they dealt with the announcement. There’s certainly nothing in Reinharz’s stated reasons for his resignation (”It is now time for me to enter the next chapter of my professional life”) which explains what has changed since a year ago, when Reinharz signed his five-year contract.

With any luck a new president will be found soon, who has no personal association with the decision to close the Rose — and who might be able to better cope with the attention now being paid to that beleaguered museum.

Scott Reyburn has a very misleading lede to his Hirst story:

Sept. 17 (Bloomberg) — A year after the record Damien Hirst sale, works by the artist are again being valued at levels seen at the peak of the art market boom.

His sole datapoint supporting this assertion? That a Hirst butterfly painting is coming up for auction with an estimate of £450,000 to £650,000. A substantially identical painting sold at the top of the market — the “Beautiful Inside My Head Forever” sale — for £1.6 million. Which means, I think, that Hirst values are actually down about 66% from the peak.

The ArtTactic Average Price Index for Hirst butterfly paintings (yes, there really is such a thing) is down a mere 41% since September 2008, which means that the estimate on the painting coming up for sale is if anything lower — not higher — than you might expect. So where on earth does Reyburn get his idea that Hirsts are back to their peak valuations? Just this: that the £1.6 million Hirst “had a low valuation of £500,000″ when it was auctioned.

No. Auction estimates aren’t valuations, they’re just tools the auction house uses to try to maximize its revenues. The valuations are whatever the paintings sell for. And it’s pretty obvious that this year’s butterfly is going to sell for substantially less than £1.6 million. Which is the only comparison that matters.

It seems that the Long Beach Museum of Art would rather lose $569,000 in annual operating support from the city of Long Beach than repay the principal on a $3.06 million loan. I find that hard to understand: it should just take the $569,000 and use some fraction of it to pay off the $3 million over time, spending the rest on art and programming. Or is there some good reason why the museum’s implied discount rate is so incredibly high (over 18%)?

(Via Maneker)