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Should gallerists earn more from artwork sales than artists?


I’m going to go out on a limb here and say the answer is “no.” But, for those of you inclined to argument, gallerist Magnus Resch has written a book about rethinking art gallery business practices (since they’re so over-regulated, right?), traditional 50/50 gallery-artist artwork sale splits included. Art Newspaper has the report, with thoughts from some notable dealers, in partial below.

A Twitterstorm erupted in the US last month over the findings of survey of 8,000 art galleries based in the US, UK and Germany. Cultural researcher and Larry’s List co-founder Magnus Resch found (no surprise here for those in the know) that running an art gallery is tough, with more than half turning over less than $200,000 a year and 30% running in the red.

It’s his solutions, many of them classic business techniques, that have whipped up the debate. None more so than the suggestion that most artists should be paid only 30% of sales not the traditional 50/50 split of most galleries (superstar artists aside).

It probably hasn’t helped that he divides artists into some all-too-pithy categories: Poor Dogs (don’t make money, take up heaps of gallery cash and staff time), Question Marks (future greats or future poor dogs), Stars (self-explanatory), and Cash Cows (generate a lot of money but seen in the art world as “too commercial”). While all of us know exactly what Resch means, it’s not often that you see it in print.

—Jane Morris
Magnus Resch, Author of Management of Art Galleries, co-founder of the art collector database Larry’s List and Professor of Art Management at the University of St Gallen, Switzerland

I strongly believe that art galleries are the most important intermediaries in the art market. So, setting aside the handful of extravagantly successful ones, why do so few thrive? A simple economic analysis should make any potential gallerist pause to think; it is a textbook inefficient market, with too much supply meeting too little demand. But a further problem is found in the practices of the gallerists themselves; they have never changed their business model, relying on white walls, commissioned art, underpaid (or unpaid) interns, identikit opening events, 50/50 artist deals, and a presence at fairs. While art can be innovative, the business surrounding it is not.

It’s time for a change because the challenges of running a gallery have increased, with exorbitant rents, rising art fair costs, international competition, private sales by artists, artist poaching by ubergalleries, and auction houses now eating into traditional gallery business. The headline result is dramatic: one-third of all galleries operate in the red.

If galleries are to survive, they must rethink their business practices. I’m not the smart guy with all the answers, but I did analyse businesses fr om all over the world to identify the success factors. Notably, flourishing galleries (and not only the big ones with a Sotheby’s-like salesforce) exploit the secondary market to create strong revenue streams that cross-finance the capital and time invested in building up artists in the primary market. Growing with the artist is all very romantic. But if your rising star should fall by the wayside, you die. So you would do better to diversify fr om the start.

Flexibility is the second rule of the game. Why would you treat all artists the same? A young emerging artist gets the same 50% as the gallery’s superstar artist. Wait a moment! A gallerist covers far more risk by building up the young artist—and should be rewarded for this, taking a higher share. The same flexibility should be applied to the superstar. If you don’t want to see him leaving to a larger gallery, offer more money.

Every year, people open galleries. I’m an entrepreneur myself, and I admire those who take a risk and just do it. However, too many wander completely unprepared into this venture. It’s not enough to be a great curator. In today’s gallery world you need to be a real estate agent, a lawyer, a politician (to get into fairs), a marketing genius, a salesperson, and a visionary. Or, be a true idealist: forget all I just told you, and do it for the love of the art.
Edward Winkleman, Co-owner of Winkleman Gallery, New York, co-founder of the Moving Image art fair and author of How to Start and Run a Commercial Art Gallery (Allworth, 2009)

As much as many young artists—and their friends and families—feel the traditional 50/50 commission split between artist and gallery is ripping the artist off (“The mafia only takes 30%,” I’ve been told), the truth of the matter is it’s the gallery who most frequently gets the short end of that stick. At least in the beginning.

The rationale behind the 50/50 split with emerging artists has never been about economics. What it costs most galleries to promote an unknown artist in a single solo exhibition, ongoing online and back-office presence, and a few art fairs, far exceeds the amount of money they will likely make fr om selling the average number of works at the emerging artist price points over the course of the first year or two. It’s only by taking a long-term view that most dealers can recoup their investment in promoting most emerging artists, even when taking 50% of any sales. The rationale behind the 50/50 split has therefore been more symbolic of an earnest partnership, a collaboration between equals, with the goal of convincing the artist to stick around long enough for their prices to rise to where the dealer can feasibly see a reasonable return on their investment.

One of the conclusions I come to in my new book is that many emerging and mid-level galleries are too soon rushing into representation agreements with emerging artists (leading to far too many of them dropping more artists than they have poached fr om their rosters, creating a justified air of mistrust between artists and dealers). The suggestion Magnus Resch makes that dealers create a laboratory-style context for presenting and testing out new artists before offering them representation makes a great deal of sense to me. I found Resch’s book an important addition to the coming tidal wave of transparency approaching the art market, whether it’s ready for it or not.

Resch’s argument that in the less expensive, less high-profile “garage” or “laboratory” context it makes sense to pay unrepresented artists less than 50% of any sales, however, does not take account of the symbolism of the traditional 50/50 split. Sure, the unrepresented artist understands they are not entering into a full-time collaboration between equals, but even that context is problematic because it is likely to create resentment. Sure, dealers can explain the economics to artists (just be prepared for retorts about studio rents, production costs, mountains of unpaid student loans, etc.), but to my mind it’s sending the message that the artist should be grateful for this opportunity, rather than the more encouraging message that the gallery feels what the artist is doing is interesting or important. The 50/50 split underscores that message, emphasizing the nurturing role every gallery working with emerging artists should play.

Edward Winkleman’s forthcoming book, Selling Contemporary Art: How to Navigate the Evolving Market, is published by Allworth.
William Powhida, Artist

There’s not much light at the end of this tunnel however you split the sales. The art market is supported by a handful of wealthy collectors and, although increasingly higher sums are being spent on individual works of art, the market as a whole is actually shrinking as fewer people accumulate more wealth. The choices of the super rich are both exceedingly expensive and also quite narrow as sales concentrate at the top end of the art market. According to an Artsy editorial on the TEFAF 2014 market report, just 0.5% of sales accounted for 48% of the art market that year. This proportion reflects the overall distribution of sales in the art market’s star system and reveals what we already know: very few dealers or artists make much money.

Here’s why Resch’s 70/30 proposal, even out of context, is so awful: we’ve created a profit-seeking industry around the sale of art that begins but rarely ends with the artist. Artists have no resale rights in the US, inconsistent fees, and little room to negotiate commercial leases for work space. All the big market operators, from Artsy to the art fairs, have figured out how to extract a percentage from the distribution of art, and every other creative industry has figured out how to share in residual income from reproduction and resale except for the visual arts.

Today most artists and dealers compete for a sliver of the primary market’s dragon’s tail: the long, thin spread of what is left over in the market after the blue chips take their sizeable cut. Resch’s suggestion that artists should share in even less of the value they create that supports a $51 bn industry and 2.8m jobs is frankly insulting. The enduring myth that artists aren’t in this for the money helps prevent us from advocating for our own interests and slows the work done by groups like W.A.G.E. and ASAP who need our support to lobby for artist fees, resale rights, and commercial lease rights in the fight for greater equity for artists, not less as Resch proposes. If Resch, the professor of “art marketing” and self-described “failed” start-up entrepreneur is offering suggestions, I think we as artists would benefit from making a few of our own after reading books like The Management of Art Galleries.