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Fortune favors the rich.
Perhaps you could make that assertion in most aspects of life, but it’s especially true in the realm of collectible alternative assets. The Art Market 2023, released last week by Clare McAndrew in partnership with Art Basel and UBS, is just further evidence.
The annual report is a staple in the art world, chronicling sales results as well as survey responses from various constituents of the market (dealers, collectors, auctioneers, etc.). The art market has been ahead of other markets like it in this regard, with significant discourse on important market data. It remains a shortcoming of other, less mature collectible markets; (shameless plug alert!) that’s a shortcoming we’re keen on rectifying.
The findings from this year’s report tell the tale of a market that has been buoyed over time by the highest echelon of sales, comprised of the masterworks of the most renowned artists. For example, in 2022, the report notes that global art market sales grew 3% to an estimated $67.8 billion. That’s tepid but reasonably healthy growth given the challenging set of circumstances faced by markets of most kinds last year. As the report dissects, though, that growth doesn’t apply to all swaths of the broad market.
Sales at auction were said to have fallen 1% to $26 billion. However, the big three houses - Sotheby’s, Christie’s, and Phillips - saw auction growth of 11% in 2022. Those houses, of course, represent the biggest of the big sales. More strikingly, works priced over $10 million were effectively the only price segment to see growth in 2022, with sales up 12%. Nearly every other segment declined.
That’s an exceedingly familiar trend for those who follow other collectible categories. In sports collectibles (as broached above), 2022 saw a $12 million Mantle card and a $10 million Michael Jordan jersey, but it also saw rapid decline in the vast majority of the sports card market. In comics, million dollar books sold with unprecedented regularity, but more frequently trafficked issues surrendered eagerly to waning sentiment in the year’s late stages.
But none of this is new. The Art Market 2023 notes that from 2009 to 2022, the $10 million-plus segment grew in value by close to 700%. The lower end, which represents works priced lower than $50,000, increased just 10%. That’s a mic-drop statistic that hits the pit of your stomach with a thud similar to the one we feel when we learn Eduardo Saverin’s stake in Facebook has been reduced to 0.03% at the end of The Social Network. Adjusted for inflation, the low end of the market declined in value, while that $10 mill-plus segment still offered robust growth.
None of that means lower end collectors can’t profit. It does mean, though, that in a much larger, much more crowded, and much choppier sea of less celebrated work, it’s significantly harder. Works and collectors in that segment can’t count on the same rising tide that seems to float the highest end so consistently and effortlessly higher.
This is the problem that fractional investing in art and collectibles - at its core - aimed to solve. With impetus to scale these venture backed businesses, though, one could argue as to whether fractional platforms have consistently constrained themselves to that most historically buoyant area of the market...or if growth has tempted them downstream.
McAndrew and crew also detail that the highest end of the market has been bolstered by a billionaire class that has more than doubled in size over the last decade and enjoyed relative insulation to recent crises. While art market spending has not kept pace with that growth, spending that clusters at the top price segments strengthens a dichotomy between the best and the rest.
With growth in ultra high net worth wealth outpacing art, we're left to wonder if some of those incremental, new dollars are shifting into other collecting pursuits? Or is this growth disparity a blip that means little (yet) in a highest-end collecting arena that continues to offer above-market growth?
Paradigms have a tendency to shift. Old Masters and Impressionists eventually gave way to Post War and Contemporary artists. At the margins, sooner or later, those markets will cede share to new pursuits.
At the moment, though, now more than ever, it’s the big money that’s both shaping the art market and driving it forward. The rest is just noise, and not of a particularly encouraging variety.
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