Interview: Ed Winkleman

Posted on January 3, 2016January 7, 2016 by Richard Lehun

Selling Contemporary Art: How to Navigate the Evolving Market

Hi, I’m Richard Lehun. I’m here with Ed Winkleman at Bruce Silverstein’s Chelsea Gallery. Ed has just released his follow up to his best seller, How To Start And Run A Commercial Art Gallery. Ed, can you give us some context on the new book?

Ed Winkleman: Selling Contemporary Art, How To Navigate The Contemporary Market was just published by Allworth Press in September 2015. The book is the second in a series of books, hopefully. I started talking to my publisher about a revision to my first book about two years ago, and we decided rather than rewrite that book – because not a lot has changed in that field – it would be interesting to do a follow up that was more the graduate level, more about the strategies, than the simple logistics that are discussed in the first book.

RL: It’s a big commitment to write a book. What was it that motivated you to choose to do this right now?

EW: Well, to talk about the themes of the book, it may help to say that I realized a little into it that what I was doing was both deconstructing my first book, as well as trying to answer the question is whether “the Leo Castelli model” is still viable. The Leo Castelli model is essentially the model that I used to write the first book, and Leo Castelli [1907-99] was a New York art dealer who didn’t innovate much about the way that one sells art, he sort of consolidated it and set it up as a set of best practices. And virtually every young dealer who was influenced by Castelli, approached their gallery thinking that that’s simply the way it’s done.

And a lot of the dealers operating right now began their galleries thinking indeed, the Leo Castelli model is the way that it’s done. But the various themes I’m looking at in the new book begin to pull that model apart. And so, as I was writing each chapter I was thinking in the back of my mind, “How does this affect what I wrote about in the first book, is that model still viable given these things that are evolving and changing?”

RL: Is the Castelli model sustainable in light of market developments?

EW: The Leo Castelli model is a phrase that somebody coined long before I started using it as a framework for my book. Very specifically, that author used it to describe a gallery approach which included: discovering artists that very few other people knew about, building and protecting a market for those artists, and with the centerpiece of that model being that there was loyalty between the artist and the dealer, that they were in it for the long haul, and the hope was that they would grow old and rich together. And that arrangement, that gentleman’s agreement, if you will, was the heart and soul of what people meant by the Leo Castelli model.

Very specifically, that permitted a dealer to invest a lot of money up front in an artist, to help create a market for them, take some risks, do some shows that wouldn’t necessarily pay for themselves, because the thought was that “we’ll be together many many years from now, and what we’ll do today will benefit us down the road.”

One of the things I discuss in the book a fair bit is how there is a threat to that model coming very specifically from the rise of the mega-gallery. And the idea of whether or not artists and dealers are loyal to each other in the same way they were when Leo Castelli built his gallery.

RL: You extensively discuss issues of globalization. Can you give some examples of the challenges?

EW: In the chapter on globalization, I discuss several strategies a mid-level or a small gallery might take to deal with the ongoing globalization of the art market. One that I spend a fair time on is collaboration. And collaboration is being explored more and more by galleries in both a defensive, as well as an offensive sort of way.

A gallery from Paris that I know teamed up with a gallery in Berlin, very specifically to keep bigger galleries from poaching their artists. And the idea is, “if I have an artist, and I have a gallery in New York, my artist really wants international attention, and so a big gallery in London starts to show that artist, if that gallery has more resources than I have and one day open up a space in New York, I might lose my relationship with that artist.” So, the strategy is to team up with a smaller gallery in London and kind of share that artist with them, knowing that they don’t have the resources to come to New York and eclipse you entirely, that you can have this mutually beneficial relationship move forward.

A really good example is the Paris gallery Jocelyn Wolff, who collaborated with a bunch of friends and other dealers on a space called KOW in Berlin. I think that initially they were very tightly collaborating on that. I believe that Jocelyn pulled back a little and isn’t as involved, but they have shared artists. And that model is a really good example for other galleries to follow. And again it’s a defensive move so that the bigger galleries in Berlin weren’t giving the Paris gallery these artists a show here and there, and the next thing you know, representing them exclusively.

We’re seeing a lot more of are two galleries proposing and then presenting an art fair booth in collaboration. And another example would be, one gallery has a very well established artist and one gallery has an emerging artist, there’s a very interesting dialogue between the two of them. These types of proposals are very popular with the selection committees of the fairs. And it’s a win-win for the galleries participating. They split their costs, and they double their exposure, and so they get into these bigger fairs. And there were a few art fair directors that I interviewed for the book who say that that is actually a very popular thing among the selection committees. So, it’s another strategy in terms of collaboration.

There’s another idea about collaboration that I think we’re going to talk a little bit later – joint events between galleries. It’s happening because galleries in small pockets of the world feel the need to attract an international audience, to let that audience know that they exist. Perhaps, they meet some of these international collectors at the art fairs that they get into, it’s really important to them to bring those collectors back. The most successful of these is Gallery Weekend Berlin. It brings collectors from around the world. And there was a joint event in collaboration among galleries there that were just not seeing those collectors any other time of the year.

RL: Can you discuss the impact of the mega-galleries, and the stage of the phenomenon that we are at right now?

EW: So, the phenomenon is something that’s constantly ongoing. It impacts on each individual artist. Art is very often a slow boil. An artist may take decades before they’re making the work that will enter the canon and be culturally very significant. The mid-level gallery system has, for the last 40 or so years, provided the support system for artists, so they could experiment at a pace that didn’t necessarily have to match the goals of a mega-gallery, the goals of the art fairs, etc. There was a built-in capacity for galleries to have some artists who weren’t necessarily covering their costs, but they believed in their work. The artists still participated in the system, still get regular exhibitions, still get press, opportunities for sales.

And the rise of the mega-gallery has started to make that model or that support system pull apart at the seams. It doesn’t make any sense if profit is your goal or your need, actually, as costs continue to rise. More and more, because of the pressure of the mega-gallery, dealers are finding out that they do not have the time to have the conversations with those artists to discover whether or not they fit into the category of the slow burning sort of “future artists in the canon.” The financial pressures don’t really permit that to happen much anymore either, and the number of dealers I respect who have closed their galleries recently have cited exactly that: their inability to have that relationship with artists. And that is part of the reason they got into the business in the first place.

RL: Do you believe that these developments [of galleries closing due to financial pressure and inability to have relationships with artists] are inevitable?

EW: A lot of the people that I know who opened galleries, not because they every thought they were going to get rich, but because they believed that art dealing was a calling for them, are saying “Okay, this isn’t the business for me anymore.” I don’t think a lot of them are looking forward to becoming more corporate. I think they’re hoping that it is a blip, that it will sort of fade and they’ll figure out a way to survive, kind of continuing to do what it is that brought them into the business in the first place.

RL: Can you give an example of how these challenges are affecting established gallerists?

EW: A really good example of a dealer who found herself in that situation was Nicole Klagsbrun. She had a great line in the press release she sent out about why she was closing the gallery that she had had for over twenty years which was “I’m not sick, I’m not broke, this just isn’t interesting for me anymore.” And, Nicole is the textbook example of someone who had a great eye, and an amazing conceptually rich program. But she felt that in order to continue to succeed and to not lose her artists to bigger galleries, she needed to do the sorts of things that she wasn’t interested in doing. She needed to operate more like a corporation, and lose the ability to talk to her artists, to be in studios the way that she wanted to. So, it wasn’t a financial issue for her. It was really that this model, this business, had evolved to a place where it wasn’t what she wanted to do anymore. She has since gone on to a number of projects and collaborations.

So I do see a big trend in dealers who say, “You know what, the brick and mortar sitting there, while I compete at the art fairs really doesn’t make any sense to me anymore, but I have the passion, I’m still very interested in these artists and their projects and I will find a way to kind of bring their projects to the public.” So, there’s a chapter in the book on the post brick and mortar dealer, and there are a few examples of high profile dealers who are doing very interesting things in that vein, and with more time would have added Nicole to that list as well.

RL: How can gallerists best respond to these challenges?

EW: The second part of the book looks at things the dealers actually have control over. And it begins discussing a conversation I’ve had for a number of years with the art dealer Elizabeth Dee, who has been an inspiration to me in the way she has approached things since the recession. The only way that galleries can deal with the paradox that they are faced with now is to not let somebody else define what success means for them. So very specifically, what I try to communicate in the second part of the book is that there are people who are defining success on their own terms, and those are the only terms that should matter to anybody who is an entrepreneur and starts their own business. And letting the system define what success means to you, especially in something that can be as individualistic as running a gallery, just makes no sense to me. I think people have gotten caught up in the glamour and the press, and all the rest of that mega-gallery system, and let that led them to make decisions that they would have never made were that not happening.

RL: How has the rise of the mega-gallery affected collectors and connoisseurship?

EW: It is definitely having an impact on connoisseurship, if only in the way that it’s eliminating the need for individual collectors to develop connoisseurship. In regards to the buying strategies at the emerging level, the prices are so low, it’s a no brainer, just buy a bunch of them, your are not really going to lose that much. In the mid-level where the prices have risen, this is real money for you now; you want an assurance that you are making a smart investment. At the blue chip level, and this is the level where the mega-galleries are operating at, the assumption is that most of these artists, if not all of them, are already in the canon. They’ve been vetted and your money is safe buying that work. So, if all you do is buy from mega galleries, you don’t really need to develop your own eye, you don’t need to study art history. Every choice you make seems, at the moment at least, to be a sound investment. Some of the mega-galleries’ artists won’t pan out, it’s just not possible that they all will, but the majority of them probably will. And so, the mega-gallery existence itself has eliminated the need to go out and learn and study on your own. Of course, at that price level, not a lot of collectors can actually buy consistently from the mega-galleries, and so I am kind of optimistic that the mid-level galleries will continue be a force. And the mid-level galleries can only continue to exist if connoisseurship remains in place and part of the collecting culture.

One other thing about mega-galleries is that I have to praise them for the quality of the exhibitions they create, as well as the fact that they have increased the overall size of the contemporary art world to an unimaginable size. I’ve seen a few mega-galleries do what I think is the right ethical thing, which is to collaborate with the smaller galleries from whom they’re poaching artists. I won’t name names, but one of the mega-galleries is really great at this. They will let the smaller galleries who discovered and nurtured and actually built the market of the artists that they’ve poached, have access to that work over the course of several years. That money is the only thing that helps the smaller galleries survive. So that mega-gallery is doing both, the program that they want and charging prices that they want. By letting that smaller gallery have some of that access, they’re keeping that mid-level gallery healthy. And if that happened more then the mid-level gallery system could keep doing its job of finding the artists and feeding them up to the mega-galleries – that’s all fine – but when the mega-gallery just cuts off the connection of the artist and that smaller gallery, that’s where the real existential threats starts to come in.

RL: Is the poaching of the Mega-galleries dis-incentivizing the mid-level gallerists from investing in artists?

EW: Zooming in and looking at the gallery system holistically, there’s no question in my mind that young gallerists will continue to pop up constantly. We’re not going to see the death of the gallery system below the mega-gallery any time soon. And the mid-level of the gallery system will probably continue in much the same way. What I do see the mega-galleries influencing are the type of people who will be willing to be a mid-tier gallery. I do think what I would call the true believers may make career changes. They won’t sit there knowing that every time they discover an artist, the artist is just going to be poached, and the payoff and the investment they put into it is never going to come back to them. I can’t see sensible people doing that unless they are extremely wealthy, and it’s more a hobby for them than an income.

RL: Are art context ethics strained by the market developments?

EW: Ethical standards are not universal; they’re unique per industry by definition. So, when we talk about ethics in the art market, I like to bring that point to the forefront very clearly, with regards to what defines honesty in the art market, and what could make somebody be honest in a way that the book discusses – being required to reach the mega-gallery stature – is treating your collectors the same way you’re legally obligated to treat your artist, which is to ensure that everything you do is in their best interests. Now, I don’t believe in New York State you have the same legal obligation to collectors as you do to artists, because you’re acting as the artists’ agent, but I think the dealers who still treat their collectors that way benefit from that.

RL: Are art fairs now a necessity for even the most idealistic of gallerists, in order to remain financially sustainable?

EW: How essential are art fairs to any given gallery success varies depending on who you are talking to. And the more I think about it, the more I talk to dealers, I think it relates very specifically to their goals. Very few galleries that I talked to don’t feel the pressure to do fairs. They all are hearing from their artists that their artists think they should be doing fairs, even if they are not doing them. And a lot of galleries will tell me point-blank the fairs are the only way they survive. They’re not making anything close to enough sales through the gallery itself, even through their online efforts, as they need to pay the rent, their overhead and themselves and everything else. So yes, we have reached a point where a lot of galleries do rely on sales they make at the fairs to sustain the business, no question whatsoever. But again, I know a lot of galleries who don’t do fairs, and I think they just manage the expectations, whether they’re losing artists, or are more ambitious than other galleries, is another question. That model is viable, you can eschew the entire art fair system, but you’ll probably will never get really wealthy doing that, unless you have a niche market where the whole world has to come to you. If you’re playing the same game across the board with everybody else, the art fairs are almost critical.

RL: Are galleries providing ambitious content, while blue-chip galleries monopolize the earnings at the art fairs?

EW: There is a phenomenon happening lately, where the big art fairs, very expensive air fairs, that a lot of smaller galleries clamoring to get into are only benefiting the big galleries that are doing them. Partly because it comes to the fact that to get into fairs you have to impress the selection committee, and to impress the selection committee you have to bring something that stands out. Very often galleries translate that into something spectacular, maybe a site-specific installation, or something like that, which really doesn’t have much of a market. Annette Schönholzer, former director of Art Basel, talks in my book about a gallerist virtually in tears at the end of the fair because they had brought something and it didn’t sell, and what were they going to do, this was all the money they had. They’d rolled the dice on this one thing. And she replied, “Well look what you brought? Did you think that was sellable in any context? Why would you think that was sellable here? We only let you in with that because you said that was what you wanted to present.” And her point was that the fairs can let you present it, but they can’t sell it for you. I mean that the younger galleries are expected to bring the new sensational, and literally just to bring the street-cred to the fair, while the bigger galleries get to cash in by more or less selling the brand names that they’re known for.

RL: How can gallerists best respond to this?

EW: The best advice to a gallery who wants to get into the big fairs but doesn’t want to lose their shirt on it, is to propose a booth of one of your artists who is sellable at the time when they’re about to have a major museum show or major magazine cover. That’s the key. Don’t think too much about making a big splash. Time it so that the selection committee has heard of that artist, their show’s coming up and it would be embarrassing for them not to have that artist in the fair. Be a little more strategic, but definitely don’t do the spectacle if you can’t afford to do it. That is a bad way to go.

RL: In the book you cite Tom Weinrich about the breakdown between art criticism, scholarship, and market value. What does this mean to you?

EW: Very specifically, when a gallery would get a New York Times review on Friday, that Saturday they would be flooded with new people. They would come in with clippings of that review, and they would generally sell a lot more that day than they had sold throughout the run of the show. That phenomenon has more or less evaporated. And I think to a large degree when that was really important, when a review would help bring the crowds in and help sell the show there weren’t as many channels to learn about art as there are today. I think The New York Times and Art Forum and ARTNews in America were the only ways that collectors could learn about what was perceived as good. Now they can get information constantly. Those reviews aren’t as critical, so they are not leading directly to sales the way they used to. That has done two things, I think; it’s made the dealers care less about those reviews, and it’s sadly made the collectors also care less about those reviews. And so I am a little concerned about the role that art criticism can play in the art market. Most art critics would say they don’t have a role in the art market. But the fact that they’re talking about their lessening influence suggests that they would pride themselves if they did have an impact in the art world.

RL: Has your relationship with art criticism changed?

EW: My relationship to art criticism has unquestionably changed over the past 20 years. I, in addition to being an art dealer, also do a little art collecting, and I don’t know that I necessarily pay much attention to art criticism when I’m buying. I’d like to flatter myself with saying that’s just because I’ve developed my eye, but that’s the same argument I hear from every collector. With regards to being a dealer, my relationship and thoughts about it are exactly the same. It’s still really important to me that there be a historical record of the exhibitions that we do. That the dialog be out there, that people debate the work that the artists are presenting, and art criticism, really well-written art criticism, is still the best means of having that conversation.

RL: What can you tell us about emerging trends of post brick and mortar gallerists?

EW: There are some great examples of what I would call post brick and mortar dealers, and some of the things that they share as key characteristics. First and foremost, they still have the spirit of a gallerist. They approach presenting artwork the way gallerists present artwork, in a space. They usually kind of sweat the details about the entire experience for the viewer. The other thing that perhaps separates them from a private dealer or an advisor is that these folks still have a boatload of credibility in the commercial art market. No matter what they do, and no matter how they frame it or contextualize it, the bigwigs in the commercial art world still pay attention, because of their track records.

RL: What are Jeffrey Deitch, Mari Spirito and Jay Gorney doing right in your eyes?

EW: The Characteristic that defines Jeffrey Deitch is his own personality. He is larger than life and he’s interesting in and of himself. So, what he’s interested in, a lot of other people find interesting. And he’s got the track record to prove that what he’s interested in is going to be fabulous and worth your time.

The major characteristic of Mari Spirito, other than she is brilliant, is that she’s a true believer. She will find and show the great artists that took her years to develop and discover. And she’s in the trenches. She will show historically very important work; but also some brand new artists coming from someplace nobody knew there was an art scene. So, Mari is a total true believer.

Jay Gorney for me is probably the most interesting, in that I think he’s going to start changing the perception of what somebody can do as a dealer post brick and mortar. Not only is he curating really great exhibitions that are selling very, very well, he’s being accepted into art fairs because of his history and because of his knowledge. The art fairs are still saying that if you don’t have a space we won’t let you in. Jay Gorney is going to break that down, and this is going to have a big impact and implications for other dealers.

RL: Excellent. Do you want to add anything?

EW: No, except these were really great questions. Your attention to this is really impressive. Thank you.

RL: Thank you Ed, thanks for this wonderful conversation.

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The Rise of NYC Art Fairs – NYSBA Event – Part 2

Posted on October 10, 2014November 19, 2015 by admin

Are brick and mortar art galleries the loss leaders in an art world, potentially spiraling beyond viable limits? More than ninety art fairs now define the rhythm of globalized art business. This development has profoundly altered the relationships amongst artists, gallerists, and collectors.

This panel discussion explores and critiques the impacts and challenges – legal, ethical and business – of the rise of art fairs. This is part of an initiative to create dialogue amongst lawyers, artists and emerging and established art professionals working in the primary or secondary markets.

Moderator: , Chair, Committee on Fine Arts, New York State Bar Association, Entertainment, Arts and Sports Law (EASL) Section, Attorney and Faculty at Sotheby’s Institute of Art

Panel:
, Gallerist
Elizabeth Dee, Gallerist
, Attorney at Stropheus Art Law
, Litigation Partner at Sullivan & Worcester LLP

Here in Part 2, an audio/video recording of Richard Lehun’s PowerPoint presentation can be found in the section on his presentation below. A dedicated audio recording of Nicholas O’Donnell’s comments also precedes his text.

Judith B. Prowda, Moderator:

In Part 1 we began with Gallerists Ed Winkleman and Elisabeth Dee. Ed offered an overview of the research on art fairs he is conducting, in preparation for his upcoming book, Selling Contemporary Art: How to Navigate the Evolving Market. Elizabeth reported on the chances and risks that art fairs impose from her perspective as a dealer and a founder of an art fair.

Here in Part 2 our speakers are attorneys Richard Lehun and Nicholas O’Donnell.

Richard M. Lehun is a founding member of Stropheus Art Law, New York’s pioneers in the provision of unbundled legal and business services to artists, gallerists, collectors and museums. Richard is one of the few to have completed a doctorate in fiduciary law, cross-appointed between McGill and Harvard Law School. He is responsible for gallery, museum and auction house ethics and fiduciary duties at Stropheus Art Law. He’ll be looking at the ethical problems that fairs raise.

Nicholas O’Donnell is a litigation lawyer at Sullivan & Worcester LLP and the practice group leader of the firm’s art and museum group. He has spoken frequently on the topic of WWII restitution litigation, including at a conference in Heidelberg last January about the Cornelius Gurlitt affair. Nick’s widely read Art Law Report offers commentary on legal issues affecting visual artists – the visual arts community. Nick will present on legal issues that art fairs carry with them.

I’m grateful for my employer, Sotheby’s Institute of Art, for graciously hosting this event, as so many New York State Bar Association, Entertainment, Arts and Sports Law (EASL) Section events, in this beautiful space which is my second home. This program is part of an initiative of EASL’s Fine Arts Committee to create dialogue amongst lawyers, artists, and emerging and established art professionals working in the primary and secondary market. Two years ago we pioneered a program on legal issues for artists and galleries during Bushwick Open Studios Weekend, geared to the primary art community. Last October we held a program on Gallery Ethics and have posted an audio podcast and transcript of that program on the Stropheus Art Law website, and we will do the same for tonight’s program.

Richard M. Lehun:

To situate our discussion let me quote Michaela Neumeister de Pury: “Whenever I hear about a new art fair starting, it is almost physically painful for me. The art world is becoming a Gypsy circus.” And Jerry Saltz, who I’m sure many of you know, categorizes the situation like this: “The downside, the beloved linchpin of my viewing life is playing a diminished role in the life of art. And I fear that my knowledge of art, and along with it, the self-knowledge that comes from looking at art, is shrinking.”

We’re in a situation where there are significant contradictions. By looking at ethics in my presentation, I’m going to be looking at contradictions. And what is an ethical problem? An ethical problem is when you have to make a choice between outcomes. Both outcomes contain good and bad, and you’re in a situation where you have to resource that decision, and you have to carry with your stakeholders the consequences of those decisions. This is an area that I spend a great deal of time with in my practice; trying to figure out what burdens on decision-making mean when there is no clear answer.

Art fairs are unavoidable, and they are a contradictory phenomenon, and contradictions increase complexity. The main problem is, the more complex things become, the fewer people can typically do something, or do it well. Those who can master the complexities profit immensely. Those who can’t, as our past panelists have repeatedly underscored, may be threatened with extinction. With the rise in the complexity comes an increased risk of failure, and not only of a financial dimension. The art context is a web of relationships. Those relationships have always been difficult, fraught with idiosyncrasy, failure, and injustice. I don’t think that the art fairs themselves bring an entirely new dimension of dysfunctionality. What they do is bring a different dynamic of dysfunctionality that people may or may not be adequately prepared for. So how do the art fairs affect these relationships? That’s what I’m going to try to cover in very few minutes.

I’m an attorney and my special interest is conflicts of interest. I want to know how we can best deal with these types of situations. I’m concerned about how stakeholders – this means artists, gallerists, collectors and museums – succeed or fail when confronted with contradictory needs and conflicted obligations.

Let’s look at some of these contradictions that affect specific groups.

We have the contradiction, that on the one hand, collectors and visitors value accessibility. This means they get to see a lot, and you get to see it in one place, and it’s very efficient. We know that collectors and advisors are time-poor. They want to consolidate research, search, and purchase. As Don Thompson wrote in The $12 Million Stuffed Shark, comparison shopping at fairs is easy. A single dealer might with difficulty get three Gerhard Richters to show a client. Dealers at Art Basel can show twelve of these at the same time. There is the impact of the herding element; that the sheer number of people and the sold stickers alleviate collector uncertainty.

Fairs are playing to the experience economy. People don’t just want to go one place and have one kind of limited aesthetic experience; they want to interact with a globalized jet-setting world where they experience something. Fairs replace quiet sessions in the gallery with a shopping mall, blending art, fashion, parties in one place. Collectors buy impulsively. They may never visit the gallery of the dealer from whom they buy at the art fair. With each fair, collectors become more accustomed to purchasing art in a shopping mall.

Okay, so that’s good for the collectors somehow, one thinks. Previously, collectors had to consider the interests of the gallery to gain access to works, and indirectly or directly, the interests of the artist, because they had to go through the gallerist, and behind the gallerist one assumes, in most cases that there was an an artist. Collectors are now rendered significantly less conflicted by art fairs. They have simpler choices. If we want to analyze what’s going on at that level, it’s not just the efficiency, it’s also something beyond that. Ethical choices of collectors are diminished by art fairs. Their lives and relationships are simplified. They can spend more money easily. This decrease in transaction costs seems like a benefit, but it also means that their virtual, idealistic investment is discounted. There is significantly less incentive to invest in the dealer and the artist. Even as the gallerist makes more money, social and contextual capital is being lost. The structural degradation of social and contextual capital is a significant structural downside of the art fair.

The art fair has a structural bias toward undermining the threshold investment of the collector in the artist and gallery relationship. Being able to see works on what may appear to be a level playing field ignores the fact that art fair politics, as has astutely been pointed out here, is no less determinate at art fairs than it is at galleries. But there is a difference here, a very important difference in the frame of reference. In their own gallery, a gallerist answers to stakeholders like artists, collectors, and others. At an art fair gallerists must uphold the fair’s standards and interests. A fair does not represent anyone. It does not have an agency relationship to anyone. If anything, it survives on visitor interest. As we saw in the previous slide, attracting collectors by lowering the ideal threshold investment makes money for the art fair and gallerist. The art fair cultivates and depends on these organic relationships, but it is structurally conflicted and motivated to removing barriers to trade by undermining those relationships. The art fair piggybacks on relationships, while needing to undermine them in fact.

We’re still on the potential benefits of the art fairs in terms of accessibility. But there are other important potential conflicts. You might be able to see a work at the fair, but is it for sale? Or is it for sale to you? Very difficult to know at times. The incentive in the old system of galleries to hang works that were pre-sold, borrowed, or otherwise unavailable to build the feeding frenzy was negligible in comparison with that of the art fairs. There is an obvious moral hazard here. What a gallerist may or may not have done in the confines of the gallery, where their practices were under scrutiny over time by a group of often knowledgeable actors, shifts dramatically under the pressures and opportunities of an art fair cycle.

Thus the lessening of the investments by the collectors is mirrored by a weakening of obligations by the gallerist. And in the first law of thermodynamics we know that that energy is going to go somewhere. And that loyalty is going towards the art fairs themselves, at the expense of other stakeholders. The problem, however, is that gallerists can’t have the same kind of perspective as an art fair, which is a money making machine essentially. The gallerists, contrary to art fairs, are often agents, representatives, and in fact fiduciaries of their artists. More on that in a second. Let’s look a little more closely at the structure of the gallerist’s conflict with art fairs.

I invite the audience to read these two quotes. Now, I’m going to refer to Matthew Slotover a few times, not because I have anything against him, or believe that he is a pernicious agent in the art world. Simply, he’s representing a perspective that is clear and necessarily differs from that of gallerists like Ed Winkleman.

„And of course, galleries are not obliged to do art fairs. Art fairs really exist for the galleries—the galleries are our clients, and we’re there to serve them. It’s up to them whether art fairs exist; if they don’t want them to exist all they need to do is stop participating and art fairs would immediately not exist. So I think there are a lot of things being confused here.“ Matthew Slotover, Artspace Interview, 2013

„Because getting into the right art fairs (or not) can truly change the fate of a gallery, dealers are spending more and more of their time strategizing and networking other influential art dealers.“ Edward Winkleman, How to start and Run a Commercial Art Gallery

Slotover obviously knows a lot about art fairs. What makes his opinion so glib here? He is not actually responsible to anybody. He can make it up as he goes along. He does not owe a duty of loyalty, so he can be as self-interested as possible without moral ambivalence. Ed, on the other hand, is a gallerist. He has a duty of loyalty and absence of conflict of interest regarding his represented artists. But if a gallerist cannot fill demand without being at art fairs, then serving Matthew Slotover’s doublethink becomes increasingly important.

I’m not going to repeat the figures about the necessity of art fairs to the dealer’s life, we’ve had enough of that. I will sum up with a blog quote: “The most expensive booth at the Frieze Art fair will go for $80,000, but the greater risk for dealers lies in not participating.” In conclusion, the costs and economic advantage of being at an art fair will reduce the ability of mid-range galleries to remain viable. The gallerists have the choice of embracing the new paradigm and its hidden costs, or risk their existence. This conflict of interest is having a profound impact on the art world as we speak.

So then, let’s talk about what this does to our artists. Again we have quotes from Matthew Slotover and Jeff Poe:

„You know, artists can make one work a year or a thousand works a year, and they make that decision based on what they are comfortable with, what their public desires are, what their credibility desires are, and how many great ideas they have. But artists are extraordinarily strong personalities in most cases—they’re not going to let their galleries tell them what to do because of an art fair.“
Matthew Slotover, Artspace Interview, 2013

“If they are any good, they make art because they have to. They don’t do it to please the market. So for some artists, hanging out here can mess with their heads. Also, let’s face it, this is not the optimum place to exhibit work. The subtle notes in artworks are drowned out by the cacophony.”
Jeff Poe, Blum and Poe

The mythical notion that artists can exist on idealism alone, and that their personalities are immune from being affected by market forces, is an act of willful blindness, self-serving towards the art fair ideology. And let me be clear, I am not here to do a cultural critique of art fairs. I’m here to look at the ethical conflicts involved, so that we can discuss them, so that decision makers at the art fairs can respond to them, as well as all other the stakeholders in the process.

It is clear that gallerists are by law fiduciaries of the artists they represent. The investments that galleries are forced to make in the art fair model impoverish their brick-and-mortar galleries, lower the collector’s necessary ideal investment, and lower their necessary investment in the collectors. This means that their ability to represent artists changes. Their role becomes one to broker access to art fairs, but the art fairs do not represent the artist. So, on the way to adapting to the new reality, potentially surviving and making more money, the artist’s reliance on the gallery is also reduced. What’s the point of a solo show, or gallery representation, when the gallery does not bring the artist to the only game in town?

In fiduciary obligations, the key thing is loyalty. So all gallerists that represent artists are fiduciaries, and the primary responsibility they have by law to those relationships is loyalty. One of the very special things about the artist-gallerist relationship is now being shifted by the art fair ideology. And we need to be aware of what that means.

Those who are perhaps less familiar with the definition of the fiduciary relationship are invited to spend a moment on the text of this slide and I’ll come to my conclusion.

Fiduciary concept’s central rationale is “nurturing and enforcing commitments to act loyally toward the interest of others […]”
De Mott, Fiduciary Obligation Under Siege: Contemporary Challenges to the Duty to be Loyal, 1992

“The principle of altruism requires that any conflict of interests between the parties […] must be resolved in favour of the beneficiary, who is entitled to the ‘single-minded loyalty’ of the fiduciary.”
Hoyano, The Flight to the Fiduciary Haven, 2011

Loyalty, pre-art fair, could mean a vast spectrum of different responsibilities. Loyalty post-art fair may mean little more than more art fairs. Post-art fair could mean for the gallerist being nothing but a broker for the art fair ideology. This fundamentally reduces the scope of what a gallerist needs to provide, and in fact, they may fail as a fiduciary if they don’t produce this outcome. What used to be a fiduciary obligation in a broad sense to the potential of an artist’s career etc, shifts as gallerists become conflicted by the obligation to bring that represented artist to a fair, or they’re not doing their jobs, while the at the same time undermining their very relationship to that artist and their collectors.

This makes the gallerist’s life more complicated. It will become much harder to balance interests. At the same time, not chasing the money will not be an option. So there is no going back to the past practices. It’s a damned if you do, damned if you don’t situation.

And the artists are also not unaffected. They must be complicit to survive. This is why I say, those who care about what they do have to sit down and go through these questions carefully. The whole point of thinking of things in fiduciary terms is to treat certain ethical questions as more than just happenstance.

There’s no time like the present, and in fact there will be no time like the present, to take a moment to strengthen our capacities with these ethical issues. Thank you for your attention.

Nicholas O’Donnell:

Good evening everyone. First I want to start by thanking Judith and Richard for inviting me and to Ed and Elisabeth. It’s really great to be here, and for their thoughts. It’s really a privilege to participate. I’m going to talk little bit about relationships.

The interaction between a client and a dealer, whether at a brick and mortar gallery, or an art fair, is the commencement of a legal relationship. It might be a successful relationship, it might be strained, but that’s what it is. So what I want to talk about tonight are some of the ways that the formation of that relationship, and its rights and duties, might be affected by the fact that it is happening at an art fair. My focus is going to be on US and NY law given my practice, but hopefully we can issue spot on things that can arise around the world.

It seems obvious, but the starting point is to remember where you are. In the absence of an agreement, in most instances for the sale of art the place of the transaction will supply the law that governs that transaction. So New York law will govern Frieze, Dutch law will govern TEFAF, and Hong Long law will govern Art Basel Hong Kong.

The nature of an art fair also creates practical differences in the formation of that relationship. Consider: every art sale involves some sort of diligence, whether cursory on the spot or in depth, a negotiation of the essential terms of the transaction, and an actual exchange. A contract, after all, is an exchange of promises: I will do this if you do that. But every contract has explicit terms and implied terms, and the practical aspects of an art fair, and the law of the place where it is, will all go into what constitutes the resulting agreement.

Diligence and preparation. What does the buyer have time to investigate, and what are the consequences of proceeding with the transaction?

This is as much a matter of risk management as it is a legal question. But whether you are a dealer at a show or a buyer, your starting point has to be the rules of the show. Is there anything in the materials in which a buyer agrees to a set of terms incorporated by reference? That is, when you attend or pay for something, do you end up signing a form that says something like “buyers agree to abide by the rules of the X show”? If so, those rules will be a part of your deal.

If you are a dealer, the same will hold true most likely at the application stage. Even without a single buyer, the dealer is probably setting foot more firmly in the location of the fair. Art Basel, for example has a choice of law provision in its application form in favor of the location of the particular show (Canton Basel, Florida, Hong Kong).

What is it? What representations and warranties are inherent to a sale, and how does the dynamic of an art fair complicate how you can rely on what you have been told?

If you’re in a Uniform Commercial Code (UCC) jurisdiction, like New York, the mere exchange of information will give rise to enforceable obligations related to that exchange if there is ultimately an agreement.

UCC 2-313 provides that

(1) Express warranties by the sellerare created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goodsand becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.

( c ) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goodsor a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

We can well imagine how this will play at an art fair rather than a gallery. Hundreds of people are passing a booth each hour. Routinized conversations ensue. The sellers give a standard litany of descriptions-they think, if they can remember. Buyers have spoken to dozens of people that day. Was it this dealer, or another, that talked about the condition of the paining or the location of origin. Which conversation becomes “part of the bargain”? So where advance homework is wise in a storefront, some system for noting what you heard from whom—or what you told whom—may matter if and when a deal is struck.

To illustrate the point, imagine a buyer who attends a fair of rare cars on Long Island. He talks to several sellers at the fair, but he is taken with one conversation in particular. This Chrysler LeBaron, he is told, belonged to a certain specific individual. Because of that, he buys the car in a handshake deal. The handshake representation about who owned it? “John Voigt.” You may well laugh at the idea of being as senseless as George Costanza, but the larger point is that once you shake hands, exchange promises, make a deposit, or otherwise commit yourself, what happened in that one conversation among many could turn out to matter a great deal.

Consider a less ridiculous scenario. In a conversation at a booth, the buyer observes a signature at the lower portion of an etching that looks to her, a sophisticated buyer, to be Picasso’s. She asks the dealer, what is that? “That’s signed Picasso” he says. Or did he say “that’s signed BY Picasso?” or did he say “that SAYS Picasso”? Do either remember accurately. The buyer purchases it. In a way that is so much less likely with an auction catalogue, there is now an issue with WHAT 2-313 warranty was made. This scenario happened to a client of mine in a more old fashioned context, and the particulars were more easily sorted out, but the dynamic of the show makes it one to look out for.

Here too geography will matter of course, and whether a civil law or other jurisdiction implies warranties into a contract like this. Many don’t.

Before we leave this topic, remember that an expression of VALUE is considered an opinion, and not a statement of fact within 2-313 or other law. But a claim of comparable sales is an expression of fact.

Did you make an agreement?

Let’s take a step back and talk a little about the basics of contract formation in this context. With apologies to the lawyers in the room who have done their best to forget about first year of law school, it is worth repeating that an agreement does not consist of what you think it meant, it consists ordinarily of the objective manifestation of the parties’ respective intent to be bound.

The New York Statute of Frauds, Gen. Obligations Law § 5-701, like most, requires that any agreement must be in writing to be enforceable if “By its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime.”

The key thing to remember here is not whether it IS performed within a year, but whether it can be.

So contrast: a visitor from a civil law jurisdiction sees a contemporary work at Frieze. She has a structured payment coming to her own business, so she needs some time to make the full payment, but she is willing to commit. So she says I’ll give you 50% now, 30% in six months, and the rest a year from today, after which I’ll pick it up. The dealer, happy to obtain 80% within six months, agrees. She’s never heard of the Statute of Frauds. But six months later he’s heard nothing, and he sues. Strictly applying the statute of frauds, he should win, right? Strictly, no. a year from today is not within a year. Cases have gone to court over this issue, and the party seeking to enforce the agreement has not always prevailed. Good news for them recently, although addressing a different aspect of the Statute of Frauds concerning auctions (this is the Jenack case), the New York Court of Appeals reserved some choice words for relying on the SOL disingenuously:

It bears repeating in such a case as this that: The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made.

But here, seller in particular, beware.

I started by teasing out some of the geographical implications on the choice of law that might apply to an art fair transaction. But, as I like to phrase the foundation of all legal questions: so what? Who cares where the fair is?

With regard to the most important aspect of any sale, title to the object, you will care a great deal. Consider again a pair of scenarios, different only in geography.

First, in New York at an art fair views a striking Max Beckmannn domestic scene on consignment from an identified and reputable seller. He views its condition, and notes its presence in the catalogue raisonné with approval. The provenance provided is orderly and has no gaps or suspicious activity. He buys the painting for $25 million, which is noted in the local and international press.

Two weeks later, he receives a letter from a lawyer. The painting, the lawyer argues, was sold at the auction at Galerie Fischer in Lucerne in 1939 after being looted from a Jewish family in Frankfurt. The provenance he was given was fictional; the catalogue raisonne confused this work with another version. The lawyer’s client wants the painting back. Oh, and the reputable and known seller has gone bankrupt and fled to Zimbabwe with our buyer’s money.

Now imagine the same scenario, but at Art Cologne. What happens, and why does it matter?

Assuming that the buyer really did not know of the painting’s history, the location will not only be important, it will probably be dispositive. In New York and elsewhere in the United States, a thief cannot pass good title. So purely as a matter of title, the buyer will lose the painting. He may have some defenses like laches if the true owners knew of the painting’s intermediate location and failed to act, but that is necessarily an uphill battle, and his burden to prove AFTER a trial.

In Cologne, or Maastricht? More than likely, as a good faith subsequent purchaser, he will keep it. Even within the western art market, an increasingly seamless one, different places make different judgments about who should bear the risk of loss in that situation.

World War II looting isn’t all that matters by location. Assume fairs in the same two locations, New York and Cologne, but for a Giorgio di Chirico. The same facts apply, but assume that in 1955, the true owner had located the painting in a Geneva gallery, sued for its restitution—and lost to a “good faith purchaser.” Now, even in New York, the seller is not passing a thief’s title, he is passing adjudicated good title. So the buyer may get the painting after all.

Lastly, assume the di Chirico hypothetical: but fair number two is in Rome, where just last week, a new government passed a law declaring all Italian metaphysical art to be the national patrimony of Italy.

The buyer in New York may now be better off. Unless it was imported to the US AFTER the patrimony designation (in which case there could be customs problems, and a visit from the Asset Forfeiture Unit of their friendly local U.S. Attorney office), it’s here and it’s probably not going back. But within the EU? That jurisdiction that favored good faith title may be out of luck.

So, to foster the discussion, remember: where you are will affect whether there is a relationship, and how it plays out in the short term, and if people ever disagree. Thank you very much.

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The Rise of NYC Art Fairs – NYSBA Event – Part 1

Posted on September 13, 2014November 19, 2015 by admin

Moderator: , Chair, Committee on Fine Arts, New York State Bar Association, Entertainment, Arts and Sports Law (EASL) Section, Attorney and Faculty at Sotheby’s Institute of Art

Panel:
, Gallerist
Elizabeth Dee, Gallerist
, Attorney at Stropheus Art Law
, Litigation Partner at Sullivan & Worcester LLP

A video of Ed Winkleman’s PowerPoint presentation can be found in the section on his presentation below. A dedicated audio recording of Elizabeth Dee’s comments also precedes her text.

Judith B. Prowda

More than 90 art fairs define the rhythm of globalized art business. There are dozens of NYC art fairs. In fact, when Richard and I were planning this program we made the strategic decision to schedule it between Frieze NY, and Art Basel in Switzerland. With the rise and rise of art fairs, sheer survival in the commercial art context now requires galleries to participate in a half a dozen or more art fairs a year – from New York to Maastricht to Dubai to Hong Kong to São Paolo – with stops along the way.

Some dealers make as much as two-thirds of their sale at fairs. Art fairs have indeed transformed the business of art and even the production of contemporary art. For serious collectors the international art fair circuit is an imperative, while visiting only a few of galleries in NY, London and Berlin seems – well – almost quaint. I recall arriving a few minutes before the opening at The Euro¬pean Fine Arts Fair (TEFAF) in Maastricht and being crushed by a crowd of eager collectors who gathered impatiently for the doors to burst open at 11AM on the dot. And TEFAF is perhaps the most subdued of fairs.

On the positive side, art fairs create a global art dialogue; galleries introduce works fresh from artists studios to the international stage. For the past three years Frieze has commissioned artists projects that have been curated by Cecelia Alemani. Frieze also offers a daily program of keynote lectures, panel debates, and discussions on diverse cultural topics. And let’s not forget the glitzy parties.

Fairs have also been criticized. Participation in an art fair is a very expensive proposition – from a highly selective application process, to fees for booths shipping, insurance and travel. Mid-tier galleries which can’t afford these costs are often left at the gate. Increasingly they are confronted with the financial unsustainability of their brick and mortar.

Also – and I leave this to our gallerists to address – is the question of art production and the responsibility of dealers who may have to pressure artists to turn out a high volume of new work in order to satisfy the demand¬ing art fair calendar.

Along with the rise of art fairs, is the emergence of complex legal and ethical issues. For example, and these are but a few on the legal side – how are relationships among the relevant actors distinct from traditional dealing? How are negotiations affected? When is the handshake deal an enforceable contract? When isn’t it? What about warranties of title and authenticity? Whose jurisdiction laws apply in title disputes if a work is stolen? That of the consigner, or the good faith purchaser, or the country from where the object was stolen? Suppose a work was shipped or looted abroad without an export license? Or it turns out to be a fake, or is seized by the bank as collateral on a loan? What are the consequences?These are but a few of the legal issues.

And there are ethical concerns as well. How are conflicts of interest addressed when dealers are evaluating other dealers in the application process? Are decisions about gallery placements at the fair – fair? Are rising costs making it impossible for some dealers to compete? How are a dealer’s fiduciary duties to their artist affected?

To parse all this out, we will begin with Ed Winkleman. Ed is co-owner of Winkleman Gallery and also co-founder of the Moving Image Art Fair. He is the author of the eponymous blog that demystifies the gallery system, and the book, How to Start and Run a Commercial Art Gallery, published in 2009. Ed will offer an overview of the research on art fairs he is conducting, in preparation for his upcoming book, Selling Contemporary art: How to Navigate the Evolving Market.

Our next speaker is Elisabeth Dee. Elisabeth is the owner of the Chelsea gallery, Elizabeth Dee, and is the co-founder of the art fair, Independent New York. She has produced a number of groundbreaking, first and international exhibitions of an impressive roster of artists. She was also included in Art + Auction Magazine’s list for the 100 most powerful figures in the art world. Elizabeth will report on the chances and risks that art fairs impose from her perspective as a dealer and a founder of an art fair.

Our next speaker is attorney Richard Lehun. Richard is one of the founding members of Stropheus Art Law, one of New York’s pioneers in the provision of unbundled legal and business services to artists, gallerists, collectors and museums. Richard is one of the few people in the US to have completed a doctorate in fiduciary law cross-appointed between McGill and Harvard Law School, and is responsible for gallery, museum and auction house ethics and fiduciary duties at Stropheus Art Law. He’ll be looking at the ethical problems that fairs raise and how their potential is impacted.

Our final speaker is Nick O’Donnell. Nick is a litigation lawyer at Sullivan & Worcester LLP and the practice group leader of the firm’s art and museum group. He has spoken frequently on the topic of WWII restitution litigation, including at a conference in Heidelberg last January about the Cornelius Gurlitt affair. Nick’s widely read art law report offers commentary on legal issues affecting visual artists – the visual arts community. Nick will present on legal issues that art fairs carry with them.

I’m grateful for my employer, Sotheby’s Institute of Art, for graciously hosting this event, as so many New York State Bar Association, Entertainment, Arts and Sports Law (EASL) Section, events, in this beautiful space which is my second home. This program is part of an initiative of EASL’s Fine Arts Committee to create dialogue amongst lawyers, artists, and emerging and established art professionals working in the primary and secondary market. Two years ago we pioneered a program on legal issues for artists and galleries during Bushwick Open Studios Weekend, geared to the primary art community. Last October we held a program on Gallery Ethics and have posted an audio podcast and transcript of that program on the Stropheus Art Law website, and we will do the same for tonight’s program.

So please join me in welcoming our illustrious panel and our first speaker, Ed Winkleman.

Ed Winkleman

Good evening everyone. I would first like to start off by saying thank you to Judith and Richard for organizing this panel and what I’m going to share with you, as the previous thing mentioned, is just some of the research from my upcoming book. Its title is self explanatory, but in the context of what we’re talking about today – going further and say it really does focus on contemporary art, but the discussion today will extend beyond just that. The book is designed to help dealers strategize with the changes of in the art markets since I wrote the first book, which was about the fundamentals of opening and running a commercial art gallery. One chapter in particular that defines a big part about what has changed since 2008, when I wrote the first book, is the chapter: The Rise of the Art Fair. I’ve read a lot of the literature as well as interviewed some of the directors of major art fairs in the world as preparation for the book, and this part is what I am going to share right now.

Since 2002, despite the quote you’ll see at the top supplied by Georgina Adams, the number of art fairs in the world has exploded, and there’s a number of quotes throughout the presentation that I won’t read out, because they’re really there for flavor. I think I do want to read this one just to set the tone. The numbers here do tell the story. In 1970 there were just three main events – Cologne, Basel and the Brussels-based Art Actuel. The number has mushroomed in the past decade from 68 in 2005 to 189 in 2011. Georgina [Adams] wrote that in 2012. I’m currently counting every art fair in the world, and among contemporary fairs only – that’s fairs that show contemporary art – I’m up to 220 and I know I haven’t counted them all. If I add in the fairs that I know that exist that don’t include contemporary art, the number is close to 300 at this point. So, even from the time that Georgina wrote that, the numbers are continuing to rise. And they are showing no signs of stopping just yet. Why the explosion?

I point back to what happened at the NADA Art Fair in Miami in 2002 as the beginning of this notion that the world needed more art fairs. If you were in Miami in 2002, you’ll know that Nada was a satellite to the Art Basel Miami Beach Fair, and a very roughly organized fair by a group of young dealers. It didn’t cost very much to participate but within the four days the fair that took place, those dealers generally sold their booth out one, two, or three times over, and brought in perhaps more money than they would see through their galleries in the space of the six months previous to that. So the perception, as word trickled out, that the galleries had just made boatloads of money at that one weekend in Miami, started to change about what an art fair could be, how much it would cost to produce one, who was qualified to organize one, and eventually more and more people started beginning their own fairs, because demand just exploded.

In 2002 roughly 48 to 60 galleries participated in the NADA in Miami. The applications for the 2003 fair were four or five hundred range. So many more galleries were immediately interested in participating in that fair. Another thing that happened, though, was in response to the recession in 2008. If you’d asked any dealer at the time when they were looking at how the financial crisis impacted their ability to participate in art fairs, they would have expected the number of fairs to start dwindling. We were already having a conversation similar to this one in 2007-2008. There were so many fairs and people expected the recession to start knocking them down.

But one of the interesting things that happened was a shift in perception of who was responsible for getting collectors to the fairs. One of the people I interviewed for my book is Annette Schönholzer, the director for new initiative for Art Basel, and she said it was a surprise for her, when in 2008 and 2009, galleries started to come to her saying: “Where are the big collectors that we’re used to? They’re not here. You have to bring them here.” And Basel was saying: “We produce the fair, we put the best galleries and the best art in the fair, you’ve always been responsible for bringing the collectors.” So, being the fair that they are, Basel said: “Okay, this is what you want us to do we will go out, we’ll increase our VIP program. We will do whatever it takes to find the new collectors that are available, as well as make sure the existing collectors you know and love come to the fair.”

One of things that started to happen, though, is when they would reach out, as they would increase their VIP programming, they would send every participating gallery a package of VIP cards, and those galleries would send their cards out to all of their VIPs. Not surprisingly, some collectors would receive twenty or more VIP cards in the mail. And because they had so many extras, they would distribute them to their friends, and their friends were very often not VIP collectors. So, what you would see in the VIP lounge or at the VIP events were some of the people that the program was targeting, and then a lot of people that it was really never designed for.

So, the fairs start telling the galleries: “You give us your list of collectors and we’ll send out the VIP cards so that they’re not all getting multiple copies. That practice, in and of itself, shifted a huge amount of the power to the fairs. The fairs now had the quintessential collectors list. They had every person who has gallery’s VIP list in the world. And rather than see art fairs start to dwindle, in response to the recession, we started to see their power grow, and their numbers grow.

The other thing that is critical is that during all this time, 2002-2014, we systematically as dealers started to train collectors – that you will see the very newest, the very best, the most exciting work by our artist at the fairs. And even if they were buying them in advance, collectors started getting accustomed to the idea that this is where I purchase art. And this is where I can get an overview of the best art in the world. So, why am I spending as much time going around to all the various galleries? Now some collectors of ours have been collecting for 30 years will willingly admit that they have gone more and more to fairs and less and less to galleries individually because of this.

So, that’s the longest I am going to spend on any one of these slides, but I think that’s important for the background here. So the bottom line in terms of money out, the TEFAF Art Market Report is generated once a year. It’s commissioned by TEFAF. It’s released in conjunction with their fair in Maastricht, and it’s perhaps the best accumulation of data and statistics on the market.

It is still considered somewhat controversial because its author, Dr. Clare McAndrew, doesn’t have what some people consider the strictest methodology. Her sample sizes aren’t necessarily what somebody coming from an industry that uses reports like this as part of their business would consider that significant. But it’s the best data available. So, it does still influence perceptions. And in 2013 she reports that the total amount of money galleries spent participating in art shows was 1.9 billion Euros, and that’s money that comes from the galleries only. So, if you continue to the money – the entire art market was estimated to be 47 billion Euros in 2013, and dealers reported that 33% of their total sales were made at fairs.

I’ve done the math and I hope its right. The total money that galleries sold at fairs, and that’s not the total profit, that’s just the money they made per se, that’s just sales, was close to 16 billion Euros. So it’s more or less 8 Euros per Euro they spend at fairs. I should note that doesn’t represent the money made by every gallery at every level.

The top-tier galleries are probably making much more than that, and the lower level galleries, especially in the mid level, are quite lucky very often if they even break even. So because galleries in the emerging market or in the contemporary market generally have a 50/50 split with their artists, a gallery is probably selling twice what they are paying to participate in the fair, but they’re only receiving half of that, so it’s a one to one. This chart is probably hard to read from the back of the room, but it breaks down the sources of sales for galleries as recorded in 2013, and you can see that 33% is attributable to fairs. The breakdown is 19% for local fairs and 14% for international fairs. This is a chart showing where the most galleries are located.

You can see cities like Paris, London, New York, Tokyo. That’s not surprising that they have the most galleries. This isn’t a finalized chart, but the idea is to show the number of galleries correlates to the number of fairs that these cities also produce. So, a city with a red star on it is a city that has either a lot of fairs – or high profile fairs, very influential fairs. A city with a blue star is a city that’s either going up or coming down in terms of the number of fairs, or the importance of the fairs they have. An example might be São Paolo is coming up, its fairs are coming up its fair are gaining in importance. Berlin is going down. It’s either losing its fairs, or they aren’t as important as they used to be.

Basel is at the bottom by itself. It doesn’t have as many galleries as other cities, but it has the most important fairs, arguably. Despite that geographic dispersion of where the fairs take place, where the sales take place is pretty isolated to the United States. The TEFAF report of 2014 found that 75% percent of sales at art fairs take place at art fairs in the United States. And if you ask – and they did – the dealers around the world, 91% of them said that they needed to participate in just as many or more fairs in the United States because of those sales. If you ask galleries in New York, most will report that everything else being equal they’ll do their best business in Miami.

There’s something psychological about it. It’s where sales happen. We cynically refer to it as it’s like shooting fish in a barrel. The impact of this fair culture, this rise of the art fair on dealers includes statistics of some galleries reporting going to 15 fairs a year, that’s more than one a month. The impact of that on their gallery practice – is they either need to bring on more staff or they themselves are on the road up to 90 days of the year. That’s 90 days they’re not in their gallery, they are not with their families, they’re not as close as they need to be with their artists.

It’s having both a financial and a personal impact on the dealers. And as this quote from a New York Times article about the life on the road of the art dealers illustrates, it’s shifting the culture from this genteel practice where you would wait for someone to come into your gallery or you would have this leisurely conversation with them, to one where you’re constantly on the road and everything is happening much more quickly.

The impact on artists is probably ten times worse in my opinion. At the fairs, the top metric of the success for any given artwork is whether it’s sold or not. And that starts to influence what artists give their galleries to take to the fairs. They want to be a success. They want the piece at the fair to sell. Also, for the galleries to get into the best fairs, and to please the collectors that come to those fairs, there’s an expectation that to every fair you’re bringing something new.

I’ve had a number of collectors complain as they were walking around one of the fairs we were participating in: “I saw that at this other fair” I saw that at that gallery, at a show they had.” And the perception is that artists can’t be doing very well if a piece I saw in a gallery is now at a fair, or a piece that I saw at one fair is now at another fair. And so to create the impression that all of your artists are very successful as well as to please the collectors that come to the fairs to see something new, galleries are constantly saying: “I need something new,” and by saying that the artists are responding to it.

Even if an artist has a very clear head about it their still compartmentalizing their practice. They’re making some works specifically for the fairs and the other work that they’re compelled to make. So, the overall impact of this is something that people are now referring to as “art fair fatigue.” And you’ll see a number of articles and the literature about it.

There are even clever little articles on how to deal with art fair fatigue, what shoes to wear and what spot to be is forming around airports, etc. Despite art fair fatigue, though, 45% of dealer felt that they will still invest in more fairs internationally. I think it’s said that there is a cultural backlash, where more and more dealers are saying: “I want you the collector to come to my galleries, instead of just meeting me at the fair.” A lot of dealers are saying just that to their collectors: “Come visit me. You won’t see at the fairs what we’re doing at the galleries. It’s important for you to be involved in the dialogue that’s happening in the gallery, and for you to come to the gallery.”

And some galleries in Chelsea have enough in the gallery and they don’t see the need to increase the number of fairs they are participating in, but remember that 17% of the sales happening is local, and for New Yorkers, they’re local for US fairs that are selling the most anyway. So, and that is it. Thank you.

Elisabeth Dee

I didn’t prepare a formal presentation, because we have so many tonight, and I’m typically Ed’s sparring partner, someone to play that role. Ed, thank you so much for giving us your insightful analysis on the situation with fairs and what the risks, rewards, and consequences can be. I’m going to speak primarily from, or just engage a little bit, primarily, from the gallerist’s point of view, because we are the two gallerists and art fair founders.

I founded a fair called Independent, which takes place twice annually in March and November at the former DIA Center for the Arts. And I think it’s really critical to talk about the dynamic of fairs, vis-à-vis those that were founded by gallerists and run by gallerists, and those that have become more institutionalized, or more of their own private enterprises.

Art Basel was founded by Ernst Beyeler who was a very important noted gallerist, a historical gallerist. And I think it’s important to think about gallerists coming together to collaborate on the issues of the day and present them mutually. What Ed said was so insightful. With the shift to a more corporate culture of art fair management, gallerists have lost certain protections that they once enjoyed. I’m not saying that there have not been benefits in that things have become more of an open and transparent market for collectors and for other gallerists to see what’s truly going on.

When you have 180 galleries from all over the world one is able to get a great index – however, I think there are certain concerns that gallerists only know and certain information that gallerists only trade with each other, that can inform and develop fair culture in a more meaningful and in some ways more progressive way. And that is why Ed and I both have started fairs with our gallery colleagues. Would you agree?

Ed Winkleman: Yeah. Elisabeth and I were on a panel all together at Art Basel last summer, and it was about the way that galleries who have been in business for a while aren’t necessarily surviving as well as the top-tier are. And the moderator said in response to what was talking about the number of fairs we were doing and the costs, and the personal costs: “But you both started fairs yourself, so aren’t you both responsible for this in some way?” To which our response was: “We started alternative fairs that are actually not only art driven, they are gallery-centric. Both of our fairs are trying to solve some of the issues that we see with some of the bigger fairs. I think that the fair model itself has a long way to go to even catch up what the galleries are able to do. I don’t even necessarily think that even the galleries are the quintessentially best context in which to view art. My favorite place to view art is in a collector’s home. But I think, through efforts like Independent and some of the fairs out there – pushing the model here and there, experimenting with it, trying to find a better way – because I don’t think the fairs are going away. But I think they have a long way ago.

Elisabeth Dee: I completely agree. I also think that given the kind of economy that we’ve created, as gallerists, doing gallery-centric fairs, it’s allowed for more kinds of experimentation in the art fair model. When I first started in 2002, one of my first fairs I ever did was NADA. I think that my costs annually in doing fairs, as an emerging gallery, was probably 25 or 30 thousand dollars. Now I spend over a quarter of a million dollars in fairs, and I’m not a large gallery. And I still want to develop artists and introduce artists and develop strategic, curatorial support for my artists – not just sales. And to me that balance is critical for the development of artists in a sustainable way.

So, when you work with many fair organizations and their economies, which are very expensive, you can see your profit margins going all the way down to 50% or 30% of the revenue that you would normally have in the gallery. One has to really analyze and consider those factors. And I think that what we’ve been able to do with Moving Image, which is Ed’s fair – which is devoted to video art, and keeping costs to a place where gallerists can afford to take the risk of introducing new material – or Independent, which is also equally inexpensive, even for the emerging gallery in Europe that may be doing their first fairs of their gallery’s career and their artist’s career.

It’s really important to be able to think about new creative economies for gallerists that aren’t selling things that are a million dollars on the stand, and who want to develop a dialogue and a programmatic curatorial conversation around their program. I think it’s wonderful that we now have so many fairs to choose from, in terms of how we spend our time and our own personal research of galleries and their programs. And I think it offers a lot. I think these kinds of initiatives help the gallerist face the realities of the economy as they grow and develop as galleries.

Ed Winkleman: You have one thing there I’m going to read off of, because I think this is a really interesting point, in the context of this conversation would be great to talk about: the ethical question of galleries being the gatekeeper’s to these fairs. They’re so important and 33% percent of your sales and your competitors have a say whether or not you get in to better fares.

Elisabeth Dee: We switched topics, okay. Because that wasn’t a part of your talk, I didn’t want to introduce a new topic. But, as we know fairs impose certain challenges for the gallerist who is looking to enter a system that already exists; whether it’s Frieze at 180 galleries or art Basel at 200 galleries. Many of the galleries have been are there for many, many years, with very strong programs – and it’s very competitive.

Maintaining a position in those fairs is also competitive, and the decision-making process of these fairs is extremely problematic from my point of view. There’s no system for rating your peers. When you’re invited to be on art fair selection committees, of which I have been on many, I have been pondering this question: how does one objectively analyze a program wants to be part of a fair. What’s the evaluation system? How do you evaluate curatorial programs on a basis of merit against other galleries that may be of a different generation, but still working with the primary market? How do you handle aspects of their own reputation in the field? What is their standing with collectors? What is their standing with artists? Have they simply careers of artists and put them into the program, or have they actually done strategic development for those artists? There are no clear factors to address this.

And when gallerists get together, even really, really accomplished gallerists may be very unaware of certain programs in certain geographical regions or certain generational regions. I feel that the fair can be often at a disadvantage making decisions about its content and its participants based on a group of dealers that may not have the right tools in order to evaluate this properly. You also have factors of politics involved, because dealers do work together. They often share artists. There is often a long history of working together or competing with each other.

There can be a lot of political factors that are unfair in evaluating other galleries based on subjective experiences that people bring to the table when they have to vote. And this can be quite problematic for many galleries who can be part of these fairs and for the reason of one single committee member be eliminated from the fair for many years and have to deal with the issues that ensue once one was part of something and is now no longer able to participate – nominally for the artists they represent. But the financial impact can be often huge and sometimes extremely debilitating to certain galleries. This is something that I think this has not been clearly addressed in the fair system and I think deserves to be

Ed Winkleman: I totally agree. I don’t know what the answer could be. With Moving Image we have selection by a curatorial advising committee, so it’s not other galleries choosing the participants, it’s curators, but even that is far from a perfect system. I don’t know what would be the perfect system honestly.

Elisabeth Dee: And at Independent we’ve gone the totally opposite route, where no, it’s invitational process with one curatorial advisor, and we have no system for application because we don’t feel we have an adequate system at hand to evaluate those applications.

Ed Winkleman: But there’s no question the impact of certain galleries can be huge and politics plays into it. The chatter that goes around after the list comes out for any big fair…

Richard Lehun: But I think both of you are speaking to very key issue. that I’m also trying to give a structural analysis to, but I’ll wait to do that. I want to just underscore that I think often from a legal point of view, we often as lawyers are not necessarily paying enough attention to. I think the very fact of being able to bring the issues out into the open, to be able to frame them, and to bring stakeholders in and have stakeholders address those problems is very key to whatever a solution might be. The greatest difficulty is to have stakeholders feeling like they’re somehow affected by the process, for which there is no voice or language. And that’s one of the things that were trying to do with these outreach events is encourage a community that has been long entrenched in a kind of self-mythology, which is been both self-serving and also protective. But some of these protective strategies about information, about one’s own positioning, might be devastating bad in times of turbulent change – where the exchange of information and the building of mutual understandings about outcomes, desirable outcomes are necessary, and where those things can’t be done ad hoc anymore, independent of what powerful actors can do on their own. But a collective understanding can only be achieved by this type of bringing to language, bringing into the foreground the multiplicity of issues that you guys are speaking of. I’ll turn the word back to both of you.

Judith B. Prowda: Absolutely. Please Continue.

Elisabeth Dee: We talked about the position of protecting the gallerist. We talked about the need for a peer rating system and how the fairs are organized. One thing we touched on was the cost, but we didn’t really go into that in great detail. I think that also deserves a few minutes. Because, when one art fair raises their prices, the other art fairs that are competitive with that fair tend to follow suit.

We’ve seen that before, especially in recent years the cost that has increased, particularly in New York and London. Galleries fight very hard to sell over these costs, to make their enterprises worthwhile there. The question that I keep asking myself and as gallerists, I think we ask together is – what rights the galleries have and what responsibilities do fairs have to the galleries with regards to these costs.

Clearly a light bulb doesn’t cost $2000 an outlet doesn’t cost $1000, even a Swiss one. As a gallerist, you start to feel like you’re not the client. And we are the clients of these fairs. We generate the revenue for the fair, and we also generate the revenue for all the artists, for all the creators of the works in the fair and that is our unique responsibility. But we do not have leverage over how these costs are allocated. We don’t have a clear system for addressing them with the fair organizers, which clearly have to make a profit as a sound business, but to what degree? I don’t know about the statistics, maybe you do, but I have heard that the application to Art Basel … just the fee alone … I can’t remember how much we paid for that.

Ed Winkleman: Four to six hundred dollars …

Elisabeth Dee: … four to six hundred dollar application fee. And given the level of applications they have, because of their stature, they do well over one million dollars on application fees alone. Now is that being given back to the project, and in what form? And how does one responsibly handle that. This is something that I’d like to see addressed in a more systematized way.

Ed Winkleman: I think I can flesh this out a little bit. From talking to some of the director’s of the fairs for the book, they collectively report not making as much money as it looks like they’re making, and that may not be surprising but the details are. There is a building where an art fair takes place in a major city. I won’t give too much away, that I think, 10 years ago, cost $70,000 to rent for the week, or week and a half. It now costs over $400,000 in 10 years. So, it’s not the fair that is just always raising their prices. It’s everybody around them knowing people are coming for this fair. I’ve got a captive audience.

If you try to get a hotel in Miami during Basel on Miami Beach, you know that everybody’s caught on. The costs are through the roof, across the board. And if you’re working with union workers to assemble or produce your fair, you’ve got a bunch of extra costs and things there. I don’t want to give any names but almost to a person, each Art Fair organizer has a long list, from their point of view, of rising costs which would make it impossible for them to lower their prices that they charge the galleries.

Elisabeth Dee: I still believe that fairs are a place to exhibits innovation in the field and when fairs cost this level of money to participate – how can one afford the risk of introducing new ideas? New ideas and new artists become risk factors for gallerists, and so that’s what you’re not seeing, innovation. One could be seeing it if there was some way to have a forum where some of these conversations could be discussed and responded to with art fair organizers. I think we’d be in a better position, I think we have the better content.

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