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Should Galleries Pay Their Artists

In Advance for the Art They Show?

The idea that artists should be paid in advance for all art that their galleries either show or offer for sale seems on the surface like a practical solution to a difficult problem for a couple of reasons, the first being to assure that artists have enough income in between shows to pay their bills without having to worry about sales. The second justification however is a tad problematic, being based on the faulty assumption that in consignment situations, the artist bears all the risk, while the gallery bears none. The fact is that the gallery bears equal if not greater risk than the artist, at least financially, by providing the space, the press, the client list, the staff, the utilities, the open hours, and more for the duration of the show-- all entirely at their own expense. They believe of course that they'll sell enough art to offset that expense and hopefully even turn a profit, but that doesn't always happen. Regardless, let's say galleries adopt the pay upfront policy where artists are paid for their art upon delivery instead of when it sells. How would that change the structure of the art business?

To begin with, there is an incentive for any business that buys merchandise outright to pay as little as possible while marking it up over cost as much as possible. This practice minimizes risk while maximizing profit potential. Businesses selling items that have no functional or tangible value, such as art galleries, are particularly sensitive to this issue. Since art is a discretionary purchase rather than a necessary one, and tends not to sell with any regularity galleries can count on, galleries are more vulnerable than most businesses when it comes to paying the bills. As few as one or two bad shows is all it takes to put many galleries in tight financial situations.

Assuming galleries have enough money in their budgets in the first place (which many don't), paying for their art in advance will not only increase overall operating expenses significantly, but may also result in efforts to purchase their artists' art as reasonably as possible. Additionally, the added burden of paying upfront has to be offset somewhere, which may mean cutbacks in how they do business like having to reduce advertising or PR, keep shorter hours, do fewer fairs, or even let go of staff. To them, offering their artists less in order to minimize the budgetary impact makes perfect sense.

Artists might counter that their art currently sells at certain prices now, so there should be no difference in how much they get paid either way. But there's no guarantee the art will sell; that's the problem with that line of reasoning. With this in mind, suppose a gallery is not willing to pay an artist consignment-level prices on outright purchases? Suppose they can't even agree on price? Now what? The artist might think, "I will just go to another gallery and they will pay me what I'm asking for." And here's where things begin to get complicated...

The first gallery has already refused to meet the artist's demands. So the artist decides to go to a second gallery. Let's say the second gallery agrees to pay the artist's price (not likely, but for the sake of argument we'll assume they do). If the first gallery is not terribly thrilled that the artist left them for another gallery, they might decide to let their dissatisfactions be known... not a particularly good situation for the artist.

But let's say the second gallery also refuses to pay the artist's asking prices, and maybe a third and a fourth as well. Now there's trouble. The artist could return to their original gallery and accept the initial offer, but that's assuming the offer still stands. Whether the gallery will take them back after all this "shopping around" is questionable. For example, word may already be out in the gallery community that the artist has been shopping their art around to the highest bidder, that they're asking too much for it, are difficult to negotiate with, or are being repeatedly turned down. If news like this starts to spread, the artist risks at least compromising the trajectory of their career and at most, losing gallery representation altogether.

As for artists shopping their art around, there is a term called "burning the merchandise." What this means is that if an artist approaches multiple galleries with their art, the more galleries that turn it down, the less desirable it becomes, and the harder it gets to sell at any price. Every "no" is essentially a black mark against the artist aka another gallery that's not interested, not to mention the fact that the art is progressively devalued every time another "no" happens. In extreme cases, getting representation becomes nearly impossible because so many galleries have already said no. What gallery wants to take on an artist who has already been turned down multiple times?

As an aside, the same thing happens to art at auction. If a painting fails to sell at whatever minimum price it's being offered for (gets "bought in"), it has a black mark against it, and if that painting reappears at a subsequent auction, it will likely be offered at a lower price than it was the first time around. Regardless of what price it appears at the second time, many buyers will still shy away based on the work's initial failure to sell.

But wait, there's more to the buying-art-outright business model. Over the years, galleries that pay artists will gradually accumulate art they can't sell, and more and more of it. This "dead stock" might even include entire shows worth of art where little or nothing sold. Galleries do what they can to sell everything at retail, but at some point if storage becomes an issue, they may be forced to sell off certain less sellable or unsellable works, much like other businesses do with merchandise they can't sell.

With the system we have now, galleries return unsold art to the artists. But when galleries buy outright, they no longer have that option. They may decide to sell the surplus to clients at substantially reduced prices, they may sell or consign it at lower prices to lesser galleries, they may consign it to auction and take whatever they can get, or otherwise dispose of it at closeout prices. Whatever happens, the key here is that the artists no longer have any control or say in the matter because they no longer own the art.

But wait, there's even more. Let's say a gallery that has purchased a considerable amount of art over the years decides to close. Worse yet, let's say they go bankrupt. What do you suppose is going to happen with all that art? One way or another it will have to be sold, or to use a less pleasant word, liquidated. Liquidation situations are never good for artists. Here again, they have no say in the matter because they sold the art outright and have zero control over its fate.

In any type of clearance situation, selling prices will likely be substantially below retail gallery prices. The optimal outcome for artists is for these sales to remain private, but that's not always possible. If the art goes to auction, selling prices become matters of public record and are either available directly from the auctions or from online price databases anyone can access. The very unhappy ending here is that low auction selling prices are never good for an artist's career, especially if there are lots of them.

More stuff to think about:

* Galleries that are required to pay for their art will likely take fewer risks and gravitate towards whatever art and artists they can sell the best. They'll also try to pay as little for their art as possible.

* Artists who don't sell regularly might lose representation because their galleries won't want to take on the risk. Or they might have to lower their outright sale prices substantially over what they currently make by consigning just to stay with their galleries.

* Undercapitalized galleries, no matter how talented and visionary they are, won't be able to pay much for the art they exhibit.

* Promising artists who are early on in their careers or who have choppy or modest track records won't be able to ask for much money for their art. This is assuming any gallery will be interested in the first place.

* Speculators or " investors" willing to take risks will have an easier time buying up significant quantities of art at very low prices by younger artists who need money but can't get galleries. These buyers have the potential to profit in big ways if those artists suddenly become popular. The more mercenary among them also have the ability to manipulate prices in not-necessarily-beneficial ways such as creating tenuous or temporarily inflated markets based on rosy promises of future performance, and then flipping the art to "believers".

* Galleries buying at fixed prices can mark the art up as much as they want to and keep all the profits.

Yes, artists getting paid for their art upfront by their galleries will provide them with steady income in the short term, but arguments can also be made that the risks and possible consequences involved in adopting this business model may well outweigh the benefits for both galleries and artists over the long haul. There are reasons why the art business has evolved the way it has and functions the way it does. Through trial and error, the current model has generally become accepted as the most practical solution to a difficult problem, aka maximizing the chances that everyone involved makes enough money to survive. We can certainly change the rules and see what happens. If we do, we'll find out soon enough what works best.

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I'm always available for consulting on any art or art career matters. If interested, please email artbusiness@artbusiness.com or call 415.931.7875 for more information or to make an appointment.

(art by Andrew Schoultz)