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Improving the on-line art transaction experience

Is there a way to apply digital innovation to make buying and selling art a much more pleasurable experience? Yes, and I’m part of a start up with that goal in mind.

This post is the first in a short series on the topic of art sales.

My Personal Love of Art

I came to love art many years ago at University. One of the fun courses I took at McGill University with my good friend, Jim Schaefer, was Canadian art history. We learned about the Group of Seven, the Automatiste Movement, Paul-Emile Borduas and Jean-Paul Riopelle, and we whiled away many hours exploring the Musee d’art Contemporain in Montreal. This has since fueled my on-going interest in art – most recently in Amsterdam where I took in a collection of Old Dutch Masters assembled at great cost by Catherine the Great of Russia and now touring the Hermitage Museum. The Rijksmuseum, also in Amsterdam and a spectacular building to tour, is home to the finest collection of Old Dutch Masters on earth – around every corner is another Rembrandt or Van Gogh.

Oil and gas companies, at least the Canadian ones that I know well, were rumored to be home to some of the finest art collections in Canada. I assume this is because the industry is a benefactor of the arts in general, and there’s lots of wall space available for decorating. Naturally, these collections are locked away and unavailable to the public.

When I graduated from McGill, I took a job at Imperial Oil, whose head office was then in Toronto on 111 St Clair Ave West. One Sunday, Marj and I decided to check out the Executive Floor where we were told the art collection was to be found. Sure enough, on this restricted floor, we were stunned to see a truly magnificent collection of prized and rare Canadian art all along the corridors. As we stood and admired works by Krieghoff, Lawren Harris, AY Jackson and Arthur Lismer, a beefy security guard quietly approached, and in that ever-so-polite Canadian way, said “Hello. You’re probably not supposed to be up here”, which we readily admitted was true, and said we’d leave immediately. He said “take your time”. And so we did, but probably without all the lingering were we unsupervised.

Suffice to say, I’ve had an interest in art for years, and now have a nice collection of carvings, paintings, tapestries and prints. I’ve always wondered how valuable these might be – I don’t really collect them for value appreciation – but the day will come when I downsize and then what? What are they worth?

The problems of the art market

I’ve been buying art for a long time, certainly for 30 years, and for me, the process hasn’t changed that much. I’m either visiting a gallery or an artist’s studio while on vacation, and I see something that I like that reminds me of my visit, and I buy for me or for someone really close to me. I’ve also received watercolors, oil paintings and carvings to acknowledge some corporate milestone like an office move or a transfer. All of these have meaning for me, but the ones that I bought for myself have the greatest emotional tie. I have sold art too, usually when I’m downsizing, and I had no idea what that art object might have been truly worth to the right buyer.

When you think about it, buying and selling art is a fraught endeavour. The supply side of art is highly fragmented – there are thousands and thousands of artists out there. They congregate from time to time in co-operatives or casual Saturday art markets, but in general, finding them is hard. The range of artistic expression in art is vast – oils, watercolors, sculptures, collages, jewelry, prints – which makes art markets a random jumble. Price comparison is really hard to do – why is one painting worth so much more than another? Who has time to run around and visit individual studios, and build up market data to help inform a purchase?

Sometimes you’ll get a “certificate of authenticity” with your purchase, but these are easily lost and easily forged. Sadly for me, I’ve purchased fake items in Hong Kong that came with a fake certificate.

I find buying art emotionally draining because the stakes are high. Selection is vast, I lack good data about the market in general, prices are high (a couple thousand or more), I lack expertise and am easily ripped off, and if I make a poor choice, I have little recourse.

Galleries provide a valuable service by verifying authenticity and showcasing art from a variety of artists, but from many perspectives, this is suboptimal. First, they command very high fees for these services (think 40% of the sale value of a work). With space limitations and low turnover, they carry a very limited selection from the most well-known artists on the gallery floor. If you wanted to sell your “used art“, they might not take your piece unless it’s from a well known artist and they can satisfy themselves that it’s genuine. Moreover, they have more data about the market and can use that to convince you that your art is nearly worthless, when in fact it may be very valuable.

You could try selling your art yourself, but where and how? More than likely, you won’t be able to find the certificate of authenticity. Even if you could, you’re asking a lot from your buyer to trust something that is obviously easily forged. Remember, they’re feeling the same emotional drain buying as you are selling.

Economic hardship for artists

Canadian artists are a resilient lot, clearly in love with the craft and not art as a business. Generally, artists receive income from the sale of their works – on the first sale, through a gallery, they might receive 60% of the selling price, or 100% if it’s directly from their studio or website, and something in between if it’s through some online art market. But if the art is then sold again (as in my case, when I sell pieces from time to time), the artist has no visibility to the sale, does not see how their art is priced, and receives no ongoing royalty. For example, Kenojuak Ashevak, a prominent Inuit artist in Canada, originally sold a piece entitled the “Enchanted Owl” for $24 in 1960. The piece was later re-sold in 2001 for $58,650 and Ashevak received nothing from the re-sale.

By the way, this isn’t the case in other countries, where artists are entitled to lifetime royalties for sales of their works, and royalties for up to 70 years to their estate, after their death, depending on their country. Tracking works of art for 70 years is clearly a challenge, and creates demand for registries, copyright collectives, and an ongoing demand for art appraisers.

Digital to the Rescue?

With such a disorganized and unstructured market, with thousands of individual buyers and sellers and a few high cost market intermediaries, it’s no surprise that some art buying and selling has gone online. These days, it’s pretty easy to assemble an online catalogue of stuff for sale (thanks, Amazon), and sure enough, there are lots of ways to buy art online, from big galleries, co-ops, collectives, markets, and artist studios. But many of the same challenges remain:

  • How do you know what you’re buying is genuine?
  • How do you know the art is not stolen and has a legitimate owner?
  • What if there is no certificate of authenticity?
  • If there is a certificate, how do you know it’s not forged?
  • Does the certificate even match that work? Only an expert may be able to tell.
  • How do you know the price is fair relative to the artist’s recent sales?

Digital online markets do solve for some of the market inefficiency, but these problems still cry out for solutions. I’m reminded of that insight from William Mougayar, in his book The Business Blockchain, where he coined the mnemonic ATOMIC to articulate opportunities to apply blockchain to solve problems:

  • Asset – works of art
  • Trust – between buyer and seller of art
  • Ownership – who legally owns the art
  • Money – setting the price, recovering the royalty
  • Identity – is the buyer able to sell the art
  • Contract – executing the transfer of art (shipping)

A Calgary-based Canadian start-up company, Adappcity Inc., is applying blockchain technology to solve these problems that are so endemic in the visual arts industry. Their blockchain-enabled online marketplace for original artwork called “UppstArt”, and aims to help make buying and selling art online much more convenient, safe and secure for market participants, and to access a much bigger market for the artist.

UppstArt also incorporates re-sale royalty functionality so that artists in Canada and the U.S. have an option to use a platform that will enable them to participate in their own success as their art increases in value and is re-sold over time.

I’ve joined the Board of Adappcity, and I look forward to advising them and following their progress as they make inroads to applying blockchain technology to real-world problems. Check out their website for yourself at www.adappcity.com and follow the progress of their art project on www.uppstart.ca.

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