Despite the pandemic, ample liquidity and technology have created new opportunities for art buyers – most notably the emergence of non-fungible tokens – but Christie’s International CEO Guillaume Cerutti warns against placing profits before passion.
«This is not a commodities market. Every object is unique. Every artist is unique. Averaging in this market doesn’t work,» said Christie’s International chief executive Guillaume Cerutti at Credit Suisse’s 2021 Asia Investment Conference this week.
«Never buy art if you are just looking to make financial returns. Buy first because you want or love the artwork. Otherwise, I promise sometimes you will be disappointed because it’s a market where price and value are two different things.»
Same Function, New Form
While the function of art remains the same, there have been new developments to its form, most notably the emergence of non-fungible tokens (NFTs). Christie’s was recently headlined as the auction house of choice to sell a $69.3 million NFT by Beeple earlier this month.
«Digital art existed before and was transacted before,» Cerutti explained. «But now that NFTs are linked with blockchain, we can guarantee authenticity.»
According to Cerutti, Christie’s has also evolved its crypto capabilities as it now accepts cryptocurrencies for art transactions, including for the latest sale of Beeple’s NFT.
Digital Art Sales
In addition to technology’s influence on art itself, the sales approach has also been disrupted by the limitations of the pandemic and subsequent digital adoption. While travel bans and social distancing measures have caused overall revenue to fall 25 percent at Christie’s – due largely to a drop in supply from hesitant artists – the firm is witnessing profound transformations to its business model.
Auction house sales and private sales traditionally account for 85 percent and 14 percent, respectively, of total sales. Last year, the latter grew to 30 percent due to concerns about market risks. More interestingly, the top transaction valued at $150 million involved the sale of an artwork that was not even seen by the buyer and only displayed via augmented reality online.
Online sales, which traditionally account for only 1 percent, grew to nearly 7 percent and is expected to reach 10 percent this year. The average online transaction price also surged from $7,000 in 2019 to $20,000 in 2020.
Next Generation
Naturally, the next generation of millennials has been a major driver of digital adoption, not only in the art world but across all markets. But they are intent on leaving their mark beyond just tech-related matters.
New wealth is a major growth driver and the most notable entrants are young collectors from Asia who are showing interest in their own counterparts in the art market. According to Cerutti, the top ten prices for leading artists under 40 years old last year were all made through its Hong Kong auction sales.
«The influx of new millennial collectors in this region and their interest for contemporary art is really amazing,» he said, adding that the trend led Christie’s to merge its modern and contemporary departments into one and also create a new 21st century art department.
Art Insurance and Banking
While Cerutti warns about the perils of art as an investment, he notes the financial sector has other roles to play with the two most common being insurance and banking.
On the former, a guarantor is identified and made to buy an artwork at a minimum price if bidding at the auction house fails to yield a higher price. And if it does, the guarantor will share part of the upside with the artist.
And on the latter, Christie’s is utilizing its own balance sheet to lend against collateralized art and the offering is currently available across all jurisdictions.
