Bracing for the Next Normal: What does this mean for the art business?

Philip Hoffman, CEO of The Fine Art Group. Photography by Charles Shearn. Image courtesy of The Fine Art Group.
Adrian Zuercher, Head Asset Allocation APAC, UBS Global Wealth Management Chief Investment Office in Hong Kong. Image courtesy of UBS.
Lisson Gallery launched both an online exhibitions platform and an augmented reality app in parternship with Augment. App interface showing Carmen Herrera’s Untitled Estructura (Red), 1962/2018. Image courtesy of Lisson Gallery.
Among various stringent regulations including temperature checks and use of hand sanitizers, the suggestion of following social distancing has become part of our “new normal” during the COVID-19 pandemic. Photography by Ehimetalor Akhere Unuabona. Image courtesy of Unsplash.
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After months of the global economy being ravaged by COVID-19, the most important question cropping up is, what will the art business look like after this?

 

TEXT: Denise Tsui
IMAGES: Courtesy of various

In recent weeks, as we continue to grapple with comprehending the disruptions and changes forced upon us by global pandemic COVID-19, the term “new normal” and “next normal” have been coined as the means by which we explore what potential permanent outcomes will result when the pandemic becomes a chapter of our history. The pandemic set off a domino effect on the supply chains of every industry worldwide, including, of course, the art business. With mobilization halted, and domestic economies reeling, the crippling flaws of globalisation are more apparent than ever.

As we begin to crawl out of the quarantine—or lockdown—slumber to emerge on the other side of the pandemic, businesses are seriously strategizing the next step forward. What will a post-COVID-19 art market look like? According to a UBS and Art Basel panel talk titled “The Impact of COVID-19 on the Art Market” on 19 May, it was still too early to tell but some signs are there. The world is falling headfirst into a deep recession, with a drastic downturn in GDP surpassing any seen before even with the Asian financial crisis of 1997 or the global financial crisis of 2008. Just recently, Hong Kong has reportedly seen its GDP shrink 8.9 per cent year on year in the first quarter. And this result is not accounting for the political uproar that has erupted since I began writing this piece weeks ago.

An art world that prided itself on an endless stream of social gatherings and a saturated—and frankly, exhausting—travel schedule for the frequent flyer among us has been forced to dig deep for new innovations and give some serious thought on the previously ignored question of business sustainability. Gallery business models that have largely remained unchanged for decades—except maybe with the introduction of marathon fair runs—are now scrambling to redefine themselves. How we will conduct the transaction of art is being questioned as much as how we may go about making and consuming art.

 

The Economy Circus Round and Round

Back in early April, I spoke with Philip Hoffman, CEO of The Fine Art Group, who remarked firmly, “The whole market is going to change in how it’s transacted.” While sharing examples of art lending spurred by the onset of the pandemic, he was confident that the art market “in the short term, will see a slight drop. In the medium term, there will be a shakeup of the good versus the bad, but there will probably not be much long-term effect.”

Meanwhile, Adrian Zuercher, Head Asset Allocation APAC, UBS Global Wealth Management Chief Investment Office, anticipates that there could be moderate economic rebound in Q4 of this year and into early 2021—given a vaccination for COVID-19 is successfully developed within the next 12 months—but he is cautious to warn of the qualms ahead. “Debt levels will be much higher at the end of the current crisis. The precise fiscal spending picture is still unclear, but given our current estimates, government debt as a percentage of GDP will be 15–25 per cent higher by the end of 2021 than it was at the end of 2019 across much of Europe and in the US. This is broadly comparable with the scale of increase seen between 2007 and 2010 as a result of the global financial crisis. Higher debt level will affect growth rates for most of the countries.”

“Beyond 2021, a post-crisis world will be more indebted, less global, more digital,” he said in an email. “Investors will need to contend with higher taxation, financial repression, and moderately higher inflation, along with populism and protectionism, while navigating the transitions from global to local supply chains, and from physical to digital.”

He adds, “It remains unclear how quickly consumers and regulators will regain confidence in the safety of the sharing economy, particularly if current social distancing measures leave a permanent mark on the public consciousness. This potential shift in how we interact with others and our environment has consequences for the recovery.”

 

Philip Hoffman, CEO of The Fine Art Group. Photography by Charles Shearn. Image courtesy of The Fine Art Group.

 

Adrian Zuercher, Head Asset Allocation APAC, UBS Global Wealth Management Chief Investment Office in Hong Kong. Image courtesy of UBS.

 

The Economist described this expectation succinctly: “The pandemic will politicise travel and migration and entrench a bias towards self-reliance. This inward-looking lurch will enfeeble the recovery, leave the economy vulnerable and spread geopolitical instability.”

Of course, much has changed since April. Now, in June, parts of the world are beginning to emerge from various states of lockdown, while others are still seeing their case numbers spike. The United States, where COVID-19 is still raging, has been usurped by an even greater humanitarian crisis that is centuries old. South Korea is facing a second wave of cases, meanwhile New Zealand has announced itself coronavirus free. Germany is reopening its economy, as is Hong Kong and China, among others. The UK is preparing to relax its restrictions.

What we can takeaway from this circus is that there is hope; there is light at the end of this tunnel, but the rate at which we can carry ourselves—and each other—out of the deep hole of recession may come down to how cleverly we play the game of business and how much we can rally together for the greater good.

 

Old Habits Die Hard: From Fairtigue to Virtigue

The last time we saw a real universal change to the art business was when art fairs sprouted exponentially like bacterium, which was primarily in the 2000s, but especially heightened in the years following the global financial crisis. Most galleries fell into the trap of dependency on fairs to make their revenue. Simply said, fairs became big business for all. Fast forward 10 years and we are all experiencing what is best known as fairtigue. Before COVID-19, gallerists were already commenting on how they planned to cut back on fair participation from 2020.

With the pandemic ravaging the world, these past few months have seen fair after fair cancel, postpone or remain in scheduling limbo. Most recently, Art Basel announced cancellation of its June fair, which had been pushed back to September. As online viewing rooms quietly became a dominant trend, and globally, the major art centres (entire countries really…) went into lockdown, the onslaught of digital content began. New platform initiatives, virtual screenings, live streams and more from literally all corners of the globe—and even those we didn’t know existed—have been pouring in.

But let’s face it, our capacity for screen time is exhausted in the art world’s efforts to stay visible and relevant at a time when the world economy is grinding to a slow halt.

Virtigue—think, virtual fatigue—is a very very real thing. Can you really spend time with all 281 galleries that will be presented for Art Basel’s Online Viewing Room? I didn’t think so. Even artnet’s Nate Freeman wrote about the excess of online fairs just a few weeks ago, and let’s remember that pre-pandemic, artnet was already a 24-hour digital platform.

So what happens when more of the world opens up again and we resume pre-COVID-19 freedoms, just perhaps with extra stringent personal hygiene measures in place? There are already whispers within the art world of people making travel plans.

Take a piece of paper and pen and mark down each fair and biennial that has announced new, or reshuffled, dates for 2021 outside of their usual allotted spot on the global art calendar. Now use another colour pen and add in every fair and biennial that is already slated for 2021. What you will have before you is an art world schedule that is even more congested. So have we really learnt our lesson?

It begs to reason that as we self-diagnose virtigue from the comforts of our couch—or office desk for us lucky ones—and our circadian rhythm becomes increasingly distorted by our screen time addiction and the demands of keeping tabs across countless time zones, the attraction of real fairs, real exhibitions, real humans, will be irresistible. Maybe you will travel a little less, maybe fairs will continue to be supported by a digital means of sales, nonetheless, we travel-addicted, art-chasing creatures will not come out of this changed for good. The unrelenting demands of an art market that thrives on globalisation will continue to be exactly that. Maybe with just a few tweaks and an additional option in the pull-down menu for how we want to be fatigued by what we love.

 

Trimming the Excess in the Post-COVID-19 World to Come

Without a doubt that there will be businesses forever lost at the end of this pandemic. But there will also be new business models, revenue strategies and other opportunities that arise. My inbox may be spammed with more emails than I can track of new virtual initiatives, but it is unquestionable that this has been a successful way for galleries to stay in the game. Reports of success have also trickled in. David Zwirner is one shining example. Even auction houses are upping their game, including powerhouse Sotheby’s who recently announced the launch of a new sale format for the upcoming season. But what becomes quickly obvious is that, beyond a certain price point, collectors have more faith in buying artists with certain provenance and market value than in younger artists. The chance to discover new finds is diminished by online fairs. Most importantly, the physical experience of viewing art cannot be entirely replaced by the digital medium. But it is a new model, and it is likely that degrees of it will remain in our post-COVID-19 world.

 

Lisson Gallery launched both an online exhibitions platform and an augmented reality app in parternship with Augment. App interface showing Carmen Herrera’s Untitled Estructura (Red), 1962/2018. Image courtesy of Lisson Gallery.

 

“You never want to start something to stop after a few times and the sustainability and ongoing nature of these programs is built into the fabric of our initiatives,” said David Tung, Director of Lisson Gallery Shanghai, who launched both an online exhibitions platform and an augmented reality app—in partnership with Augment—as part of their global strategy in response to the crisis. “Art experiences via digital medium, while unable to replace the experience of seeing works in person, remain an incredibly important and effective part of our engagement with our clients.”

He adds, “No one really knows what will happen in the next few months. It’s important to be open and honest about the fact that there will not be a return to ‘normal’—the world has changed, but we don’t know yet how this will be reconstituted. Our objectives and goals remain on the forefront to develop and build the new systems and ecology in what ever form that may take.”

That the art world will bear scars left by COVID-19 is without question. Short- and mid-term effects are already evident, but to think we will somehow change the very core of the art world is also perhaps too dramatic. The various facets of the art world will be shaped somewhat differently, but you’ll still recognise it. The beast is still exactly that—a beast—and it isn’t about to turn into a prince just yet.

 

Among various stringent regulations including temperature checks and use of hand sanitizers, the suggestion of following social distancing has become part of our “new normal” during the COVID-19 pandemic. Photography by Ehimetalor Akhere Unuabona. Image courtesy of Unsplash.

 

 
1 Comment

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One thought on “Bracing for the Next Normal: What does this mean for the art business?”

  1. Hi Denise,

    Great article. Thank you.

    The question of "business sustainability" that you raise is an important one and how art transactions (including purchases, sales, exhibitions, lending, education, marketing, conservation, long-term stewardship) may be structured to enable and optimize business sustainability is a crucial question.

    Business sustainability does not exist independently of the "interactions with our environment" that Adrian Zuercher, Head Asset Allocation APAC, UBS Global Wealth Management Chief Investment Office, mentions.

    That environment includes, of course, all the variables that Mr. Zuercher mentions such as fiscal spending, government debt, taxation, financial repression, inflation, populism, protectionism, supply chains, and presentation (e.g., physical, digital).

    Importantly, that environment also includes, as Mr. Zuercher, UBS, and the Bizot Group, amongst others, are well aware, our natural environment. Our "art," inherently, cannot be separated from our natural environment. Materials, supply chains, built environments in which works of art are exhibited, protected, and studied, the fact that "art" is a factor of "mind," itself a phenomenon of nature – all manifest how art is embedded in nature, as are we all.

    A sustainable business model, while attempting to be global in the sense of highlighting both the multiplicity of cultures and the fluidity of culture, globally and over time, needs to be able to interact with our shared environment without negative externalities.

    We might be well advised to heed the signals that are coming our way. Rather than "scars left by Covid-19," as you call them, what we are learning might enable us to better determine sustainable business models.

    As we seek ways to really appreciate, and learn from, all that art (and the related human discipline of science) is trying so hard to communicate, we might want to question the merits of being "travel-addicted, art-chasing creatures responding to unrelenting demands of an art market that thrives on globalisation."

    Perhaps there might be, and there likely will be, even as David Tung, Director of Lisson Gallery Shanghai suggests, further dialogue: "It’s important to be open and honest about the fact that there will not be a return to ‘normal’—the world has changed, but we don’t know yet how this will be reconstituted. Our objectives and goals remain on the forefront to develop and build the new systems and ecology in what ever form that may take.”

    Wishing you all the best,

    Mary