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Rise of online art auctions and digital art signal disruption

Jovi Ho
Jovi Ho4/1/2021 06:31 AM GMT+08  • 8 min read
Rise of online art auctions and digital art signal disruption
On average, collectors in Singapore bought seven works of art in 2020 despite the pandemic, holding steady from 2019.
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With the lockdowns of last year, families with young children are not the only ones feeling stir-crazy. High-net-worth individuals around the globe are itching to get out and return to the auction house.

As Jacob Bernstein wrote in the New York Times recently, “bored rich people” are turning luxury collections into “alternative asset classes”. Pent-up demand for jewellery, watches, furniture, collectible cards, vintage cars, limited-edition sneakers and even digital art is driving prices sky-high, says Bernstein, noting that many retailers were hesitant to speak of the boom owing to the current economic uncertainty.

Just like the proliferation of e-commerce last year, auction houses have had to shift online for much of 2020. But auctions were largely a seller’s market, notes Guillaume Cerutti, CEO of Christie’s.

“The demand for art and luxury goods remained very strong. Everything that was put on the market last year did rather well. It was more challenging on the supply side,” he says. “People were not confident to put their art on the market because of the overall atmosphere and the economic context. They preferred to wait until later last year, or this year, maybe this fall, to make the decision to sell,” he adds.

See: Forget whisky bottles and casks; investors can now trade with tokens

Speaking at the 24th Credit Suisse Asian Investment Conference, Cerutti notes that the British auction house experienced a 25% drop in revenue in 2020.

Revenue mix also shifted considerably, with private sales doubling to 30% from 14% and online sales contributing between 6% and 7% of revenue, up from just 1% prior to the pandemic.

“Private sales are a good way to give security to people who are a bit hesitant [and] are testing the market,” says Cerutti.

After months of cancelled fairs, demand proved overwhelmingly strong when Christie’s itself gauged industry response in July 2020 with ONE, a four-hour hybrid event livestreamed from London, New York, Paris and Hong Kong.

A 1994 nude painting by Roy Lichtenstein, initially forecast to fetch US$30 million ($40 million), stole the virtual show. Following an intense nine-minute bidding war, an anonymous Asian collector picked up the artwork for US$46.2 million.

Of the 79 works on offer, only five were left unsold. In total, Christie’s saw US$421 million worth of sales, with Asian bidders taking home more than a quarter of the lots put on offer.

Asia’s heir supply

With increased demand from Asia, industry leaders like Cerutti are paying attention to this growing slice of the art collector pie. “At Christie’s last year, 35% of active clients were new to Christie’s. Most of them were young clients, especially in Asia. Millennials have been so active in our sales, driving some new trends in terms of collecting patterns. That’s very exciting and great to observe,” he says.

That demographic shift is underway in Asia due to a generational transfer of wealth, says Adrian Zuercher, head of global asset allocation at UBS Global Wealth Management.

“In Singapore, we can already see that there’s a high share of second-generation, even third-generation [individuals] who are less involved in their family businesses,” says Zuercher in an interview with The Edge Singapore.

These moneyed millennials are turning to artwork and building collections in a drastically different way from their predecessors. Unlike collectors who fixate on a particular period or form, young collectors favour broad collections across various categories, and are more likely to purchase contemporary works.

“Sales by category are a bit old-fashioned, and we need to re-invent them,” says Cerutti of auctioneers.

Christie’s Asia set a record last December with US$225 million of sales achieved across five modern and contemporary art auctions. The auctions also drew the top 10 prices for works by living artists aged below 40, says Cerutti. “The influx of new millennials [and] collectors in this region and the interest for contemporary art is really amazing.”

Singaporean tastes

Singaporean collectors exemplify Asian collectors’ focus on 21st century works. According to the Art Basel and UBS Global Art Market Report, collectors in Singapore held some of the highest share of works by living artists in their collections (56%) compared to other markets surveyed.

On average, collectors in Singapore bought seven works of art in 2020 despite the pandemic, holding steady from 2019. More than half of collectors in Singapore (58%) were optimistic about the global art market over the next 12 months, with 67% optimistic about its performance in the next 10 years.

Authored by Irish cultural economist Dr Clare McAndrew, the report includes insight from a survey of 2,569 high net worth collectors, conducted by Arts Economics and UBS Investor Watch across 10 markets: the US, the UK, France, Germany, Italy, Hong Kong, Taiwan, Singapore, Mexico and, for the first time, China.

The US market retained its leading position in 2020 with a share of 42% of global sales values, with Greater China and the UK on par at 20%.

While global sales of art and antiques were an estimated US$50.1 billion in 2020, down 22% y-o-y, online sales of art and antiques reached a record high of US$12.4 billion, doubling in value y-o-y and accounting for a record share of 25% of the market’s value.

Indeed, collectors are becoming increasingly comfortable with purchasing big-ticket items online without first seeing the work in person, says Cerutti. “For our online-only auctions, before the pandemic, the average price point for transactions through this channel was US$7,000. Every year [prior to the pandemic], the average value was increasing by US$1,000. Last year, we jumped from US$7,000 to US$20,000 on average,” says Cerutti.

From its current revenue share of between 6% and 7%, Cerutti sees Christie’s online sales passing the 10% mark this year. “Buying art is often a social event; that’s why the art fairs are popular,” says Zuercher, who is based in Hong Kong.

“But we also can see that millennials are connecting more online. If you can create a more virtual, digital world that can connect millennials, that’s definitely something that may impact channels like auctions, which have been a bit more traditional.”

A token sum

New waves of technology have already arrived at the shores of the art world. Earlier in March, Singapore-based technopreneur Vignesh Sundaresan spent an eye-watering US$69.3 million on a non-fungible token (NFT) in a Christie’s online auction.

The chief financier of cryptocurrency fund Metapurse paid for the work in Ethereum (ETH), the second-largest digital coin.

See also: How far will the non-fungible token mania go?

Commanding headlines around the world, Cerutti compared this landmark sale of Everydays: The First 5000 Days by American artist Beeple, to Christie’s 2017 sale of Salvator Mundi by Leonardo da Vinci, which set a record then as the most expensive painting ever sold, at US$450.3 million.

This sale marked a record for digital art. Mike Winklemann, the real name of the artist Beeple, has earned the third place on the list of record auction prices for works by a living artist. The first was Jeff Koons, whose sculpture, Rabbit, sold for US$91.1 million in May 2019; David Hockney took second place in 2018 with his US$90.3 million painting, Portrait of an Artist (Pool with Two Figures).

“[The NFT sale] is probably the most fascinating thing that’s happened in the art market, and maybe in the art world, for the last 10 or 15 years,” says Cerutti.

However, perhaps in a sign that the art world is still tethered to the real world, Winkelmann promptly converted his takings of US$55 million in ETH into cold hard cash. “I absolutely think it’s a bubble, to be quite honest. I go back to the analogy of the beginning of the Internet. There was a bubble. And the bubble burst,” said Winkelmann in an interview with Fox News Sunday. “But it didn’t wipe out the internet. And so, the technology itself is strong enough where I think it’s going to outlive that.”

See also: Prices in a 'bubble', artist says after US$69 mil NFT sale to Singapore buyer

In any case, digital art has assumed a permanent place in the art world. London-based contemporary art gallery HOFA announced last week the release of its inaugural NFT, a high-resolution video titled Red Flower IV by Chinese artist Zhuang Hong Yi.

Released on March 25, the piece consists of 25 unique digital artworks priced individually at 1 ETH, or about $2,272.47 as of March 29, with a single full crypto art animation to be auctioned to the highest bidder.

Even old-school names are entering the art world via NFT technology. Known for creating some of the most recognisable games of the 1980s, Atari announced in March that it is partnering Bondly Finance to release collections of dedicated NFTs covering gaming and music.

According to Bondly, its native NFT gaming brands have grossed over US$4 million in revenue in the first three months. Last month, the e-commerce platform reportedly released “the very first NFT music album” in collaboration with YouTuber and musician PelleK, which sold out in less than two hours for US$160,000.

“Digital art existed before and was transacted before. But now with the NFT, which is linked to the blockchain, we are able to provide the guarantee of authenticity and of the unicity of the work,” says Cerutti.

Zuercher thinks blockchain technology could one day cut out the need for auction houses. “If you look at blockchain, that’s probably something that could be exploited as a channel. Because you can interact directly, you don’t need an intermediary, and that’s definitely something that could disrupt the art market in the next couple of years.”

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