The Art Mart

 Art galleries are (among other things) middlemen, intermediating between artists and buyers of art, who may range from passionate consumers to institutional investors. (There are of course also passionate consumers who are also investors in an asset class that, like real estate, you can enjoy while it appreciates.)  

Of course, the galleries' incentives may not always be perfectly aligned with those of creators and consumers.  Galleries play a big role in helping bring young artists to market, and matching them to consumers and investors.  But as artists become more well known, other opportunities present themselves.

Here's a story from the WSJ about tensions involving sales by galleries versus sales by auction.

Why Artwork Flipping Can Incur the Wrath of Dealers. Dealers want to control the artists’ narrative and pricing, but investors want to leave it to the market  By Daniel Grant

"Chicago gallery owner Rhona Hoffman has three or four collectors she won’t sell to again.

“They broke the rule,” says the contemporary art dealer.

"That commandment to collectors: If you later decide to sell your artwork, consign it back to the gallery—do not put it up at auction.

"When buyers ignore this rule and auction off recently purchased pieces, it’s called flipping."

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Here's an older story, from Artsy, about the British artist/entrepreneur Damien Hirst, who has a long history of ambivalence about the role of galleries in the design of the market for art.

How Damien Hirst’s $200 Million Auction Became a Symbol of Pre-Recession Decadence by Nate Freeman

"On September 15, 2008, Sotheby’s was set to auction off 223 brand new works by Damien Hirst, including top-flight examples of his whole animals in formaldehyde, medicine cabinets, and spin paintings. It was an unprecedented incursion by an auction house into the primary market, and an unabashedly flashy sale accompanied by a global marketing tour with stops in Kiev, Aspen, and New Delhi.

...

"The Hirst auction, which the artist had dubbed “Beautiful Inside My Head Forever,” exceeded all expectations, grossing $200.75 million over the course of two sales in the span of 24 hours and becoming the most expensive single-artist auction ever. The 56 lots at the evening sale went 97% sold, and the two lots that did not find buyers during the auction were sold before the night was over. Over a third of the buyers had never bought contemporary art before. On the cusp of a global recession, Hirst walked away with $172 million.

...

"Taking work directly to market through an auction house would siphon millions of dollars from Hirst’s powerful dealers, Jay Jopling and Larry Gagosian. Hirst’s set up was typical of any in-demand artist at the time: He made work, and his dealers decided where to place it. Ordinarily, it is frowned upon when a vetted collector flips a work at auction. But Damien embraced that very act of betrayal and decided to pre-flip his own works to whoever could pay, with the support of Dunphy, whom he trusted more than his two dealers.

“Frank has my best interests at heart,” Hirst told The Economist in a story published before the sale. “Dealers say they do, but they don’t.”