Should artists get royalty?

Once again there is a lot of discussion on whether an artist should be given a royalty or a percentage of the sales, when one of his artworks does exceptionally well during a resale, for instance, at an auction. There is mixed feeling towards this. While most artists feel that a certain percentage of the sale proceeds should be given to the respective artist, gallery owners and collectors feel that the issue is debateable. In practical terms it is very difficult to track each and every artwork that is sold or resold, unless it is at an auction. Art collector Harish Padmanabha asks, “when I invest in real estate and I sell the property a few years down the line, should I give a percentage of the profits to the previous owner?” He says that once an artwork leaves the studio, it becomes a commodity and gets bandied around in the market. An artist’s job should be to give vent to his creativity and give enjoyment to the viewer and himself. He brings out the point that when the artist is no more, who should benefit from the percentage? Therefore, it appears that implementing such a plan is full of loopholes. Artist Ravi Kumar Kashi also admits that the idea has its benefits, but wonders how the mechanism would really work in practical terms.

On the other hand, Indian artists who have struggled a lot in their career and have only now begun to make a mark at international auctions are unfortunately not getting any share of the proceeds. We have seen in the past that legends from the fields of music and sports have languished in abject poverty in their last days. One wonders, when the modern and contemporary Indian art market is thriving so well, is there a way to acknowledge the contribution of its key players? Giving a royalty to the artist may or may not be the answer, but a solution that aims at long term benefits rather than short-term gain is much needed.

Contemporary art market draws more buyers

There is a general feeling in the art market that the focus has shifted somewhat from Indian modern artists to contemporary artists. In fact, a trend that has become more noticeable now is that buyers and investors are backing younger talent. There are even reports that some senior artists are not finding any takers at all. Whether this is true it is difficult to say, but prices of some of these artists have definitely gone down. Paintings by a few well-known artists that were selling for Rs 12-15 lakhs (market price and not their auction price) are now barely holding out in the Rs 5 lakh range. It appears that there is a greater confidence in the contemporary art market.

There could be many reasons for this downward trend. According to an art collector, quality is a prime factor. As all works by the same artists are not of the same quality, the poorer works are now being reflected in their prices. Another theory is that the buyers are simply bored and find art from younger artists more exciting and refreshingly different. Contemporary artists are more open to experimentation when it comes to medium or concept. Brands and signature styles seem to be getting outdated. The new buyer now wants something ‘different’. Originality of thought is also considered to be one of the parameters that is now defining the art market.

Again, one must remember that the buyer profile has also changed in the last few years. Investors and collectors are getting younger every day and probably that is why they relate better to works by their contemporaries. It is also believed that contemporary artists have a greater international appeal as compared to modern artists. Having said that there is no guarantee that all contemporary artists will continue to perform well. Some of them are bound to lag behind over time when it comes to their investment potential. Similarly, it is very unlikely that Indian modern art will continue its downward trend, but how long it will take to bounce back it is difficult to predict.

(Published in Financial Times)

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Selling an artwork

Once art forms a part of an investor’s portfolio, at some point in time he may want to sell it. One sells an artwork to obtain liquidity either because funds are needed to buy another artwork, or to reinvest, or simply because it is a good time to sell and maximise the profits.

When should you sell a painting? Although this would vary from person to person, as a general rule you should sell when there is an increased demand for that artist/artwork in the market. The demand is likely to be high after an artist has performed well at an auction or has participated in a major exhibition or has been recognized internationally. This generally translates into a better selling price. However, when there is a slump in the market it may be good time to buy but not to sell.

Some people may want to buy newer works and may decide to sell the older ones to create space. One must realise selling an artwork is not a simple and easy process. Sometimes the painting may remain with the gallery for a long time before being sold. One may not always get the asking price. Also, when reselling the artwork, it helps to remember that there are gallery commissions, and tax implications, which will affect the profit margins. According to gallery owner Premilla Baid, “There is no right time to sell. It is a very subjective thing. When we sell artworks for our regular clients, we charge them 10% of the sales.”

To ensure you make a sound investment it is essential you know how to pick upcoming artists with the potential to appreciate. Which means when your reinvest the funds try to pick up works that are likely to appreciate in the future. Remember, art should always be looked at as a long-term investment option.

In general art cannot be compared to the stock market or real estate, there are a lot of variables involved and one must make a decision after a thorough research of the market conditions.

Tips for buying at an auction

At the recently held Christie's Hong Kong auction of Asian contemporary art, N S Harsha topped the sale of Indian works. Harsha's 'Mass Marriage' fetched $6.4 million, which is a new record for the artist. Other Indian artists such as Atul Dodiya, TV Santosh, Ravinder Reddy and Subodh Gupta also performed exceedingly well. This is a good sign for Indian contemporary art.

International auctions usually feature well-established names along with a select group of promising artists. Continuing with our series on whether to buy from an auction, here are a few tips that will help you buy from one.

Apart from the big auction houses there are several smaller ones that also organize art auctions on a regular basis. The amount of money involved in these is generally more reasonable. In fact, some of these are organized to raise funds for a charitable cause, and in such cases a portion of the sales are donated towards the charity. Why should you buy at an auction? According to gallery owner Renu George, “auction houses are able to predict future trends, so even if you buy at a higher price at an auction, chances are it will appreciate in the future.”

Before the auction event, a catalogue is distributed to prospective bidders. The catalogue, lists out the works (name of the artist, title, size, medium, provenance, etc), lot numbers, and estimated selling prices or ‘reserve price’. This will give you an idea, which works to bid for. It also gives you time to crosscheck and get familiar with the artist’s credentials and track record. Before the auction there is a viewing of the works that is organized for the prospective bidders (unless it is an online auction, but these too sometimes organize an exhibition). It is usually a good idea to physically check out the artwork and not bid on the basis of the catalogue alone.

It is important to predetermine your exit price. It is very easy to get carried away during the auction, and to keep bidding in the heat of the moment. However, if you set your limits it will help you enormously.

(Published in Financial Times)