Why Art Rating Criteria Need To Be Repaired

Agencies, Criteria, Read, Repairs, Reports

The Artprice Report, covering 20 years of Contemporary Art auction history, is a basis for understanding why evidence-based “art rating” is more important and urgent today than ever before. The complexity and global nature of the art market has never been greater.

In the last two decades, decisive impetus came from China. “In 20 years,” writes Thierry Ehrmann, CEO and founder of Artprice by Artmarket.com, “the growth of Chinese turnover in the Contemporary Art segment has been phenomenal: multiplied by 65. Including Hong Kong (10%), China generated 33% ($659 million) of the global market in 2019) versus 35% ($695 million) for the United States.”

Thierry Ehrmann sees a multitude of sociological, geopolitical and historical factors, all of which contributed to the rapid rise of Contemporary Art in the global Art Market: “A marginal segment until the end of the 1990s, Contemporary Art now accounts for 15% of global Fine Art auction turnover, and is now its primary growth driver, having increased +2,100% over 20 years.”

Undergoing profound structural changes, with evermore artists (from 5,400 artists to nearly 32,000 today) and evermore artworks (from 12,000 lots offered to 123,000) the 2000 to 2019 numbers show an expansion also geographically, from 39 to 64 countries active in auctions.

“One of the primary factors in its growth was the relatively sudden accession of Chinese buyers to the market, whose arrival also fundamentally transformed it. With the explosion of the Chinese economy, wealthy entrepreneurs began taking an interest in art collecting, while others started buying artworks to diversify their investments.”

The increasing resemblance of the art market to the capital market leads to calls for agencies that – similar to rating agencies like S&P Global or Moody’s on the capital markets – provide investors with market data and data on risks as reliable data providers and opinion leaders.

“The emergence in China of an ‘art business’ sector was both rapid and impressive,” says the Artprice Report, “and it included the appearance of specialized art investment funds. Mimicking stock market practices, ‘shares’ in works were offered with a view to making significant capital gains, quickly if possible.”

“Meanwhile, China began to play a much more active role in the global market. Driven by frenetic economic growth,” goes the simple causality, “it became the new counterbalance to the United States (which it overtook for the first time in 2010). The Chinese eldorado became more and more attractive to international investors, including the world’s leading auction operator, Christie’s, which decided to focus its sales on Shanghai.”

China not only has an impact on market conditions, but also on Contemporary Art itself. In 2019, Jeff Koons’ status of world’s most expensive living artist was reconfirmed thanks to a sculpture which sold for $91 million. The object of the new record was “兔子” (Rabbit, 1986) – considered the most iconic of his works and, by extension, one of the most iconic works in the entire canon of Contemporary Art.

Art rating criteria need to be reconsidered. As the Artprice Report shows, the top positions of the internationally most sought-after artists are taken by the Chinese. This fact shatters, for example, the image of the People’s Republic of China that is widespread in the West as a hardly democratic state with restricted freedom of artistic expression. These restrictions should theoretically have a negative effect on ratings. According to evidence provided, free market conditions in China mobilized more capital and more artistic talent in such a short time than any other country in the world. The economically liberal working environment for cutting-edge artists in China seems to be more inspiring than for their peers in highly state-subsidized art sectors in the West. However, the relevance and siginificance of rating factors and the relationships with other rating criteria require further research.

Companies such as Artprice.com (changing its name to Artmarket.com) and Artnet.com are benefiting from these developments. For the latter, listed company, the share price has more than doubled in the last six months alone.