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Written by: Northern Trust
Technology promises to affect every aspect of the art world.
A great work of art can appear timeless and unchanging, its insight and beauty set apart from the march of time.
The art market paints a different picture. Traditionally hampered by opacity and inefficiency, it is primed for digital disruption — the same sort that has transformed industries ranging from transportation to publishing. A new wave of startups has the art world in its sights, bringing to market products like provenance trackers, collection management systems and virtual-reality gallery experiences.
Silicon Valley has taken note: Twenty-three art-focused startups received $505 million in venture capital in 2015, and art startups have received nearly $1 billion since 2013, according to Deloitte’s 2016 Art & Finance report. That’s a gold rush of activity in a sector that hadn’t received much attention.
For artists, collectors, galleries, dealers and auction houses, the influx of technology promises to affect every aspect of the art world, from the creation of new works to the way masterpieces are vetted, bought and enjoyed.
“As our ability to track the history of each piece improves, it’s going to eliminate a tremendous amount of energy that right now is spent around wondering, ‘Where did this come from?’ and ‘Who previously owned it?’”
— Howard Tullman, 1871“
This is going to really drive the democratization of the art market,” says Phillip Ashley Klein, who leads Deloitte’s art and finance practice in New York. “It’s going to allow aspiring collectors — those with traditionally less knowledge and access — to get up to speed quickly. And with the greater access that comes along with more globalization and democratization, savvy collectors will have much more opportunity to see potential deals.”
Here are three ways technology promises to change the art market landscape.
1. Expanded global and remote access.
When art was examined and sold exclusively at auction houses, it made sense that art market activity would be concentrated in cities like New York and London. But today, internet-based auction houses such as Paddle8 and Auctionata enable far-flung buyers and sellers to connect with one another, decentralizing and expanding the marketplace.
That has contributed to the globalization of the market and opened opportunities for regional dealers to reach a broader audience. Klein predicts that top-priced artworks will continue to be sold at live auctions, but the vast majority of sales under $1 million will move online. It also puts “pocket listings” — art for sale that’s made available only to a small group of prospective buyers — on the endangered species list.
“The future is going to be 100 percent about transparency and efficacy. It’s about making true global markets where all the information is available and accurate,” says Howard Tullman, an art collector and CEO of the Chicago-based startup incubator 1871 .
In the same way, education-focused services, such as One Art Nation, train new collectors and their advisors in the intricacies of the art world, enabling a new generation to quickly learn to discern art market tendencies and negotiate the purchase process. As collectors grow more confident and comfortable with the art market, they are better able to evaluate art purchases as investments.
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2. Power shifting to collectors from gallerists.
Remember when you read the newspaper or asked a friend about a new restaurant in town? That was before online restaurant review sites. The art world is in for a similar shake-up thanks to a confluence of several trends.
First, virtual-reality technology promises to give more people access to art works in private collections or faraway galleries. Second, data-focused startups such as Aura solicit user comments about art. When a broad base of art aficionados weighs in on new art, some of the star-making power that has long been the exclusive domain of collectors and gallery owners transfers to the vox populi.
“We’re creating a new class of tastemakers,” says Klein. This means an artist or artwork that connects with a mass audience can leverage the new exposure. “That artist can be that next big up-and-comer, even if they don’t have that traditional financial backing or big endorsement.”
Mass audience tools and virtual- and augmented-reality platforms also promise to expand the reach of art, enabling more people to view more work, and build community among fans of different artists and media.
A second class of art-tech businesses aims to apply big data to the art market in a different way: assimilating market trends and past performance to predict the asset value of new works. ArtAdvisor.io, for example, predicts the longevity and influence of artists based on algorithmic analysis of factors such as an artist’s background, medium and critical reception over time.
3. Tracking art and its provenance going digital.
Two of the trickier aspects of art purchasing — at least outside of the major auction houses — are tracking an artwork’s provenance and facilitating the transaction itself. Deloitte’s Luxembourg team recently debuted a prototype of a product that could employ blockchain technology (a relative of bitcoin) to reliably track the provenance of a work. Startups such as Athena Art Finance Corp. allow buyers to pay for their art over time using the art as collateral, therefore removing friction from the purchasing process.
“As our ability to track the history of each piece improves, it’s going to eliminate a tremendous amount of energy that right now is spent around wondering, ‘Where did this come from?’ and ‘Who previously owned it?’” says Tullman.
Deloitte’s Klein says the biggest factor driving the art market toward greater transparency may not be technological but cultural: The auction houses and galleries that sell high-end art know they need to change.
“Considered as an asset class, the art market is viewed as obscure, esoteric and nebulous,” he says. “The market realizes that needs to change and that there’s a need for standards and regulation. It’ll take time for these standards to be enforced, but there’s agreement that these changes are needed.”