25th November 2019 – (Hong Kong) According to the latest Contemporary Art Market Report 2019, more than 71,000 works by nearly 22,000 artists were sold in the 12-month period but while the Contemporary Art market may be extraordinarily diverse, relatively few artists fetch seriously high prices. The market’s economic power is largely dependent on 500 high-performance artists, whose works generated US$1.68 billion, or 89% of global turnover.

More than half of the global turnover (64%) comes from only 50 artists, who, in financial terms, represent the most competitive investments. American artists dominate the high-end market, followed by Chinese artists supported by their effervescent domestic market.71 of the top 100 performing artists in terms of annual turnover are American, British or Chinese

One of the specificities of the Chinese market is the confidence it invests in young artists. HAO Liang (1983)MI Qiaoming (1986) and JIA Aili (1979) are the top-selling under 40 artists in the world. This rising generation is already fetching million-dollar results on the auction market in China and Hong Kong. The success of these three artists – who also revised their personal records in 2019 – owes much to the dynamism of the Chinese and Hong Kong markets.

A 100% US podium

The three economic pillars of the global Contemporary Art market are Basquiat, Koons and Kaws. They alone account for 19% of the segment’s global auction turnover, with sales of their works (more than 900) generating US$362.7 million in the 12-month period (2018/19).

Source : The Contemporary Art Market Report 2019

Kaws, The new idol of the global market

KAWS (aka Brian Donnelly) has enjoyed the most breathtaking progress of the year, taking third place (in turnover terms) behind Jeff Koons, with a total of US$936 million, that’s US$78.3 million more than in 2017/2018. The forty-year-old American artist represents – along with Koons – one of the most remarkable examples of the continued success of Pop culture on the art market. Kaws has managed to pursue the Pop ethos through his Companion, an emblematic character with crosses for eyes and crossbone ears. He has invaded the world with a large-scale production of affordable works and giant (high-priced) sculptures, such as the 36-metre float that was anchored in the Hong Kong harbour in March on the sidelines of Art Basel HK. The artist has a perfect understanding of the modern era “internet buzz”, particularly via Instagram (2.3 million followers) and fashionable art lovers like Justin Bieber and Pharrell Williams. Many Asian collectors are also among the fervent admirers of his regressive universe: 58% of his works are sold in Asia versus 13% in the United States (since 2018), which makes Kaws the Western Contemporary artist who receives the greatest support from Hong Kong and Japanese buyers.

His breathtaking auction record of US$14.8 million was set in Hong Kong on 1 April at Sotheby’s. Entitled “The Kaws Album” (2005), the Beatles/Simpsons inspired canvas multiplied its low estimate by 15 just a few days after the appearance of the floating Companion giant in the port of Hong Kong. Back in New York two weeks later, his acrylic “The Walk Home” confirmed the feverish demand focused on the new idol of the Contemporary Art market by fetching US$5.955 million at Phillips against a high estimate of US$800,000.

“The Kaws Album” (2005). Picture source : Sotheby’s

The exponential increase in prices of Chinese contemporary art

Meanwhile, the Chinese-French artist Sanyu’s Five Nudes (ca. 1955) was sold for a record high of HK$303 million at the 20th-century and contemporary art evening sale by Christie’s in Hong Kong on 23rd November.

‘The rich red background in Five Nudes, like the rich yellow carpet the women stand on, calls Matisse to mind,’ says Eric Chang, Deputy Chairman of Asian 20th Century & Contemporary Art at Christie’s in Hong Kong. ‘As does Sanyu’s use of lines to suggest movement. Though each of the figures’ upper bodies seems at rest, their lower halves seem to perhaps be dancing or somehow on the move.’ Hence comparison to The Dance.

Sanyu’s Five Nudes (ca. 1955), Picture source: Christie’s Hong Kong

In 2018, Zao Wou-Ki ascended to the price range of Willem de KooningMark Rothko, and Francis Bacon in 2018, when the late Chinese-French artist’s almost 33-foot-long abstract triptych, Juin-Octobre 1985 (1985), sold for HK$510.4 million ($65.2 million) at Sotheby’s Hong Kong. The price is a new record for an Asian oil painter, the most expensive work of art ever sold in Hong Kong, and contributed to a HK$1.56 billion ($200 million) sale, making it the city’s highest total for an evening sale.

Juin-Octobre 1985 (1985). Picture source : Sotheby’s.

Two questions posted by Don Thompson, the author of ‘The Curious Economics of Contemporary Art’ as he began the journey in the world of contemporary art. Who determines what makes the work of a particular artist sought after? and by what alchemy is a Sanyu’s Five Nudes worth HK$303m rather than HK$1m?

First, how does a highly sought after young living artist like KAWS obtain that distinction? The artist has been accepted and shown by a mainstream dealer and usually moved to representation by a superstar dealer. The artist’s work has been cleverly marketed, placed in branded collections and with branded art museums. The work has appeared in evening auctions at Christie’s or Sotheby’s. It is this process, not aesthetic judgment and certainly not critical acclaim, that defines the artist who has achieved almost idol status.

According to Art News, KAWS left Perrotin Gallery after 11 Years in July 2019. Since 2008, Perrotin has hosted nine solo shows by the artist. Perrotin Gallery which also represents Takashi Murakami is considered one of the leading dealers in the contemporary art world.

The gallery’s founder, Emmanuel Perrotin, has been instrumental in branding the artist in the international art market, in particular, works by KAWS have been specifically showcased to the affluent Chinese buyers in recent years. He said in a statement, “We are very proud of the work we did with KAWS over these 11 years of our collaboration. Considering all the pressure, this collaboration has come to an end. In any case, we will be satisfied if his career continues to develop in a good way and we wish him all the very best moving forward. ”The departure from Perrotin’s roster comes as KAWS’s market is ballooning dramatically. His work achieved a new record at auction earlier this year at an auction at Sotheby’s in Hong Kong, where his 2005 painting The Kaws Album soared past its $760,000–$1 million estimate and sold for $14.7 million. In the recent London auctions, NYT (COMPANION CLOSE UP) Brown (2013) sold for $2.31 million at Christie’s contemporary evening sale. In May in New York, KURF (Hot Dog), 2008, brought in US$2.66 million at Sotheby’s evening sale.

An artist whose work is big on creativity, innovation or shock value rather than through traditional skill in draftsmanship or use of colour will garner more attention and much more money than the thousandth great colour field painting. It’s incredible how art nowadays can be ‘manufactured’ in large quantities via limited editions of 100 to even 3,000 in various colours and designs in order to prep them to reach astronomical figures in the secondary market. KAWS Companion (Karimoku) figure executed in 2001 from an edition of 100 was sold for HK$875,000 at the Phillips auction 2019. Similarly, a DIOR BFF Plus toy clad in Dior (KAWS X DIOR collaboration) debuted in 2019 in limited edition of 500 was sold at the recent Phillips online auction this year at HK$125,000.

30 years ago, none of these ‘toys’ would be taken seriously as art but in today’s art world, toys manufactured in limited edition of 500 can be auctioned off at prestigious auction houses. The exponential and rapid increase in prices have baffled the traditional art dealers who find it hard to comprehend the economics behind the ‘toys’.

Source: Phillips Auction.
KAWS X DIOR sold for HK$125,000 at Phillips auction this year. Source: Phillips auction.

Can we perhaps attribute this shocking new phenomenon in contemporary art to the forerunner of pop art i.e. Andy Warhol? Andy understood the superficial nature of celebrity in American society. Images of public figures are created by marketing companies to make money, but in reality say little about the person behind the mask. Warhol succeeded in creating a powerful public image for himself – the Andy Warhol ‘brand’ – with his trademark straight blonde hair and dark glasses. He became a master at cultivating his own celebrity profile as his fame grew. He constantly documented his daily life through photography and film, an early version of today’s social media. He created large quantities of colourful silkscreen prints of famous people including Marilyn Monroe and Chairman Mao and the prices have appreciated over the decades since his death but they still cannot rival the increment in value of the works belonging to contemporary artists who are still alive and kicking i.e. Yoshitomo Nara, KAWS, Yayoi Kusama and Takashi Murakami.

These new generation artists managed to create distinctive characters such as Mr.Dub by Murakami, KAW’s Companion and the famous little girl by Nara that are used as the ‘mascot’ of their art empire. They replicate them in large quantities but in limited edition to reach out to the mass market with an objective to fortify their branding. These artists managed to infiltrate consumerism and make their creations as desirable as trendy pop art items traditionally dominated by mega fashion labels such as Louis Vuitton and Dior. Through witty commercial collaborations between artists such as Daniel Arsham, KAWS and Soroyama and fashion label such as Dior, these business-savvy artists successfully made their art accessible to the young rich who were probably not art savvy before.

Why the Christie’s and Sotheby’s duopoly is impregnable

Mr.Dub by Murakami
The subject matter of Nara’s sculptures and paintings is deceptively simple: most works depict one seemingly innocuous subject (often pastel-hued children and animals drawn with confident, cartoonish lines) with little or no background. But these children, who appear at first to be cute and even vulnerable, sometimes brandish weapons like knives and saws. Their wide eyes often hold accusatory looks that could be sleepy-eyed irritation at being awoken from a nap—or that could be undiluted expressions of hate.” Source : Sotheby’s

So, how does a work then come to be worth US$14.8 million or US$1m? Don Thompson thinks that this has more to do with the way the contemporary art market has become a competitive high-stakes game, fueled by great amounts of money and ego. The value of art often has more to do with artist, dealer or auction-house branding, and with collector ego than it does with art. The market is driven by high-status auctions and art fairs that have become events in their own right, entertainment and public display for the ultra-rich.

Perceived scarcity also produces inflated prices. A limited-edition of 100 will create a combination of fear that prices will go up, coupled with the i.e. ‘I will pay to have it now’ approach of wealthy young collector.

The value of contemporary art also reflects the reality that art history can be rewritten by a buyer who is cash-rich. If a buyer pays HK$303m for a painting by Sanyu, the next major artwork by Sanyu is more desirable if priced at HK$310m because its new owner acquires bragging rights. Hence, art prices are propelled by what is known in economics as a rachet effect. A price rachet means that prices are stuck in a downward direction but free to move up. In an auction, a form of ratchet is at work when the first five items sell for double their estimate. The higher-quality items that follow must be worth more, because these lesser works sold for so much more than their estimates. So long as popular taste such as KAWS’ works rules, super collectors driver and dictate the market as never before. In the last decade, it was Charles Saatchi, Steve Cohen, the famous hedge fund owner and 15 others who could make or break an artist such as Damien Hirst. One fear relates to the psychology of so many contemporary art collectors whose fortunes originated in finance and hedge funds. Will traders dump art before the market catches on similarly to the stock market? When Japanese markets crashed in the late 1980s, banks seized art from about 20 major borrowers who had pledged their collections against bank loans.

However, the future art market crash may be avoided because high prices for contemporary art reflects a generational shift. The new generation of collectors from China want to decorate their homes with contemporary art to establish their own taste rather than following their parents’ collecting preferences. People also want their collections to shape how they are seen by peers, and contemporary art is a lot more, well contemporary than are Old Masters. As financial advisors always tell us not to put all eggs in one market, perhaps, it is high time for us to start collecting these limited-edition ‘toys’ for exponential yield in the future.