As the major art fairs Frieze in London and Art Basel in Paris take center stage this month, the pressing question is: How many galleries will continue to struggle in this challenging market climate? Recent months have seen a troubling trend, with more closures in New York City. And on my travels through Europe this summer, I met gallerists who hadn’t sold a single piece all year. Many confided—off the record—about revenue drops exceeding 50% from the previous year. Even industry giants like Sotheby’s and Christie’s reported a 30% decline in revenues. The art market is clearly in crisis.
Who’s to blame? As my colleague Olav Velthuis posed in his 2018 essay, the answer remains unchanged today: Big art fairs hold significant responsibility.
Smaller and midsize galleries are caught in a vicious cycle: they can’t afford to participate in top fairs, yet they can’t afford to miss them. Today, half of all gallery sales happen at fairs, double the rate of just ten years ago. Galleries now participate in an average of five fairs annually, not out of choice but necessity. Though art fairs offer opportunities to network with collectors and increase visibility, the financial burden can be immense.
While some smaller fairs like NADA, Spring Break, or the Affordable Art Fair can be profitable for galleries, booth fees at larger fairs often start at $50,000 and can easily rise to $200,000 when factoring in hotels, hosting dinner parties, transportation, and art insurance. No wonder that galleries frequently return home with a loss. Surveys show that galleries fail to turn a profit at up to half of the art fairs they participate in. For many galleries, these top fairs present a significant existential risk.
Frieze and Art Basel Are Failing to Lead the Market’s Evolution
View of the 2024 edition of Frieze New York from above.
Maximilíano Durón/ARTnews
Two powerhouse fairs, Frieze and Art Basel, are in a unique position to alleviate this crisis, serving as the only platform where the entire market gathers. However, they have failed to innovate or live up to their role as market custodians. Their attempts at solutions, like offering minor discounts to smaller galleries, provide little relief. A 20% cost saving won’t cut it for most galleries.
Well-intentioned attempts to leverage technology have also missed the mark. Art Basel’s foray into blockchain technology was designed to streamline art transactions and significantly reduce friction costs. Despite having a great team, a clear vision, and over $10 million in investment, the project failed to gain traction and was eventually folded, with key personnel departing.
There is a major obstacle in the art market: the general aversion to change. The powerful elite – top galleries, mega collectors and established artists – benefit most from the current system. And it is precisely this top end of the system that the fairs do not want to upset. But who, if not global brands like Art Basel and Frieze, have the influence, stamina and reach to bring about meaningful change and break up the existing structure – if they really want to? It would require a willingness to challenge and potentially upset some key stakeholders who resist change because they profit too much from the way things are.
Instead, art fairs have continued to rely on an outdated revenue model that reliably generates profits: real estate arbitrage. By capitalizing on the presence of galleries and artists who attract their top clients—and willingly share their client databases—art fairs generate revenue through ticket sales and booth fees. This model thrives at the expense of the very entities that bring vitality to the fairs, perpetuating a system that prioritizes short-term gains over the long-term health of the art market.
Rethinking Revenue
An aerial view of the city, in Miami, United States on May 9, 2024.
NurPhoto via Getty Images
Yet, a more innovative revenue model is within easy reach. Through smart marketing and a dedicated, hard-working team, Art Basel and Frieze have become synonymous with luxury and lifestyle, drawing large crowds and generating substantial revenue for their host cities. Art Basel estimates that its Miami edition alone contributes $500 million to the local economy. So, why not tap into this revenue stream directly?
By offering comprehensive packages that include hotel rooms, event access, and dinners, art fairs could significantly reduce fees for galleries. This could go as far as providing free spaces or even compensating galleries and artists for their participation. After all, in a rock concert, the musician gets paid rather than paying to perform. Why should artists and galleries be any different – they are what make art fairs worth visiting in the first place?
However, while these changes could ease some of the immediate financial pressures on galleries, they won’t tackle the core issue plaguing the art market: people aren’t buying art. Each year, fewer individuals are making purchases. Over the past decade, the number of millionaires has doubled, yet the number of collectors has declined. Without the dedication of a few high-end collectors willing to spend record sums, the art market would be facing a recession. We need to attract new buyer groups. The potential buyers are already present. In the U.S., more people attend art events and museums than sports events, including NBA and NFL games. Yet, only a small fraction of these visitors buy art. At Art Basel, for instance, of the 80,000 visitors, fewer than 2,000 make purchases.
How Art Fairs Must Evolve
Why aren’t more visitors converting into buyers? Many shy away due to a lack of price transparency, an overwhelming supply of art, and the exclusive aura that art sellers often project. Anyone who has visited an art fair knows the experience: after just 15 minutes, you’re already overstimulated. Then comes the daunting task of asking for prices, which can be off-putting for many potential buyers. And with a median price of over $10,000, even in the “discovery sections,” Art Basel and Frieze are hardly welcoming to first-time buyers, most of whom are looking to spend less than $5,000. It’s no surprise that most visitors leave empty-handed.
The current structure is unsustainable for the long-term health of the art market. In their present form, Frieze and Art Basel function more as barriers than bridges. To secure the future of the market, it’s essential to ensure that it remains a space where new talent and buyers can thrive. The lower end of the market is where creativity and risk-taking flourish, offering a platform for emerging artists and where prices—sometimes under $5,000—make art accessible to new buyers. This is typically where the journey of any collector begins. Proposals such as free booth space, fair and transparent selection of galleries away from nepotism, reduction of art prices, mandatory price transparency, the use of technology for personalized tours of the fair, and artist and gallery participation in fair profits could put galleries and artists on a more secure financial footing. The solution lies in disruptive change and a shift in perspective – away from outdated revenue streams and towards bold steps to foster a vibrant, inclusive market.
The original version of this essay was first published in “Welt am Sonntag,” Germany’s largest Sunday newspaper.
Magnus Resch teaches art management at Yale University. His recent book “How To Collect Art” was published by Phaidon in February 2024.
