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Economics of Art: From Renaissance Masterpieces to Hollywood Movies

The ability to create art is one of the key things that separate us from the other primates on this planet; that, and the ability to turn that art into great wealth.

In classrooms for time immemorial, the debate about art, commerce, and if the twain should ever meet goes on and on. Should our free expression ever be sold for a price? Doesn’t that cheapen the underlying meaning of the work of art? Shouldn’t artists earn money for their hard work? What price can you put on the feeling that something gives you? Welcome to the economics of art.

These questions are not likely to be answered in any satisfactory way, but that hasn’t stopped an entire economy from being built on the strength of art. From selling masterworks of long-dead artists at stuffy auction houses to the billion-dollar box office blockbusters from Hollywood to the emerging stars of social media, creativity can pay big dividends.

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The economics of art is not much different than the economics of anything else. The same principles apply: supply, demand, and what of value can be exchanged. The value of the art itself? That is a more difficult thing to pin down. Of course, there is the value the work of art has to those who experience it. What does a painting, a song, or a story make you feel? There is also the value of it as an object. For example, the original Mona Lisa by Leonardo Da Vinci is a priceless piece of wood and canvas. However, you can get a framed identical copy of it from Amazon for under eighty bucks.

Finally, there is its value to collectors. If you purchased a copy of the first issue of Action Comics in 1938 it would have set you back ten cents. If you wanted to buy an original copy of the first appearance of Superman today, you’d probably need around four million dollars. How does this happen? What makes some art priceless and other not worth the paper its printed on? There aren’t always clear answers, but we’ll do our best below.

The Economics of Art

To fully understand the economics of art, we'll first need to brush up on a few topics. Below, we've broken down everything you need to know about what art is and how it shapes economics.

What is Art?

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Credit: Wikimedia Commons

The writers of the world probably put down millions of words trying to define what art is, while the painters of the world tried to capture it in every brushstroke. The scholars might have clearly defined metrics by which to classify something as art or not. However, the real answer is that art is whatever the artist says it is. From make-up tutorials on YouTube to people dressed in costumes on the sidewalk, it’s all some form of creative expression. When it comes to the economics of art, that people are willing to pay for whatever the artist or dealer is selling is all that matters. The business itself may not be straightforward, but there has to be an angle for profit.

Sometimes the economics of art are very simple. A man stands on the sidewalk playing a guitar with an open case in front of him. If you enjoy the music, or even stop and listen, you should toss a couple bucks in the case. Similarly, a painter creates a work of art and that art is then sold to someone, usually via an art dealer.

Other times the economics of art aren’t so straightforward. Superman is one of the most recognizable characters of all time and has made DC Comics billions of dollars. Yet, the two men who created him had to spend decades in court just to get credit for the work, let alone what they were owed financially. The millions of dollars that change hands for a copy of that first Action Comics issue doesn’t go to DC either. That market is just for the collectors. It can get very confusing. So, to understand the economics of art, you have to understand the “supply chain.”

Who Makes Art?

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All art begins as ideas in the minds of a person or a whole group of people. Michelangelo’s David is considered the best sculpture of all time, but even it was not just the work of the great Renaissance artist (and Ninja Turtle namesake). Two other sculptors worked on that piece of marble before Michelangelo (though they didn’t do much). And the idea of the statue came from the minds of Florence city officials a century before Michelangelo even won the commission. Still, even on team projects one or a few artists often have an outsized influence on the finished product. No matter who all was involved, it’s still Michelangelo’s David.

The economics of art often have little to do with the artist, unless that artist is a superstar. In the early days of the music business, producers and recording-industry honchos made the bulk of the money. Blues legend Howlin’ Wolf earned a good living playing the blues live but didn’t earn much in record sales. However, when British rock bands like the Rolling Stones and Led Zeppelin started covering his songs, he was earning money from those and his new records became hits. Thanks to the financial mind of his wife, Lillie Burnett, he was able to manage his money and even pay his band better than any other musician at the time. Still, even stardom isn’t always a guarantee of financial stability. It’s not like any other job, but being a professional artist is still a job. So, who is the boss?

The Economics of Art - An Investment

Now that we are aware of what are is and who makes it, let's talk about the buying and selling of art. This factor is a key component to the economics of art.

Who Sells Art?

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Credit: US Air Force

When people create a product or perform a service, they want to be paid. However, especially when it comes to artists, not everyone wants or is capable of selling their product. The artistic temperament is a strange thing and earning money for writing a book is usually the least important thing to its author. Like a splinter stuck under their skin, writers just have to get the story out. Once it’s done (or some version of done), they usually want people to read it.

Until recently, the publishing industry handled the economics of art, at least when it comes to the printed word. They paid the writers, the editors, and the cover designers. They marketed the book, and they reaped most of the profits. However, publishing and print magazines don’t sell the way they used to. This has lead to writers self-publishing via Amazon’s Kindle services, Smashwords, or Wattpad. Similarly, 20 years ago retail video rental companies were the gatekeepers, and today streaming services are the kings of video entertainment.

Of course, the economics of art change when the art in question is not for mass production. Concerts or plays are limited exhibitions of art meant just for the audience. Even those these can be recorded, it’s never the same as being there. Paintings are like that, too. Standing before Monet’s Waterlilies in person is just a different experience than looking at on a page or a screen. As mentioned above, you can find framed copies of masterpieces on Amazon for next to nothing. However, if you want an original Van Gogh or Monet, you have to know an exclusive art dealer. In these areas, the economics of art are overseen by gatekeepers, though some want to change that.

What Makes Art a Good Investment?

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We’ve discussed quite a bit about the people who make and sell art, but what about those who buy it? When it comes to popular art, from home movies to tickets to concerts or museums, it’s not an investment at all. Rather, you are paying for an experience. It may change your life, but unless you happen to find a wad of cash that’s more than you paid to get in, you’re not getting a financial return. But, if you were to buy a building, turn it into a music hall, start booking bands, and selling the tickets yourself? That could be a good investment. The economics of art often have little to do what investors like or dislike. Instead, their consideration is what the public or, at least, their intended customers like.

Though, the economics of art can be very tricky. Sometimes, even if something isn’t a great business decision, it might be a good investment. With a decline in both print book sales and retail sales overall, buying a book store would not be a smart investment. However, small book stores and used book stores are seeing an uptick in business recently. This is both because of collectors and those folks who just want to feel the weight of a book in their hands. Even though ultra-high-quality music is easier than ever to get, there is vibrant and active economy around vinyl records. Even though they’ll never make as much money as their digital downloads or monetized streams, new artists still produce records for these folks. When it comes to art, even obsolete technology never grows truly obsolete. 

Art Dealers and Auction Houses

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Credit: Ssavage11, Wikimedia Commons

For at least five centuries, dealers have been central to the economics of art. Historically, art dealers serve as the liaison between the artists and the dealers’ client. In fact, according to the Economist, there are experts who believe that art dealers are actually more important than the artists.

For example, Vincent Van Gogh is one of the greatest artists of all time but was destitute while alive because no reputable dealers could sell his work (including his own brother). Pablo Picasso, on the other hand, was championed by D.H. Kahnweiler, an art dealer who encouraged the artist to embrace the cubist style that made him famous. These dealers are integral to what artists are sought-after, how the art market takes shape, and even who is allowed to buy an artist’s work.

The other key figures in the traditional art market are the auction houses. Dealers will often try to sell their pieces to individual collectors or even just loan them to museums. This will build value and prestige for the artist. Eventually, though, ever painting ends up at the auction house. There other art dealers, some working at the behest of collectors, buy old and new artwork. These auction houses are old, with history dating back centuries. The art dealers and the gatekeepers at these auction houses have a firm grip on the traditional art market. But there are some dealers who believe that it’s time for the way art is sold to change.

Case Study of Stefan Simchowitz

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Credit: Stefan Simchowitz

Stegan Simchowitz was born in South Africa and traveled with his parents as he grew into adulthood. He was involved in the economics of art from the beginning, starting out his career as a movie producer. Eventually, he produced a hit movie, Darren Aronofsky’s Requiem for a Dream. He also started a digital image library called MediaVast which Getty Images purchased for more than 200 million in 2007. Since then, he’s tried to modernize the art world in a way that threatens the dominance of art dealers and auction houses. He wears a camera when he goes to auctions, posting photos and videos on his social media accounts. These places and the dealers who buy the artwork there aren’t used to this sort of publicity. Rather than working with established artists, Simchowitz is more speculative.

He will link up with a young, talented artist and arrange an exclusive deal with them. As they produce work, he helps support them. He will create a market for his artists, often loaning pieces out or waiting to sell the pieces. By sharing the art on social media first, he is able to build buzz for his artists. The traditional art dealers accuse him of unfair market manipulation, specifically because of his use of social media. He’s been called a “Sith Lord” and the devil of the art world. Still, his champions like that he is lifting the veil of secrecy on the art world. Art dealers are often very selective who they sell to, often turning down sales. Simchowitz will sell to anyone. He also advises other collectors and dealers, meaning that the market is being shaped by his influence.

The Economics of Art in a Variety of Mediums

Since we've established the basis for the economics of art, let's take an in-depth look at the multiple mediums in which art comes. We've broken each type of art down to discuss the details.

Record Prices for Paintings

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Credit: Wikimedia Commons

There are some who suggest that the traditional art market is guilty of the same “crime” Simchowitz’s critics claim he committed. In the past 40 years, the record-high price for a work of art increased by more than 32 times. In 1970, the Portrait of Juan De Pareja by Diego Velázquez tripled the previous record when it sold for $5.5 million. Twenty years later, that record was shattered when Van Gogh’s Portrait of Doctor Gachet sold at auction for more than $82 million. Since then, the price paid for paintings has skyrocketed. Since 2010 it is very common for artwork to sell in excess of $100 million. 

For example, in 2013, British painter Francis Bacon’s Three Studies of Lucian Freud sold for $142.4 million. This stunned the art world, but it didn’t last long. Less than two years later, Christies sold Les Femmes d’Alger by Pablo Picasso for nearly $180 million. Still, these auction houses deserve scrutiny. Former chairman of Sotheby’s Alfred Taubman went to prison after his CEO and the CEO of Christies confessed to a criminal price-fixing scheme. 

Hollywood and Blockbusters

When “moving pictures” were first invented, they were a technological novelty. Soon, early filmmakers realized the potential for film as a storytelling medium. In the century since, movies have become the most popular delivery system for storytelling today. They are also huge business, earning box office receipts in the billions of dollars. That films today are such big business is both a good thing and a bad thing when it comes to the economics of art. Because the payoff can be so high, it means that studios and producers are willing to invest the money into projects needed to make them as amazing as they can be. Conversely, this means the margin for error is slimmer than it might be otherwise.

There are those who argue that these big action films aren’t really art. They are just two-hour-long commercials for toys, comics, and officially-licensed clothing. While this may not even be incorrect, that doesn’t mean that these films aren’t artistic. Take the above clip from the first Spider-Man sequel. Even if you know nothing about the film or the character, it’s difficult to watch the above clip with dry eyes. It’s true that some blockbusters that end up making a lot of money are actually bad films. The economics of art rarely care about quality over profit. Yet, in some cases, it is the quality of a movie that makes it box office sensation. It just usually happens by accident.

Case Study of Iron Man and the MCU

When it comes to big-budget blockbusters, Marvel Studios has no peer. They have created a cinematic universe that rivals its comic book one in size and scope. If you add up all of the movies, the short films, and the television series, it’s more than 200 hours of content. But when this weird experiment launched, it was a huge risk from an independent studio. The comics industry struggled from the height of the 1990s popularity, and Marvel survived these lean years by optioning the film rights of their most popular characters to big studios. Spider-Man and the X-Men launched the era of superhero films, but by the time of Fantastic Four 2, people thought comic book movies were “over.” 

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Credit: Marvel Studios

So, when Robert Downey, Jr.’s Iron Man ended up being a huge hit, it surprised everyone. Here was an arguably C-List Marvel character from a studio that never made a movie before, and it was one of the best superhero movies of the decade. In the ten years since, Marvel Studios has had one of the best runs of all time. Not only did they make a mint for their parent company, Disney, but they created a series of 20-plus films that kids grew up watching. The MCU movies will become as iconic as the 1960s Batman series or the Richard Donner Superman films. That’s what makes the economics of art difficult to grasp. Iron Man shouldn’t have been a success, and the MCU shouldn’t work as a concept. But it works, because people respond to it.

The Independent Film

Big blockbusters and summer tent-pole movies are not often thought of as high art in the world of cinema. In fact, for many years, studios balanced their big-budget action pieces with smaller-budget, character-driven stories. As studios moved away from these sort of films, independent production companies stepped into fill that role. Filmmaker and podcast pioneer Kevin Smith made his first film, Clerks, on a budget of less than $30,000. Upon release, it made $3 million at the box office. An independent film that becomes a blockbuster, almost by surprise, is one of the best returns on an art investment possible. However, it’s lighting in a bottle.

In the past, quality independent films would have to win over a big-name distributor. For example, Smith’s Clerks only made $3 million because Miramax studio released it. However, because the box office stakes are so high, studios are less likely to take chances on these films. That has allowed video streaming and on-demand services to step and produce some of this content. Netflix, Amazon Prime, YouTube Red, and others are all hoping that financing original content like the indie films of old will help them win subscribers. So, while it may be more and more difficult for independent films to make it to the big screen, it’s never been easier for them to find an audience.

The Music Scene

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No artistic industry was ever more decimated by technological advancement than the recording industry was by digital music and the internet. Audiophiles were used to the way they listened to music changing. First there were records. Then came cassette tapes, which made music much more portable. There were the ill-fated 8-tracks tapes, and then the big one: compact discs. The sound was immaculate, and CDs were easy to use. People were buying more music than ever. Then, thanks to Napster and other file-sharing software, it became very easy to download music for free from the internet.

As time when on, internet pirates could download an entire album in minutes without paying a dime (unless caught by the RIAA). In fact, it used to be much easier to steal new music than buy it. Why go out to the store to buy the new Eminem album when you could just download it? Soon the industry figured it out. You can get digital downloads in seconds, or you can pay a small fee to stream music from services like Spotify, Google Play, or Amazon Music. You can listen to music on YouTube, and all it costs is a few seconds of your time to watch an ad. The economics of art are ever-changing, but the demand for it doesn’t change.

The Live Experience

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Credit: Wikimedia Commons, Flickr

Musicians are luckier than other artists in one key way. Half the fun of being a fan of their art is seeing them play their music live. For most of history, live music was the only way you could hear it at all. The sound quality of recordings on vinyl or magnetic tape was never as great as hearing it live. Even digital music with high-quality headphones can’t replicate the feeling of the sound waves pummeling your body as they spill forth from the stage. You feel the music at a concert as much as you hear it. That’s something that technology can’t replicate, at least not yet.

The live experience is a key part of the economics of art. There is, of course, live theater. The actors perform the same roles from the same script each night, and it’s somehow always a little different. You can visit art galleries to see installations up close, sometimes even meeting and listening to the artist discuss their work. Poets and novelists will often give live readings of their work. Admission to these events is usually free, though they will often have copies of their books to sell and sign. There are now entire conventions where you can meet writers, artists, actors, and other figures in genre entertainment. There is a market of people who want to be in the presence of their favorite artists, even if they don’t perform in any traditional way.

The Literary Market

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At the turn of the 20th century, the economics of art was drive by the profitable publishing industry. Thanks to the technology of the time, the only mass-market media was printed media. Newspapers, magazines, and books were everywhere and the stars in that field were huge.

The late Harper Lee wrote a single book in her career, arguably the best American novel ever written: To Kill a Mockingbird. Literary stars were such giants, that Lee was able to live off the profits from this book for her entire life. In more modern times, big name authors like Stephen King, James Patterson, and Suzanne Collins are the pinnacle of the publishing world. Everyone from novelists to memoirists to magazine writers are struggling in an age where people’s attention are focused on screens, apps, and web content. The old way of doing literary business is fading out.

Yet, 50 or even 20 years ago, self-publishing was considered “vanity” and frowned upon by all serious literary types. To be sure, paying for a run of books in print cost thousands of dollars. As an unknown writer, that was sure to be a poor investment. Yet today, thanks to Amazon’s Kindle Direct Publishing, you can publish a book both as a digital ebook and a print-on-demand paper copy for no cost to you at all. It is a stunning irony that at a time when people seem to read less, there are more books being published than ever before.

The Economics of Art: Big Profits in an Uncertain Industry

The problems facing both the traditional art market and filmmaking are the problems that pop up in the economics of art. Thanks to the creative work of innovative geniuses, both in creating the art and inventing the technology used to make it, it will always be a boom and bust economy.

Books and music used to be two of the most popular kinds of art, thus making them some of the most profitable media industries. These folks made so much money they never even imagined that it could ever run out. Yet, as technology developed, the industries underwent changes. The same is true for movies and television, the current most popular media for mass entertainment.

The big four television networks were economic powerhouses that had a firm grip on their medium and the culture itself. They earned the highest ratings, and they charged the most for ads. Then, cable got cheaper, and the quality of the programming got better. Cable had fewer content restrictions. Then people started being able to fast-forward through commercials thanks to digital video recorders.

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Now, cable networks have to fear the same thing as the broadcast networks and the big Hollywood studios do: the streaming giants. Netflix, Amazon, and other companies invest heavily in original content, but is it sustainable? The art is, that’s for sure. People can make movies on their smartphones if they’re really committed. But the economics of art is never certain where technology is involved. 

As technology levels the playing field for filmmakers, especially where visual effects are concerned, amateur filmmakers produce work that looks as good as the stuff on the big screen. Fan films or original shorts can be a great opportunity for the art investor. You build relationships with talent on-the-rise and help bring their vision to life. For example, Deadpool was a blockbuster for Fox, but it languished in development hell for years.

It was only when the public response to the above test footage that leaked online was effusive that Fox pushed forward with production. It went on to be one of the highest-grossing R-rated films of all time. Another action film, Hardcore Henry, started out as a short film. STXFilms picked up the concept, made a feature-length version for $2 million, and released it where it earned a total of $16.8 million. Movies are big business.

Treat the Economics of Art Like the Stock Market or Your Hobby

When it comes to the economics of art, it is possible to blend both an appreciation for the work and a smart investor strategy together. If you treat your art investing like you would any other market, you will be well-served. It may feel cynical or soulless, but it doesn’t have to be. You can invest in artists or media or companies that you believe in, and also seem like they can be successful. You can support the art markets that you think are good for the art world and society at large and ignore the markets that have outgrown their place in society. With your investment dollars, you can help shape the future of an artistic medium and the industry around it.

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The other way to approach buying and selling art is to approach it as a hobbyist or collector. It’s difficult to tell what will appreciate in value, especially when it comes to art. No one thought a funny book for kids about a guy in a cape would eventually sell at auction for $3.2 million. More than 50 years later, a special, collectible edition of the Death of Superman comic was published. Today, it’s worth about $20 and you can get it from an Amazon seller. However, with the print comics industry in decline, you can invest in these comics because you love them and want to preserve them. It’s possible they might appreciate in value, but if collect something it should be because you love it.

There are many ways to both fund and profit from artistic expression, but its true value is in what it makes you feel.

Art, whether it’s paint on canvas or words on a page or images on a screen, is big business. With the right business sense and access to talent, the economics of art can make you rich beyond your wildest dreams. With the wrong timing or bad talent, the economics of art can feel nonexistent. It’s important to have an economy around art, because it’s one of the most amazing kinds of creation we can do. An artist can take nothing, something as ephemeral as an idea, and create an entire universe out of it. It’s magic. It defies physics because it’s something from nothing. Maybe you can put a price on that, and maybe you can’t. But what we really need to fund is the attempt. 

Yes, art can make you rich. But the true value of art is not that it makes you wealthy, but what it makes you feel. There are cave paintings in Argentina that date back thousands of years. One is collage of handprints, dozens of them. These hands, belonging to people just like us, reach out through the eons and to touch those who view them today. It’s as if they traveled through time just to say “hello.” What kind of price can you put on something like that? Art will be bought and sold as long as people are making it. But the feeling you get from experiencing that art? Once you have it, you never lose it.

What do you think? Share your thoughts, feelings, and reactions in the comments below. Remember to share the article on social media if you liked it!

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