Do Art Fairs Make Money?

This article first appeared in The Edge Financial Daily, on March 13, 2018.

Attendees regarding a sculpture about war in Syria called ‘Aleppo’ at ARCO 2018, a contemporary art fair at Ifema in Madrid, on Feb 22. Photos by Bloomberg

A view of Untitled Art Fair in Miami.

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You’ll be hearing a lot about what’s in them, but not much about why they exist in the first place

The month of March inaugurates the spring art fair season, a combination of commerce, parties, and culture that attendees love to pretend to hate. Even though the fairs are explicitly designed for galleries to sell art, dealers complain about them whenever they get a chance.

For everyone else, the phenomenon can be a bit of a mystery. These art fairs often occupy prime real estate in the hearts of cities, yet have entry fees so high that most locals can’t attend.

Many of today’s biggest fairs were started in the 1970s: Art Basel, which runs from March 29 to 31 in Hong Kong, mostly sells 20th century and contemporary art; Tefaf, operating from May 4 to 8 in New York, is better known for its antiques and old masters.

But it was only in the early 2000s that they really took off. “The reason that art fairs have become so important has to do with the shifting demographics of wealth,” says Marc Spiegler, the global director of Art Basel. “Wealth is more and more in the hands of people who are working, rather than those who’ve inherited it.”

While previous generations might have had the time to travel the world looking for choice paintings and objets, current collectors “are actively building their fortunes”, Spiegler says. An art fair, with hundreds of galleries in a single space that’s in, or close to, collectors’ homes “allows patrons today to discover a lot of galleries and artists in a concentrated way”.

While some art fairs have become destinations — most collectors at Art Basel Miami Beach don’t live in Miami, and last year there seemed to be more people speaking German than English at the Frieze Art Fair in London — the fair, in its essence, is a venue for dealers to travel to customers.


What it costs to host an art fair

As a general rule, most art fairs don’t own their venues — the Art Dealers Association of America’s (ADAA) the Art Show (Feb 28 to March 4) takes place in the Park Avenue Armory on Manhattan’s Upper East Side, for instance, and the New Art Dealer’s Alliance (Nada) New York fair (March 8 to 11) takes place in an event space in SoHo.

Renting space is the fairs’ primary cost, followed, for many, by production expenses. “Rent plays a big part in our expenditures,” says Adam Abdalla, a board member and spokesman of Nada. “But there’s also the overall production: building the walls, on-site installation of lights, and design.”

There’s also the cost of labour, both to run the art fair (carpenters, art handlers, security guards, vendors), and to organise it year-round.

Some fairs make do with a skeleton crew of administrators; others, such as Art Basel, have a large team, including personnel dedicated to maintaining relationships with galleries and collectors. “It’s pretty much what you see is what you get,” says Spiegler, of art fair costs. “Except that you don’t see the team of people who’s working, both internally and externally, to make it happen.”

Art Basel is owned by the Swiss MCH Group AG, which owns art fairs, watch fairs, conferences, exhibition venues, and other subsidiaries, including event companies.

MCH shares are listed in Switzerland. While Art Basel’s costs are bundled into MCH’s annual reports, readers can at least get a sense of the company’s scale: In 2016, for instance, MCH employed 588 full-time staff, and operating expenses, including administration, maintenance, furnishing expenses, advertising and public relations, and staff salary, totalled almost 399 million Swiss franc.


How art fairs make money

Booth rental fees, paid by galleries, constitute the largest revenue stream for almost every art fair.

Many fairs charge by the square foot or square metre. Nada’s New York fair, for instance, charges about US$3,000 (RM11,730) for its smallest six-feet (1.83m) by six-feet booths and up to US$15,000 for the largest.

Art Basel’s fair in Basel, Switzerland (June 14 to 17), generally considered the highest-stakes fair of the season in terms of the quality and cost of the material on offer, charges from 400 Swiss franc (RM1,644) per square metre for its subsidised “Statements” section, to 830 Swiss franc per square metre for its “Galleries” and “Feature” sections. A 60-square-metre booth would cost about US$53,000; a 100-square-metre booth could cost more than US$88,000.

“And then you have additional services,” Spiegler says. “Let’s say you’re selling a sculpture by Anish Kapoor: You’re going to need a reinforced wall. Or if you’re selling old masters, you’re going to want to have a stand with special lighting — or perhaps, carpeting.”

Sometimes, a space’s constraints necessitate a different pricing model. “We always use unique spaces that are already built,” says Touria El Glaoui, the founder of 1-54 Contemporary African Art Fair, which holds its London fair in the rooms of Somerset House and its New York fair (May 4 to 6) at Pioneer Works in Red Hook, Brooklyn. “So we don’t charge by square metre, but by the size of a room,” she says.

A small room at 1-54 costs, at minimum, £6,500 (RM35,259) El Glaoui says, and a medium room costs £12,000 and large rooms cost £14,000. Extra-large rooms, of which there are few, cost £18,000.

Ticket sales are an additional revenue stream. To boost attendance, some fairs keep ticket prices low, even free. Nada New York’s ticket price is US$20; 1-54 charges £15 for its London fair “and about US$18 for New York”, El Glaoui says.

Finally, art fairs do their best to get corporate sponsorship.

Nada, a non-profit organisation, has sponsors “and we put it back into the fair”, says Abdalla. “We use it to help enhance fair experience” through special projects and installations.

For a fair of Art Basel’s size, sponsorships are more lavish. Art Basel Hong Kong lists UBS AG as a “lead partner” and MGM Resorts International and watchmaker Audemars Piguet Holding SA as “associate partners”.

“For the first 25 years of its existence, Art Basel had no corporate partnerships,” says Spiegler. “But it would be a very different show without these sponsorships.” The fair’s talks programme, its subsidised section for smaller galleries, and its outdoor performance night, “Parcours”, in Basel “would be very hard to pull off without the corporate partnerships”, he says.


Who benefits?

While the non-profit fairs don’t make money, Bray, of the ADAA, says about US$1.3 million was raised this year for New York’s Henry Street Settlement. El Glaoui, who owns 1-54, says the New York and Marrakesh, Morocco branches of her fair “break even”, while her London fair makes a modest profit. “That hasn’t always been the case, but we’re in a good place right now,” she says.

Frieze, which considers itself a “media and events company”, was founded by Amanda Sharp and Matthew Slotover in 1991. In 2016, the company, which hosts fairs in New York and London (and soon, Los Angeles), formed a “strategic partnership” with the Hollywood agency WME-IMG, run by Ari Emanuel. The size of the agency’s investment wasn’t disclosed.

Because Art Basel is part of a much larger conglomerate, it’s difficult to determine its profitability. Overall, though, MCH had a poor 2017.

While its sales increased 12%, to 493.3 million Swiss franc — thanks largely to its acquisition of the American “live marketing company” MC2 — MCH had a net loss of 110 million Swiss franc, a company statement says.

The loss was the result of “special depreciations and special provisions” caused mostly by the scaling down of Baselworld, a watch and jewelry expo. If you ignore those depreciations and provisions, the company noted, its expected group profit for 2017 is approximately 10 million Swiss franc — just enough, perhaps, to buy one of the Gerhard Richter paintings on offer at the fair.

“At a more fundamental level, the art fair has always been an optimistic gesture on the part of galleries,” Spiegler says. “It’s the notion”, he continues, that “they will gain more by sharing their collectors with other galleries than they’ll lose”. — Bloomberg