How technology is changing the way art is bought & sold
Artificial intelligence, blockchain, virtual & augmented reality — how are these innovative technologies disrupting the art world’s sales model.
Innovations in technology are expanding access to the art world, increasing the speed of sales, and fundamentally changing how businesses operate in the art industry. Technology has changed the way art is bought and sold at three key steps of a sale, from how art is displayed, to how it is paid for, and finally how ownership is exchanged through new art business models. While technology increases the efficiency of the market, it also threatens to financialize, and commodify art, thus diluting artworks’ intrinsic value. Institutions and art professionals must clearly define how these technologies are implemented and governed to address this concern.
Technologies such as the Internet, virtual and augmented reality, blockchain, cryptocurrencies, and artificial intelligence are all changing how art is sold. The sale of art can be simplified to three steps: the finding or showing of a piece, a bidding auction or request to purchase where currency is exchanged, and finally an exchange of ownership for the work. This, of course, is an oversimplification of an expansive market that has unique features namely authentication, provenance, and anonymity. However, even at this superficial level, we can see how technology is changing the sale of art.
Art market accessibility and how art is displayed
The Internet and the World Wide Web, for example, have changed how purchasers search for artworks and how sellers display them for sale. It is now possible to browse collections, bid in auctions, and quickly complete transactions from any corner of the globe. This advancement in technology has enabled the sharing of information and expanded access to the world of art. Purchasers and sellers can interact digitally, increasing the number of art sales and the speed at which these transactions take place.
As more and more consumers have moved online and become accustomed to purchasing everything from personal goods to stocks, with the click of a button, galleries and auction houses alike have evolved to meet them on the Web. Established companies, like Sotheby’s, have partnered with online platforms and evolved to offer online auctions on their websites. ECommerce companies like Amazon, also seeking to cater to the art market, have added an art section to their online stores. Meanwhile, newcomers like Paddle8, 1stdibs, and Artsy have sprung up with innovative business models to offer new forms of trade catering to modern market needs shaped by technology. The Internet has enabled purchasers to browse thousands of e-catalogs, discover artists, and have an entirely new art buying experience. It is no longer necessary to visit a gallery, or fair or to participate in an auction to buy art. Virtual and augmented reality, have expanded on the innovations of the Internet and now allow a purchaser to view a “simulated, computer-generated environment” almost anywhere. Artsy has developed an augmented reality feature in its iOS app that allows you to view a masterpiece on your wall. It’s even lead to online virtual reality (VR) galleries, like Easton Gallery, where buyers can experience works using VR technology. This space is expected to continue growing as it evolves from a way to browse art to an entirely new model of art sales.
This is how technology facilitates reaching wider audiences. However, with the rise of a market now accustomed to instant gratification, other parts of the buying and selling process have evolved as well. Particularly in the art world where the sale of an art piece can be an obscure interaction, technology has increased the speed and confidence with which these transactions can be executed. Take for example provenance and authentication. With the rise of blockchain technology, these once document-heavy endeavors, a key part to any sale or purchase, can now be immutably recorded on decentralized ledgers or blockchains. Blockchain technology can record bids and validate transactions, increasing the speed of sales while still protecting the privacy of those involved, an important feature in the art world. It is still the early days of blockchain technology and cryptocurrencies, the digital currencies blockchains enable, but the opportunities are astounding. They are changing how quickly, accurately, and transparently art deals are done and promise to disrupt the market, even changing how works are paid for.
Cryptocurrencies and paying for art in the future
There have already been trades completed using cryptocurrencies like bitcoin. Rather than paying for a purchase with a bank transfer, cash, or other traditional means that require clearances from third parties and that can be time-consuming at the least, and prohibitively expensive at worst, buyers can now make payments for a lower cost and sellers can receive payments almost instantly. Cryptocurrencies mitigate the need for trust between parties through decentralized consensus networks. Their pseudo-anonymous nature also allows traders to operate privately, a key feature for the art market. While it is still too early to tell if cryptocurrencies in their current form will become the standard of the future and replace fiat or local currencies, the technology behind them, blockchain, will continue to impact how art is bought and sold when it comes to authentication, as discussed above in the case of immutably recording transactions, and transfer of ownership.
Exchanging ownership in new art business models
There are entirely new concepts when it comes to both the consumption of art and what is exchanged in the sale of an art piece. In relation to physical artworks, purchasers are no longer limited to buying an art piece in its entirety. Ownership is no longer limited to the physical piece of artwork. Innovative startups are bringing liquidity to the art market through the tokenization of artworks via blockchain technology. Companies like Maecenas, Feral Horses, and Masterworks, to name a few, use tokens to allow purchasers to acquire “fractional ownership” of art. A majority of the startups mentioned here issue their own cryptocurrencies (tokens) to fund their businesses and enable this fractional ownership by taking advantage of initial coin offerings. Blockchain technology uses cryptocurrencies and tokens to record and verify pseudo-anonymous transactions on an immutable distributed ledger. These ‘ArtTech’ investment platforms vary their approach in terms of how they intend to acquire the artworks that are included. However, their main collective claim is that this new model opens up the opportunity for more people to be involved in the art market and own a percentage of a masterpiece. Ownership of the work is not necessarily transferred, but it works similarly to art investment funds.
There are now also business models where the ownership of the actual artwork is not exchanged but rather rights to a digital reproduction of it are authorized. The technologies for streaming and subscription services, for example, have hit the art world. “The Frame”, a 4K smart television from Samsung, for example, is being pitched as a digital canvas.
The device has 100 free artworks pre-loaded but offers the options to pay to download additional pieces from galleries and dealers from around world, or to download multiple pieces for a monthly fee. This opens new possibilities for increasing accessibility to works, particularly those deemed of importance to our collective social history. In the future with improvements to technology, we may even see licensing of intellectual property for hyper-realistic digital reproductions like holographs.
The value of art and the threat of financialization
These innovative business models can lead to greater liquidity in the market and growth in profits. However, there are certain serious considerations to be taken, including whether the motivations behind these fractional purchases and sales of art are purely financially driven. It is argued here that there is a non-financial value of art that must be consciously guarded against the commodification and financialization that threatens the art industry through the guided implementation and non-biased governance of technology.
From a perspective of the societal value of artworks, technology can be allowed to affect the process of sales but should not designate the actual value of art. As quoted in Danchev:
“Art matters, ethically and politically; affectively and intellectually.”
Further, the soul of art, as artistic movements like Der Blaue Reiter articulated, is the underlying value of artworks. Industry reports from the likes of Deloitte and ArtTactic claim that “the art industry has an intangible quality that can never be replaced or co-opted by technology.” While it is true that the art market does reject the purchase of art purely for profit, in this instance referring to the practice of flipping artwork, if the entire sale process becomes automated, as in the example below, then the non-financial value of art is in fact threatened by technology.
As technology fundamentally transforms the art business world and impacts every step of transactions, some steps are removed altogether. Taking a look into what the future could hold for the industry, it is possible that artificial intelligence and automated algorithms could have a huge impact. The combination of these two futuristic technologies, that already have functional implementations, can lead to even deeper changes in the way art is bought and sold. Imagine a smart contract on a blockchain that is instantly fulfilled, transferring ownership titles and cryptocurrency payments after an automated negotiation or auction run on algorithms using artificial intelligence. It may seem futuristic, but the technology to enable these types of transactions is not as far off as it may seem. Online auctions and marketplaces linked to technology are accelerating the speed and frequency at which transactions occur. Algorithms, machine learning, and quantum computing can enable these changes to happen faster than ever before. However, as the world witnessed during the crash of the financial markets in 2008, technology that is not implemented and managed appropriately can cause monumental issues. Algorithms and derivatives markets commodifying underlying objects of value can cause massive losses in terms of financial value and social disconnect; technology can have the opposite of its intended effect.
The risk of the commodification and financialization of art increases as technological innovations are implemented in the process of the sale of art. It is crucial to guard this intangible value as financial valuations sky-rocket and the ethereal question of “What is good art?” continues to be debated. Technology offers tools to increase value creation in the art market but at the same time, it must be implemented and directed consciously, in order not to dilute the societal value of art. For this reason, the implementation and future management of technology must be guided by non-biased frameworks. Further, technologies should be governed by those not in positions to profit from the financialization of the industry.
Implementing technology and governance
While the possibilities are both encouraging and daunting it is important to note that technology is not occurring on its own. Technology offers opportunities for significant cost savings, speed, and increased access to the art market. However, as Zeilinger states:
“in a global economic landscape of hyper-commodification and financialisation,”
which we currently live the implementation and governance of technologies must be carefully considered. From fair trade laws, and institutional buy-in of technologies to accepted modes of transacting, art professionals can guide the implementation of technology. Innovations can help us cut costs and speed up the rate at which art transactions close. Also, they can increase access to the art world while maintaining the necessary security and trust. However, these benefits must be weighed against the risks of automation, and commodification and addressed accordingly.
Technology is changing the way art is bought and sold from the basics of where and how a sale happens and is paid for to more complex instances like what ownership is actually exchanged in the sale of an artwork. As technology fundamentally changes these processes it creates an environment for innovative business models and value creation. It is making the purchase and sale of artworks faster, and cheaper, and more reliable and transparent. However, it is also changing how vulnerable the process of buying and selling art is to financialization. There is a need for internal organization to guide the implementation of technology and govern it in order to prevent a commodification of the industry. In this way, the benefits of technological innovation can be reaped while maintaining the true value of art.
How do you see technology changing the art market?
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