Art Galleries Operating in the Red

The Art Newspaper is reporting on a new book by Magnus Resch with a claim that nearly 1/3 of modern and contemporary art galleries operate at a loss, and that only 1/3 of the modern/contemporary art galleries in the US, UK and Germany earn a 6.5% profit margin.

Resch claims too many galleries focus on the art and not on the proper business model.  I know from my time as a dealer there were many, many who failed to understand, or to devote the necessary time and skill level to running a business, so the numbers are really not that surprising.

The Art Newspaper reports

Almost a third of modern and contemporary galleries operate in the red, while the average profit margin of 1,300 galleries from the UK, US and Germany is 6.5%, according to a forthright book about the art industry.

The updated, English version of Magnus Resch’s Management of Art Galleries, published by the Berlin-based Hatje Cantz, pulls no punches. Its author writes: “A tradition has evolved of amateur management presiding over an enterprise that is all too often sinking into financial obscurity.”

His suggested remedies are drawn from tried-and-tested business school models and include advice such as adopting more rigorous systems of management and not competing for the same small number of clients. Among the more challenging ideas are a proposed change in the way living artists are paid by galleries (largely in favour of the gallery) and a recommendation that all dealers should operate in the more profitable secondary market as well as selling new works.

Resch’s style is clear and businesslike, but he is not advocating a corporate art world. The foreword by the US curator and dealer Jeffrey Deitch begins: “Art dealers who focus less on business and more on art are generally the dealers who become the most successful and influential.”

The volume of raw data on the private art market is impressive. In addition, Resch conducted 51 interviews with industry experts over the ten years he says it took to research the book. His own experience working in galleries and ten lively case studies also pepper the pages.

Source: The Art Newspaper