PLEASE NOTE THIS REPORT IS IN PROGRESS.

FoAM Valuator SPRING 2008 Jack Anderson, MBA, MA-Art Management The FoAM-Valuator Research Project - “Economics, Market and New Media Art Sales ValuatorResearch”

“Art cannot be a utilitarian act. For, inasmuch as a utilitarian act aims always at arriving at a pleasure and, hence, at removing a pain, art considered in terms of its own nature has nothing to do with the useful, or with pleasure and pain, as such” (Croce 1913).

INTRODUCTION

- What is Valuator?

Valuator is a study of the contemporary art market, focusing on marketing strategies for new media art sales. The most innovative and challenging of contemporary art practices are not transacted in the mainstream market for current art. To have agency within these spheres of trade, the results of new media art disciplines require a redefinition of: what is deemed collectable; how the price mechanics in fine art are circulated and the preservation instruments used to build the heritage trust necessary for the endorsement of future beneficiaries. Valuator is a qualitative-analysis safari into the wilds of economic value construction in the arts.

• Is there any added value to the marketing of New Media Art other than profit?
• Will this aid or detract from the art?
• Is Money as Profit a detraction from your worth as an artist (New Media or Other as applies)?
• Why would the Art Market behave differently than any other market? Does it? Why?
• Why would New Media Art sales be different than any other art sales?
• Is there something special about New Media art that makes it unmarketable?
• If it is marketable, then why hasn't it been successful?

- Why study value construction in the arts? What is the relationship between Culture and Economics?

“The economic impulse is individualistic, the cultural impulse is collective” (Throsby 2001)

The pursuit of economic self-interest (maximizing utility) vs. the desire for group experience or collective consumption and production (even artists working alone are working towards the expectation that their work will communicate with others) are demarcated by many critics, historians and sociologists as two opposing functions that are diametrically opposed .“[A]estheticism and economism effectively cartelized the social world by dividing cultural exchange and market exchange into separate disciplinary jurisdictions” (Agnew 1986). This opposition is epitomized in the “Hostile Worlds” (humanist scholastic approach to the study of art and economics) versus the Neo-Classical Economic “Nothing But” approach which reduces the transactions in the art marketplace to those rules that govern all markets. Socio-Economist Olav Velthuis construes these oppositional approaches into economic systems: “…the 'Hostile Worlds' perspective makes a sharp distinction between an (ideal) gift economy, and a (corrosive) market economy,” (Velthuis 2002) neither of which realistically describe the circuits of activity that actually take place in the transactions in the field that are constantly negotiated through the agency of the Art Dealer.

To understand how value is determined and endorsed is a difficult task for an economist - even one open to social methodologies of research. “Another reason why art historians are reluctant to deal with art economics is the conscious or unconscious effort to keep newcomers out” (Frey 2002). In doing field research, the economist is challenged by the closed, mercurial social spheres that collect and transact art that is distributed into the contemporary market. The 'supra-individual' institutional secrecy makes gathering empirical data a difficult and misleading process. To understand how value may be determined for New Media art has additional hurdles. A central issue for neo-classical economists has been: “the cost of producing them [works of art] does not account for their selling price” (De Marchi and Miegroet 1999). The discrepancy between the cost of several tubes of paint, some canvas, a frame and a new media art installation with computers, projectors, sensors lend to the notion that the standard 'exceptional economy' descriptor does not apply in contexts where prices of production may often exceed the budget that an organization is willing to pay for it. Consider for a moment, the possibility that New Media art work might be better classified nearer to the economic functions of the performative arts. At the same time that the cost of production might exceed budgetary allowances, New Media artists do not have the same support mechanisms that a theater troupe, a dance company or even a stand-up comic might have. If New Media artworks were to overcome this hurdle and emulate aspects of the 'exceptional economy' of visual arts, could these meet the criteria for collection that a patron would demand?

Problem/Aim

“”[e]conomic value, strictly speaking, is the general form of all value, including that which is aesthetic and that which is not aesthetic but is value of another kind (…) To say that aesthetic value is 'consistent' with economic value is to say no more than that the particular comes within the general, or that aesthetic value is a form of economic or artistic value just as every other form of value is“ (Grampp 1989).

• concise summary of the problem domain/s that the research explores, or the specific aims of the research undertaken.*

1) What are the Hedonic price functions of contemporary art sales? What are the Hedonic price functions of New Media art transactions?

The hedonic price functions which economists have measured art against in the past include: size, material, style, technique, age of artist, reputation, institutional recognition, type of sales outlet in which the transaction took place. For New Media art works that have been sold to a private, corporate or institutional collector, what are the Hedonic metrics that we can use to quantify those characteristics which might lead to stochastic measures and empirical formulaic quantifications for study? If we can identify each of these characterisics, we can assign them a value and create a function by which to identify price structures. The down side of this approach is that we don't know if these price-determining factors relate to supply or demand or both.

2) Do the existing funding mechanisms for New Media artists displace their effective participation in the art market?

In several contexts, subsidies can inflate conditions of structural poverty and decrease the conditions for a healthy marketplace. New Media art is generally subsidized - supported through private and public institutional grants. Structural poverty happens because: ”…the effect of more subsidies, and more donations, social security and subsidized eduction, is that more people will become artists and more people will end up earning low incomes“ (Abbing 2002). The myth of the starving artist has perpetuated this cycle of poverty through charitable and benefactor conditional supports that make payment for artistic services into a romantic notion of “financial assistance.” Supply side subsidy (project subsidy) creates a substitute demand that displaces market participation because artists no longer make work for the market, while a demand side subsidy (tax breaks for art purchases) inflates the number of artists attempting to sell to a limited client base and does not increase sales to any one artist. ”…government intervention tends to be supply-oriented [in Europe]; subsidies go to the poorer artists and art institutions rather than to art consumers. And yet, because of their signaling effects, these types of subsidies are more counterproductive than other subsidies“ (Abbing 2002). To overcome the hurdles incurred by subsidization, how can New Media artists build commercial demand for their products? Or, what changes to their productive output would they have to make to become viable despite the subsidy draw?

3) What curation/preservation standards must develop to make New Media art viable in the marketplace?

There are several monikers used to describe New Media artworks for the purpose of defining its historicity and preserving them for future generations. Variable Media Art is a term that has been adopted by the Archiving the Avant Garde: Documenting and Preserving Variable Media Art project. In addition, to this body, The Dennis Langlois foundation has spearheaded a new initiative as well to resolve many of the complex issues that have to be resolved to build valuation standards for New Media artworks. Why is there a resistance for transacting the exchange of New Media Art? For the Artist(s) For the Dealer(s) For the Consumer(s) Finally - For the Government(s) What are the effects of subsidy on the market? What kind of state is providing that support? The extent and type of public support and its effects on the arts crucially depends on whether the state is centralised or decentralised, and on whether it is authoritarian or democratic. How is artistic creativity fostered? Institutional creativity is best supported by attributing a large role to the market and market-like institutions. Personal creativity hinges on intrinsic motivation, which may be crowded out by different types of public support. Who are the market agents?

How do we engage in the market (or should be engage in the market)?

• justification of the aims (scientific/artistic/historical/etc…)*

Artists have not always been poor. Artists do not have to be poor to make work that is culturally significant. New Media art is stricken by a 'cost disease' that makes its distribution untenable without the direct participation of the artist in the exchange. Technical requirements, service demands and few opportunities for cost-reductions in development are further exasperated by increasing and constant technological costs without increasing compensation standards and a 'new entrant' position in a marketplace where tastes are remarkably constant (or lagging). New Media arts are generally technical in nature and technological advances implies a change in the quality of the art produced. Other visual arts have been able to incorporate change [technological] to their advantage, while new media artists are hampered by their use of new technology because there is no cost savings associated with their new techniques.

Grow your business/Make your business more efficient/Build into new markets/businesses - the 3 things that an MBA can do for an organization. FoAM asked me to look into new marketing strategies and I had concluded that if FoAM were to continue in the production of New Media art works, then finding a market for their labors could be beneficial to diversifying their funding base. What is the Market Value of LyTa?? I began looking into the market (or lack thereof) for New Media art because when I asked members of FoAM what the market value of their LyTa? project was, they didn't have a clear answer because the project hadn't been considered for the open market.

• expected outcomes of the research*

1) Models for Marketing to Marketing Plan(s) to Strategic Marketing Actions 2) Framework for Discussion to Discussion List to Collection and Repository of Knowledge 3) Synopsis of Data to Generation of Data to Application of Data Project Phasing

• Stage One - Organizing, Literary Review
• Stage Two - Interviews, Dialogue, List Discussion and Conference Proposal
• Stage Three - Outlet for Publication of Discussion Paper and Conference Finding
• Stage Four - Pragmatic Exploit of Knowledge

Topics for Practical Paper (Publication for Stage Four)

Topic One: Economics of New Media Arts Organizations

• Market Dynamics
• Art and Commodity and Utility and Scarcity and Mystification and Hierarchy and Fashion and Function
• Market Entry and Exit
• Innovation Research
• Funding and Financial Returns
• New/Alt Economics of New Media

Topic Two: Valuation Standards - How the price mechanics in fine arts are circulated

• Social Value Construction
• International Valuation Standards - Insurance/Property/etc.
• IPR vs. Open Source (are you selling an Object or a System?
• How the prices are set for New Media artworks (or play)

Topic Three: Preservation Instruments and the Heritage Trust

• Do Art Museums represent your needs?
• Heritage and Conservation and Economics
• Who is deciding how to be historical?

Topic Four: What is deemed collectable? Who is the Market? Gallerists/Collectors/Foundations/Stores and Other Possible Outlets

• New Media Curating
• Collecting and Dealing
• Art Fairs

Topic Five: Marketing for the Market (What Market?) and Development Strategies

• Value Based Marketing
• The Appeal of Public Art (and Public/Private)
• DIY, On-Line and Traditional Galleries

Topic Six: Relational Roles

• Technology and R&D and New Media Arts
• Social Formenters
• Research Agency
• Cultural Diplomacy

Topic Seven: Other Economic Exchanges

• Reputation-based
• Patronage
• Auction
• Financial Instruments
• Royalties

Methods

• concise description of the way the research will be (has been) developed from establishing the problem definition to the final results

Qualitative/Deductive   Literary Review

• Annotated Bibliography with links and references
• Questions drawn from texts and issued (when applicable) to author/institution
• Compilation of resulting information
• Summary and analysis

Mail, telephone surveys

• Created two brief, fact oriented simple answer questionnaires - one for dealers and one for artists.
• For exploratory, open-ended and inductive questions, used a dialogue approach through e-mail and telephone.
• Having finished my lead round of questions, looking to reformulate and begin to look for larger pools of data so that I can build towards a more complete and objective body of knowledge.
• Due to administrative effort and time constraints, I am looking to rely on e-mail interviews followed by telephone calls for clarifications on interesting responses.

  Telephone, in-person interviews, conference questions

• Setting up in person and long-answer background interviews in 3 fields - economists, dealers and artists
• Not meant for high-volume data collection - mostly for reaction to information that I have compiled and as follow up on the Literary Review questions
• Expert opinions will reduce consistency of survey, but offer greater insight into individual issues.
• Telephone vs. in-person considerations include sensitivity of information, need for candor; need for stories; risk of bias, social desirability, cues; interview-interviewee relationship

Solution/Results

• concise description of the actual outcomes of the research

Models for Marketing to Marketing Plan(s) to Strategic Marketing Actions Framework for Discussion to Discussion List to Collection and Repository of Knowledge Synopsis of Data to Generation of Data to Application of Data

Discussion

• comparison of the expected and the actual results

From September to October 1. Defining the Scope and Scale of the Project 2. Re-Familiarizing with FoAM 3. Introduction to New Media forums and publications 4. Gathering Data - Ordering of books, periodicals, etc. 5. Project Working Active Learning (Tech Nouveau - Shape Memory Alloys and E-Paper research) 6. Contextual Brussels

From October to November 1. Web Search - Creation of topic list with links 2. Adoption of Omni-Reader format for internal publication (transferable to HTML) 3. Construction of Annotated Bibliography 4. Creation of interview questions and consultation/interviews with several scholars in the field. 5. Material Gathering From November to December 1. Answered Primary Question of: “Why doesn't New Media Art sell?” 2. Devised Organization Method for Research 3. Extensive Literary Review (Online Materials, Articles and Books) From December to January 1. Reading of materials 2. Scripting of Interviews 3. E-mailing of experts for feedback 4. Compiling research report

• suggestions and comments on the research process and its results

These comments were generated during the Altitude 1000 Festival Presentation on 12/12 at 12:12.

do you have any leads on subsidy market combinations?

start with a non-profit and spin offs.

companies that conceptually start as NGO's and then transfer to a for-profit.

A lot of the things that we do - seem more of a service than an object.

Service related - marketed differently than products. Are there more appropriate models for selling services than products. The difference selling a painting and a performance. Structure of financing encourages loss.

How to make service economy profitable?

Making artwork is just a part of what we do, the services are a large part…

What is an appropriate way of developing for-profit clients?

Selling of experiences vs. selling of objects - in the cinema you buy a ticket, in avant garde art there are not entrance fees…How to get this across?

How to convince people to finance these properties? People take experiences for granted.

Pix: Not actually selling audience experience, but financed by an external funding body.

Reputation-based system

S: As in Getting Famous?

N: People have good experiences - at what point do they give us money? When can we turn that into value? Reputation based actions - this becomes something tangible to get other financing.

P: Collection agency - the popularity of a recording artists is how you compensate them.

M: Is this similar to a PGP network of trust?

N: It is not transactable? How do you make this representation of value?

P: what can you do with your reputation pile?

N: If you have a big pile of gold it is only valuable if there is a desire for it.

M: Reputation is important to us, not for fame, but for how we work in the environment.

S: If you want an independent assessment of your work, you need a scientists..

N: The value of meaning is relative to how much they have given away before.

• suggestions for the future work based on the conclusions of the research

References

The complete annotated project bibliography will be available as an Omni-File and as an HTML document.

– JackAnderson - 12 Jan 2007