When Art Is Becoming Digital, Should Everyone Get a Piece?
Contrary to other types of commodities that went through a process of digitalization before becoming more accessible to the general public, the art world is not getting there yet. Until now, the digitalization of art seems to enhance the hyper competitiveness that exist in the secondary markets for art, crafts, and all kinds of cultural goods, making it relatively difficult to invest.
An accelerated transition
Technological progress and globalization are two phenomena of great importance and influence in the twenty-first century, which affect and influence many markets, that of culture being no exception. These activities are relevant beyond their cultural applications and represent a strong pillar for the creation of economic value at the global level (Throsby, 1994).
In recent years, because of the health crisis caused by the SARS-CoV-2 virus, this part of the economy has suffered from numerous changes both from a macro and micro economic point of view. The most relevant current trend, which also represents a consequence of public policies related to lockdowns and public gatherings, is that of the digitalization of the production and consumption of “culture”, the actors of this march being forced to find alternative solutions in order to continue their activities. At the individual level, many people have seen the need and importance of this creative industry and the role it plays in our leisure activities, but also the potential it has to support educational approaches, help us achieve social cohesion, the formation of feelings of identity and also in the expression of political and cultural memory in the region where the economic actors of this industry carry out their activity.
A booming trend in an overall recessionist economy
Art is an illiquid asset that is relative stable over the long term, the art market being the one and only market whose value went up during history regardless of the overall economic situation around the globe. It has proven to be extremely effective for classical art collections (i.e., paintings, sculptures and other tangible artwork). What about intangible art?
The art market is exploding as a result of NFTs (non-fungible tokens), which are tamper-proof digital certificates that attest to the authenticity of a virtual object. For some, the NFT is the future of the art world, while for others, it is a passing fad reserved for collectors and speculators. But what exactly is an NFT?
At first glance, all of this may appear a little hazy or far-reaching. However, many experts in the field believe that the “NFT revolution” is still in progress. These certificates are revolutionizing digital art, next-generation video games, and possibly many more domains in the future.
The concept of “tokens” is related to the concept of blockchains, which are decentralized computer protocols that allow for the encryption and security of financial transactions over the Internet (Popescu, 2021). A blockchain token attests to the legitimacy of a transaction. It cannot be tampered with.
Big change, big players
The opportunity that was being presented reached the big players of the art market very quickly. Museums and galleries around the world invested a lot of resources to keep up with the hype among collectors and individuals that are passionate about art.
When I said the big players, I meant the biggest of them all. For instance, in February 2021, at Christie’s, the famous auction house in New York, the American artist Mike Winkelmann, known worldwide as Beeple, sold for 69 millions USD (Christie's, 2021) a picture that regroups 5.000 digital artworks that the artist created in a single large frame in the form of an NFT. This digital photo in the NFT is however searchable and downloadable by all users who wish it. But this is not the case for all NFT projects that exist on the art market. On the other hand, the State Hermitage Museum, in St. Petersburg, Russia, held an auction last September of NFT replicas of five of its best-known paintings that raised $444,000. The Belvedere Museum in Vienna has fractionalized the digitized image of Gustav Klimt’s “The Kiss” into a one-off drop of 10,000 NFTs, priced at 0.65 Ethereum, or €1,850, each. A media relations officer at the Austrian museum said around 2,400 of these Klimt NFTs had been sold, generating about €4.3 million (Reyburn, 2022). We can cite other private projects that shake the digital world of NFTs such as CryptoPunks and the Bored Apes, AI created collections that have a market value that reached millions of dollars for their tokens.
The small collector is left once again on the sidelines by the art world, investors with less money being forced to a lot of speculative action if they want to cash in on this trend.
Investing in art can be a lucrative investment because the art market is relatively unaffected by stock market fluctuations and other vagaries of the economy. If you want to get a good return, you must invest for the long term. Indeed, because it is difficult to predict the evolution of a work’s price, it is necessary to invest in the long term to smooth out any market fluctuations and to navigate the so called “market bubbles”.
Photo source: PxHere.
Christie’s. (2021). Beeple: A Visionary Digital Artist at the Forefront of NFTs. Retrieved from www.christies.com: https://www.christies.com/features/monumental-collage-by-beeple-is-first-purely-digital-artwork-nft-to-come-to-auction-11510-7.aspx
Popescu, A.-D. (2021). Non-Fungible Tokens (NFT) – Innovation Beyond the Craze. 5th International Conference of Innovation in Business, Economics and Marketing.
Reyburn, S. (2022). Museums are Cashing In on NFTs. Retrieved from New York Times: https://www.nytimes.com/2022/03/25/arts/design/museums-nfts.html
Throsby, D. (1994). The Production and Consumption of Arts: A View of Cultural Economics. Journal of Economic Literature, 1-29.