Size and Segmentation of the Fine Art Photography Market, 2013 Edition

I recently finished up the data gathering for the last few Contemporary Art auctions in London last week, and so now have a complete set of numbers for the first half of the year. In aggregate, and accounting for the harmonization of different currencies, I tallied up $91,601,540 of photography sales at auction in the first six months of 2013. If we assume that I covered most of the action, but missed some smaller sales in secondary and tertiary markets/geographies and some random lots buried in mixed sales, I think a round $100 million isn't a bad thumbnail number for the actual public secondary market results. While no one can predict the arrival rate of top dollar consignments and single owner collections for the second half of the year, I think a logical approach would be to double the amount given the second six month period, making the annual total roughly $200 million. This number represents the photography transactions that took place in public with verifiable data, covering everything from vintage to contemporary, big name and small. It's an important first step toward understand how big the market for fine photography really is.

Unfortunately, the statistical sledding gets quite a bit tougher from here, since there are no data sources for what actually occurred in private transactions between galleries and collectors, museums, and other buyers. So out comes the back of the envelope for some approximations, assumptions, estimations, and guesses. What if we start with a hypothesis that the private market roughly equals the public market, i.e. that if the public market is $200 million in 2013, the private market will be roughly the same, getting us to a total of $400 million for the entire fine art photography market. The first question is whether this number passes the laugh test in terms of potential credibility. So let's try to test it via breaking the gallery market down a bit.

Let's assume there are four types of galleries, and these galleries are defined not by their programs, their geographies, their longevity, or their general smartness (as we might normally characterize them), but merely by their top line revenue selling photography. These galleries could be photography specialists or broader contemporary art venues, but all we care about is how much photography they sell on an annual basis. This dollar number will include both primary market sales and any secondary market transactions they may be doing in the front or back room (I'll come back to try to break this part down in a moment), as well as whatever photography they sell at art fairs. In this model, a "small" or "emerging" venue sells up to $500K of photography in a year, a "mid-sized" venue sells between $500K and $1M, a "large" venue sells between $1M and $2M, and a "mega" venue sells up to or beyond $5M. I'm not looking for perfection here, but simply a plausible estimate of the buckets.

If we agree on this breakdown, the next question is how many galleries of each type are out there in the world, and what kind of flow through numbers they produce in aggregate. Here's a little spreadsheet table to help guide the discussion:

	Small/Emerging	Mid-sized	Large	Mega
Annual Photo Revenue	$           500,000	$       1,000,000	$       2,000,000	$        5,000,000
Number of Galleries	100	50	25	10
Total Revenue for Category	$       50,000,000	$     50,000,000	$     50,000,000	$       50,000,000
Overall Total Revenue				$     200,000,000
$ Market Share/Gallery	0.25%	0.50%	1.00%	2.50%

As you can see, I've plugged in numbers that make my original $200M assumption hold true, but in looking at them, I think they hold up decently well. I think we could argue there are many more than 100 galleries on the low end, but I think that many sell so little photography in terms of raw dollars that they don't move the overall market number much; you've got to sell a lot of prints at $1500 a throw to make the top line worth counting. On the top end, there may indeed be more than 25-35 galleries that are selling multi-millions in photography on an annual basis, but I think it's decently lumpy. If Gursky, Sherman, Wall at el all have shows in the same year, or a handful of million dollar Westons or Stieglitzes show up, we'll get a spike here, but if they are generally spread out, then this model isn't far off I think. I think reasonable, well considered arguments could be made for both larger and smaller numbers that $200M, and since we'll never get the top 200 galleries in the world to tell us their revenue numbers, I look forward to hearing alternate speculation or analysis in the comments area below.

The other number in the table is the market share number by revenue dollars for each gallery type. The reason I calculated this number is that I wanted to see how fragmented the photo market is. The answer is that it is very fragmented, with even the largest players only holding a few percentage points of share; in the markets for other kinds of products, 20, 30, or more percentage points of share for a market leader aren't unheard of. Which brings me to the now infamous "grow or go" effect we are seeing more broadly in the art world, where many galleries are adding spaces, gobbling up artists, and generally trying to get bigger. Part of this is an economies of scale issue in terms of amortizing the fixed costs of the underlying infrastructure of art selling and distribution (both fixed locations and endless fairs), but in many ways, I think this is just a bold market share grab, led by economic might. And as sellable artist names are plucked from the lower tiers, there is the danger of hollowing them out and driving the galleries that once supported them back down to smaller revenue rungs. This is the pressure that many of the mid-sized galleries are feeling now, and unfortunately, it's a result of straightforward competitive forces I'm afraid. Galleries feeling this onslaught need to find creative new ways to handle the pressure (from alternate partnership/support models with artists to different/lower cost distribution/selling options), as this stress isn't going to go away.

So let's assume you are willing to grant me the $200M private/gallery revenue number. The next idea to consider is how much of this is primary market and how much of it is secondary market. I'm defining primary market to mean a sale where an artist (or his/her estate if the artist is no longer living) is the direct consignor, and the revenue is shared between artist and gallery, rather than a secondary market transaction where the artist receives nothing. Another way to ask this question is what is the split between primary and secondary for most galleries. Of course, the answer is all over the map: some do only primary business, while others use a back room secondary business to fund their front room primary efforts. I'm going to timidly put out a number of seventy percent primary (in aggregate across the entire photography market) as an estimate, giving us a primary market size of $140M (the auction market is all secondary except in exceptional cases). It could be as low as half I suppose, but my gut tells me most galleries are still leading with primary sales.

The reason I wanted to know this number is that I think this $140M is the effective "servable" market (at least in 2013) for a contemporary photographer. Any start-up worth investing in understands very clearly how big their target market is and has sliced and diced it with granularity to understand what part of that market they can reasonably hope to take from the existing players. I think artists are a little like individual start-ups; they bring a "product" to market and hope (with the help of their galleries) to sell it to customers who have choices. Like any market, there are both entrenched market leaders and there are upstart attackers hoping to push them aside. And again, it comes back to a market share (or mind share) issue; collectors (and museums and other buyers) are spending $140M a year on fresh to the market photography, and all the artists out there are competing for a share of that pie. Those with big, hairy, audacious goals want to not only crush their competitors, but also grow the total market and create new spaces where they hadn't existed before. I don't get these sense that artists in the photography world are as cut throat as their counterparts in the business world, but in many ways, the substitution trade-off between dollars spent on a Thomas Ruff and those on a new photographer is just as real.

If I was a contemporary photographer, I'd actually want to take these calculations a few steps deeper, and try to subdivide the market further. While a large majority of collectors "buy what they love" and don't necessarily adhere to rigid rules about what they might buy, I think there might be as many as a third who have defined limits of one kind or another. Perhaps they buy landscapes, or abstract photography, or German photography, or work made since 1990, but they don't buy other things for the most part. So if you are a contemporary photographer making portraits, the "buy what you love" types are a target, but the landscape lovers generally aren't. So that $140M quickly gets chopped up into smaller sections, the main body still at least $100M I think, but less than the full total to account for the specialized collectors who don't fit a particular photographer's profile.

All of this statistical musing will seem anathema to many artists, many of whom don't like to think about their art in the context of a "market" or in competition with anyone, and at some level, I agree with that sentiment - it would be nice if art could reliably transcend commerce. But I can tell you that if I was running a photography gallery, I'd be poring over these kinds of numbers, trying to understand how to optimize the math for the good of both the artists in the stable and the gallery itself, especially if I was trying to buck the "grow or go" momentum. Like it or not, big box retailing (AKA the aggregated art fair) and broad franchising (AKA the multiple location mega gallery) make it easier for customers to buy; it's more convenient and it saves time for the consumer/collector. If the one location, tightly focused, artist-centric gallery model is to survive this shift in the competitive landscape, it will need to innovate economically (probably via cooperation with others and the power of the Internet), and this starts by understanding in detail how big your market can be and who your customer really is.