Art in a clic(que)

Erasmus University Rotterdam - Cultural Economics and Entrepreneurship - Study the business of art

Caoimbhe Molly Crowe 


Topic: Technological change and digitalization 

Title: Art in a clic(que)
Key terms: Innovation, Digitalization, art market, metaverse
Key concepts: convergence, gatekeepers, Anderson’s longtail theory and niche industries, Baumol’s cost disease,

Introduction: Understanding the traditional art market

In recent times the world experienced a transformation from digitation to digitalization. This is accompanied by globalization and a reshaping of the art business. As investigated in the journal, Global Art Market in the Aftermath of COVID-19. Arts we learn that the prevailing digitalization trends of the contemporary art market have emerged or are involved due to the COVID-19 pandemic (Sidorova, 2022). Specifically, the focus of this paper is to exploit the effects of the pandemic on digitalization within the art market by investigating the question: What are the most immediate effects of digitalization on the cultural industry of your choice? To what extent, has the ecosystem evolved during recent times, and what tools of digitalization are used to reshape the art market in the case of Sotheby's art auction house? I want to begin by addressing key terms and concepts that support a broad overview of the current ecosystem starting with briefly recapping the traditional career and practice of an artist operating with the mediator. Following the case of Sotheby’s in the UK, how have they adapted their market tools to the COVID-19 pandemic towards digitalization, and what innovative tools are reshaping the way they approach their audience?

Digitization and its impact on the art market

To estimate the current development of the art market, I need to understand the traditional art market. Typically, an artist would collaborate with galleries or institutions and would be foremost dependent on art mediators and dealers to substantiate their career. These mediators or dealers are gatekeepers controlling access to a platform or audience. They operate as a middleman between the collectors and the artist and influence to regulate the discourse of the art market. Artists rely on their network and those gatekeepers that present themselves as agencies, distributors, and experts. Traditionally the collector would act as a consultant that may influence shaping the preferences and perceptions of collectors by promoting specific artists and their work. Although these mediators ensure the quality of this speculative good, this route to sell the work of an artist can create a barrier for an artist to enter the art market and push competition within the artist network.

Following the transformation from Digitization, that is the converting analog information or physical objects into a digital format that innovated the way artist and creatives produce their work in a shorter time frame, this is accompanied by the utilization of a reduced number of resources as in the case, for example, Photography or Filmmaking. Resources such as analog film and the processing time as well as the need and skillset for this processing equipment can be reduced when a Filmmaker decides to work with digital cameras and the required computer software instead of a developing room. Later digitalization is using digital technologies to transform a business process which leads to digital transformation which means the process of using digital technologies to create or adjust business processes, customer experience, and culture. Generally, it delivers a broader range for the availability of artworks allowing greater diversity in the art world.

Distribution and access to the global audience

In terms of distribution, online access has become a key for artists, mediators, and collectors to connect to a global audience. It becomes a tool for artists to mediate for themselves and establish their brand through social media. On the consumer side, interactive and online showcase rooms create an experience for the audience as digitalization provides increased access to digitalized art. This allows an artist to widen their catchment pool and access to their work besides, overall generating opportunities for artists and mediators to reshape conventional manufacturing, distribution, and consumption practices.

Baumol’s cost disease remains a significant challenge for artists to earn a decent income as we find much art for art’s sake creators online where the nature of the artistic work requires a high level of skill, capability, and understanding of art theory that cannot be automated or substitutes by technology.

Sotheby’s and the concept of the metaverse  

So how did this apply to the case of the UK auction house Sotheby’s? During the COVID-19 pandemic, Sotheby's expanded its, traditional business model, from a not only online market platform that underlines the concept of convergence to an entirely digital experience for the customer within the metaverse.

The Metaverse is a term used to describe a potential future Internet in which the virtual and real worlds are more closely linked and merged. Users interact with each other and with digital items in this shared, immersive metaverse, which blurs the distinction between the real world and the digital one. The Metaverse is a collection of interconnected virtual worlds that can be accessed through a variety of gadgets, including smartphones, PCs, and augmented reality glasses. The idea of the metaverse is not new, it has recently gained popularity as a result of advancements in virtual reality, AI, and blockchain technology. The Metaverse is viewed by some as the next great platform for human interaction, impacting everything from social norms and cultural values to economic and political systems (Rathenau Institute, 2021).

Speculatively I would say that Sotheby's as a monopoly such as Christy as an art auction house would need to participate in this trend towards an online marketplace since it aims to stay resilient within a changing market and audience. Sotheby's partnered with platforms such as Decentralland and created a digital replica gallery that is located within this metaverse in the art district. Decentraland is a decentralized virtual reality platform where you can purchase virtual plots of land in the form of NFTs using the Ethereum blockchain's MANA cryptocurrency. You may also create your own business, shops, and applications on that land. Its users govern the platform through the Decentraland DAO, a decentralized autonomous organization (Laeeq, 2021).

As the latest big step in the new industry, Sotheby’s has developed Sotheby’s Metaverse, a dedicated site oriented towards digital collectors that provides a curated selection of NFTs selected by the auction house’s specialists. The initiative is being marketed as an ‘industry-first’ by the corporation. Alongside the convergence of different media, forms have created a new opportunity for this organization to reach a niche audience across different platforms.

“We want to create more channels and more ways for our collectors to be able to engage in and buy things that they love,” explains Goodman. “We’re able to see a different group of people from what we would normally have in the consignment auction process. It’s a way to expand our distribution and brand and introduce new people to the collecting world. We’re excited about the momentum we’re seeing in the online space.” (eTail East, 2018).

Andersons Long Tail and the role of online auctions in Sotheby’s

Upon this recent development, Andersons Long Tail describes the phenomena of the process of coming into prominence in this specialized art market to border a range of selected items. In the case of Sotheby’s, it can be used to explain the long tail in terms of that transformed from a face-to-face personalized relationship to changing dynamics in the auction house, particularly towards online auctions, and the role of online auctions.

We know Sotheby’s as a high-profile auction house for blockbuster goods, that sell high-end works of established and notorious artist such as Banksy. They regularly appear in the media with their multi-million sales. These types of auctions typically have a limited supply as they deal with rarities and a strong demand as they advocate for unique luxurious and prestige goods that result in high prices. With the transformation towards an online and metaverse experience of the auction house, they increased the availability of information about the artist and the works as well as that buyers interact within online communities that allow a wider range of items that are offered for sale such as NFTs. According to the theory of the long tail, transportation, and distribution costs are reduced by the online market and digital technology. Moreover, this can lead to the democratization of those deals as more buyers participate online which results in broader diversity, accessibility, and inclusiveness. Moreover, the long tail theory can explain how Sotheby's expands its service and experience and therefore its range of selected goods to a broader audience that leads to an increase in revenue along with unprecedented online art market tools.

Conclusion: The changing dynamics in the art market and the future of Sotheby’s

Looking at the traditional artist career we can say that digitalization has innovated the way artworks are produced, distributed, and consumed. Artists gain the opportunity to evade the gatekeepers and expand their skill set to become their own advocates on social media. This, unfortunately, does not overcome Baumol’s cost disease as that artists although do not solely need to rely on those gatekeepers to reach their audience, the art market remains a space in which establishments such as Sotheby’s remain in a market that sells unique and rare luxury goods at a high price to demanders that aim for prestige.

To predict how buyers will respond to the increasing popularity of online art and the development of new methods for viewing and buying art, just like in the case of Sotheby's. The way the art market operates changed with the creation of internet-based platforms for art auctions and sales. It's unclear if these innovations will get more momentum or if buyers and collectors will return to the traditional auction and purchase practices. Caves' "nobody knows" idea emphasizes the need for businesses and individuals in the art industry to be resilient to a shifting market and consumer behaviour. This can include changing the way they create art, investing in innovative technology, or expanding their network of collectors to reduce the impact of uncertainty and increase a broader audience (Caves, 2010). In conclusion, digitalization has impacted how art is purchased, sold, and experienced, even though its effect on the art market and auction houses like Sotheby's remains an open question. On the other hand, the art market will keep developing and adapting to new trends in response to new technology and shifting market conditions.


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