A slice of the LEP art market pie

by Ingrid Bond, 2/16/2017

Following is a 20 year overview of the limited edition print secondary art market as it relates to my dealership experience – from right before the advent of the online gallery of the late ’90’s – to today.

I started dealing in Norman Rockwell limited edition prints (LEP) in 1995. The three Rockwell LEP publishers Abrams, Eleanor Ettinger, Inc., and Circle Fine Art, in the 70’s, produced and distributed high quality LEP’s of over 300 editions (300 piece average in each).

At his peak Rockwell’s mass appeal garnered a global reach with art distribution in large number, this artist’s market dynamic offers a good point of reference for this overview.

In ’95 people still sourced goods availability and information from newspapers, magazines, and catalogues. The standard sales platform was the little classified ad in the city paper.

Norman Rockwell, Muggleton’s Stagecoach
1996 and our dealership was one of less than a handful of online galleries; and I had a front row seat from which to view and experience how the internet was to change the art market over the next 20 years.

Before online, artwork was purchased AT RETAIL (as set, and strictly monitored, by the publisher) at commercial gallery locations. Publishers sold to galleries only if they were a verifiable brick and mortar, commercially functional, gallery and dealers could not buy even close to wholesale (approx. 25% of retail) unless the order was of a significant quantity.

If you sold for less than retail and the publisher found out — no more product for you! Your gallery was blacklisted. Price controls were tight – therefore the LEP value (closer to retail than away from it) – was maintained. By and large, consumers expected to pay retail or thereabout. In our dealership’s case, (regarding the resale of privately owned artwork) purchasers were able to buy from us at less than retail — which was well above what is today’s fair market value (FMV).

And in effect, there are far fewer buying artwork at brick and mortar galleries. For these locations to stay in business they need to meet the interests of their locale with artwork that can not be found on the internet – for less. In other words, a commercial local business, exclusive/unique product and strong secondary market presence.

Today’s online consumer expects to pay FMV or wholesale, or less. They have no problem searching, waiting for the response, the price they want — because they can. And not any handful of dealers trying to maintain a level of value by holding out on price, will change that tide.

Many, many owners however do not want to sell below FMV, or at wholesale; required to contract professional assistance often needed to sell artwork favorably, or at least close to current market levels.

If secondary market art buyers refuse to pay more than FMV and actively seek price points less… what does a dealer have to buy artwork at – in order to resell?

Before we answer that we must touch on… the cost of resale. There are significant expenses related the resale of artwork, especially that which is several decades old. Conservation, restoration, framing, packaging, shipping, insurance, none of that comes cheap. In fact, a 40 year old LEP may cost up to $1,400 and beyond in preparation costs alone – if all or most of the above are factors in a transaction.

As an example: a piece has a retail value set by the publisher at $6,000 (whenever that may have been), has a current FMV of $3,000, with wholesale at $1,500.

In today’s competitive online market a piece that has a FMV of $3,000 – might be found at $1,800.

For a dealer to purchase a piece and invest in the resale, the most basic cost in the best of circumstances is $500. At an $1,800 selling point the artwork will have had to be bought (at most) at – $1,000 which is less than wholesale.

And I can tell you, owners are not willing to sell at wholesale or less.

So what does this mean? It means that there is A LOT of marketable artwork in storage, under beds, in closets, hopefully not in a moist basement or attic (resale cost: $300+ to restore such kept paper, if it can be done).

Just how much valuable LEP artwork is there out there potentially — somewhere in storage? Well let’s go back to Norman Rockwell’s LEP editions: 300 editions, 300 signed prints in each, that’s a min. average of 90,000,000 pieces produced and distributed. From 1996 to 2016 BFA has collected a database of Rockwell print owners (sellers) of 3,000+ most of whom have multiple pieces and have not sold their artwork.

THE POINT: There is a HUGE, yet seemingly unnoticed, impasse occurring in the art market created by owners storing marketable art rather than selling at wholesale or less; and buyers not buying unless priced at market or less.

Out of 80 owners, 68% still had have artwork, 70% of that group are open to donating for either current FMV or original purchase price – as a tax deduction. Many see the value of receiving a FMV tax benefit rather than cash at wholesale or less — especially as others benefit from the transaction. But how many would actually follow through on donating?

The greatest obstacle to donation is the unknown. Owners don’t know the tax laws, how to, or who to – approach in such a situation. Seeing limits, and obstructions they are not interested in penetrating translates to a limited, stifled market with a lot of art assets wasting away in storage. Arm potential donors with information, direction, support and the number that respond may be surprising.

These are dynamic and extraordinary times. Uncertainty effects the marketplace and yet new opportunity also blooms.

What I know:

• the art market • that there’s a lot of dormant marketable artwork that needs recirculating • plenty of nonprofit organizations and their constituencies that are in need of alternate forms of support • and a lot of owners who need to realize a return on their investment (at either the purchase price amount or today’s FMV) while they can — before the issues of condition, lack of demand, economic and tax law changes, etc. zap the asset and with it the potential available now.

For additional perspective from the original artwork point of view: an article dated 11/2015 that is very relevant, informative: The Wall Street JournalWealth Management: Art Donors Give to Smaller Nonprofits, by Daniel Grant. ‘Recipients Increasingly include hospitals, libraries, retirement centers and nursing homes.’