Art Balloon: Contemporary Art's Deflating Market

After years of record-setting sales, the contemporary market is showing signs of weakness. Here’s why “bubble” is the wrong word.

The art world has been partying hard these past few years, plying ever more fairgoers with ever more champagne as prices for contemporary work rose to astrophysical heights. Now comes the hangover. In London in February, lackluster sales at Sotheby’s and Christie’s—the hobbled auction-house duopoly, both of which brought in reforming new CEOs within the past year—offered the latest evidence that the once seemingly impregnable market for fine art may now be in trouble. And sales at art fairs such as Art Basel Miami Beach and Frieze, where not long ago wealthy collectors shoved through the aisles as if they were at a Black Friday sale, were notably slower in 2015.

And yet, amid the woes, attendance at museums and fairs is higher than ever, and new stops on the international art circuit keep appearing, from the Fondazione Prada, in Milan, to the Aïshti Foundation, in Beirut. Trophy sales continue, too. Ken Griffin, the hedge fund billionaire, recently acquired two paintings—a Pollock and a de Kooning—from David Geffen in a private deal reported to have cost a record $500 million.

Is the art market a bursting bubble? Or is it more like a balloon: Squeeze the air out of one end and watch the other inflate further? Dial up any of the dealers or auctioneers whose livelihoods depend on a buoyant market and they will assure you that beyond the headlines everything is ticking along. But a correction is clearly under way for auction-house madness, thanks in part to weak macroeconomic performance in China, Brazil, and especially Russia. In London this winter, serious works of art from undervalued figures—such as a 1972 blackboard drawing by Joseph Beuys—fared far better than second-rate dregs from big names, priced too high to sell. Blue-chip works have held their value, while the so-called Zombie Formalists, a biting but accurate designation of certain brain-dead abstract painters pumped up by speculative collectors, have collapsed in value as quickly as they rose.

In her authoritative annual checkup on the health of the art market in March, the Irish economist Clare McAndrew confirmed that the market’s polarization is accelerating, with just one percent of artists constituting more than half the volume of global art sales. Contemporary art now looks less like an isolated boom market and more like the global economy in general, in which a few superelites accrue value while the middle and even the upper-middle ranges deflate. Until now, the acme of the market, where prices for both masterpieces and lesser works have so many meaningless digits they might as well be telephone numbers, has masked the softening elsewhere—but a reckoning has indeed begun. And though the coming readjustment may be painful for some dealers and auctioneers, it has a silver lining: We may be returning to a dispensation in which collectors see paintings and photographs not as mere speculative investments but as works of art.

Jason Farago is the U.S. art critic for the Guardian and editor of Even magazine.

Plus: How To Raise The Bidding

They say that a great auctioneer can add 20 to 25 percent of value to the sale, but that’s misleading—the energy of an auction, and of course the money, comes from the audience. But it’s up to the auctioneer to read the room, to draw everyone in, to lead them, and all the while to keep the math in order since there is a certain number of set bids before things even begin. The day of the auction, someone may have a look in their eye. Some major collectors will devote their careers to gathering only a dozen pieces, masterpieces in a particular area, so you know where the appetite will be, but you don’t want that to peak too early. Sometimes you have to pause, or move on to another bidder, or pick up the tempo. I do study how conductors lead an orchestra. —Jussi Pylkkanen, as told to James Scott Linville

Jussi Pylkkanen is the chief auctioneer for Christie’s, who oversaw the record-breaking $179.4 million sale of Picasso’s Les Femmes d’Alger last May.