The art industry is booming, young artists are getting phenomenal prices, contemporary is the way to go when it comes to art....these are just some of the catch phrases doing the rounds of the art community just a year ago. The new century seemed to be the golden age for art, especially after the dip in the '90s. There was no looking back for art galleries, dealers and buyers. Once a well known gallery displayed the works of an emerging artist he became hot property overnight, with prices spiralling and works becoming 'unavailable'. The new breed of art collectors looking to hang a 'name' on their walls began to resort to auctions to purchase, albeit shelling out a few thousands or even lakhs more. Auction houses began to have 'record breaking' sales.

This also created an atmosphere of false invincibility, it was believed that the art market had gone global and finally come of age, ergo, nothing could touch it. Unfortunately, those who buy art live and function in the real world of stocks and shares, many fortunes used to buy art were made in the stock markets. So when the financial market fell, the art market found its foundations being shaken. The truth remains that the art market can only remain as strong as the economy. The portfolio values of many art buyers have been hit forcing them to downsize on their art investments as well.

In fact, while the purchase of art is seeing a downtrend, there are also those who are seeking to disinvest their art holdings to improve their liquidity standings. The former director of the collapsed investment bank Lehman Brothers, Richard Fuld, and his wife, Kathy, sold 16 drawings — three Willem de Koonings, five Barnett Newmans, four Arshile Gorkys and four Agnes Martins at an auction conducted by Christies in November. They sold at $13.5 million, below the low estimate of $15 million. Art has never been a 'liquid' asset and to try and offload it in these trying economic times is a futile venture, unless of course you are on the verge of bankruptcy like the Fluds! Besides, an artist's worth is based on 'perception' if the artworks that come up for sale under perform or are not bid for, it reflects on his/her popularity and could well spell doom for his career, this holds especially true in the case of emerging artists, where buyers are constantly looking for the 'next star'.

November was a historic month for the art market, 11 auctions conducted in New York by Christies, Sothebys and Phillips De Pury, showing primarily Contemporary Art, showed dismal results. Of the 1388 lots on sale, 1028 or 77% underperformed that is they were remained unsold or were sold below their reserve price. Ian Peck, the chief executive of the art finance firm, Art Capital Group, said the auction results at Sotheby's had been a wake-up call to the art world which "firmly demonstrated that the concept of a recession in the art market is not abstract but real. Prices in all categories – the trophies, the great, and the merely good – were less contested, if at all, and end prices were likely reduced by 20 to 40 per cent".

Even Artcurial the French auction house that held an auction of Contemporary Art in October had disappointing results. From the lot of Indian contemporary artworks almost 80% remained unsold and those that were sold were at an average 20% less than the reserve price. Nothing can demonstrate the mood of the art market more that the fact that while a Subodh Gupta artwork, "Vehicle for the Seven Seas", sold for a record breaking € 502,330 in May at Artcurial's auction, however, his work remained unsold in the October auction. Buyers are clearly steering clear of artists whom they perceive as being 'pricey'. Strangely enough, tribal art continues to get patronage with both artworks by famous tribal artist Jivya Soma Mashe being purchased in the October auction. Artcurial has bowed to the demands of the current situation and has postponed its other planned auctions of contemporary Indian art pending improvements in the economic scenario.

Unfortunately, the International Monetary Fund predicts further pitfalls ahead with the world set to slip into recession in 2009 and global growth being estimated at a mere 2.2%. For the art market this could mean that many small and mid-level galleries may have to close their doors, some estimate that about 50 such galleries in New York alone could be affected. This also means that talented, emerging artists will find it more difficult to exhibit and sell their works. At such times 'on-line' would be the way to go. Take the case of Mr. Minaz Cassum, director of Art Invest India, seeing the downtrend in art he chose to start an on-line gallery rather than invest in gallery space and overheads.

There is a silver lining in this scenario though. The art market has since the turn of the century gone global. This means that storms that buffet one economy can be cushioned by the upswings in another. Billionaires from Russia seem now to have discovered art. In a strange coincidence, the very day that the Lehman Brothers filed for bankruptcy, a $100 million were raised by British artist Damien Hirst held a Sotheby's auction and a third of the buyers were Russians! The recession in the art market in the 1990's has intensified because then the buyers were mainly Americans, Europeans and Japanese, purchases were made on borrowed money. When the Japanese economy stumbled so did the art market. Today, with the globalisation of economies and the connectivity options of the Internet, the emerging economies of India and China are also expected to cushion the blow to the art market. Galleries that represent blue-chip artists and those with talented emerging artists are expected to ride out the storm and thrive through the financial crisis, their collectors also of course stand to benefit. The need of the hour is to adapt. Galleries need to look at unconventional marketing strategies and artists need to realise that the bubble has burst – the much spoken of 'levelling' of the art market has finally arrived!

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