Art Dealers and Galleries

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 4,600 art dealers, galleries, and auction houses in the US generate revenue by selling artwork or earning commissions from consignments. With a consignment sale, the dealer earns a commission based on a percentage of the purchase price. Auction houses earn commissions based on the hammer (sale) price. Primary-market dealers develop relationships with promising new artists and help establish a market for their work. Secondary-market dealers specialize in art for resale on behalf of collectors, institutions and estates.

Long Sales Cycle, Slow Moving Inventory

Art dealers and galleries often have significant investments in inventory, with no indications of a quick return.

Vulnerability to the Economy

Demand for art is sensitive to economic conditions, and drops during periods of uncertainty.

Industry size & Structure

The average art dealer operates out of a single location, employs 4 workers, and generates over $2 million annually.

    • The art dealer, gallery, and auction industry consists of about 4,600 companies that employ about 18,000 workers and generate about $10 billion annually.
    • The industry is concentrated; the top 20 firms account for 49% of sales.
    • Large companies, which include the Gagosian Gallery, David Zwirner Gallery, and The Pace Gallery, generally have a limited number of locations (ten or less) and often have international operations. The industry includes auction houses, such as Sotheby's.
    • Contemporary and modern art (art produced after 1875) accounts for 51% of global art trade, according to The European Fine Art Foundation.
                                Industry Forecast
                                Art Dealers and Galleries Industry Growth
                                Source: Vertical IQ and Inforum

                                Coronavirus Update

                                May 24, 2022 - NFT Sales Plummet
                                • The sale of nonfungible tokens, or NFTs, fell to a daily average of about 19,000 during the first week of May, a 92% decline from a peak of about 225,000 in September 2021, according to the data website NonFungible. An NFT is a digital asset that represents real-world objects like art. Art galleries and dealers who have entered the NFT market may be negatively impacted. Experts say that rising interest rates have crushed risky bets across the financial markets—and NFTs are among the most speculative. Many NFT owners’ investments are worth significantly less than when they bought them. Interest in NFTs measured by the number of searches for the term peaked in January and fell about 80% since, according to Google Trends. The imbalance between supply and demand is also hurting the NFT market. There are about five NFTs for every buyer, according to data from analytics firm Chainalysis.
                                • Local leaders and health officials are struggling with changing conditions as they manage their mask mandates. The city of Philadelphia, PA, reinstated in mid-April a mandate requiring a mask to be worn in indoor public spaces, only to cancel it within days due to what city board of health members called "decreasing hospitalizations and a leveling of case counts." Officials are again requiring masks to be worn on all public transit within Los Angeles County, CA, including buses, trains, taxis, and ride-hailing service vehicles. Los Angeles County Public Health Director Barbara Ferrer said that the order is based on the US Centers for Disease Control and Prevention's opinion that mask-wearing on transit remains an essential step in preventing spread of COVID-19. Art dealers and galleries may be negatively impacted if foot traffic decreases due to uncertainty caused by changing requirements.
                                • Hawaii, the last US state with a mask mandate in place, allowed the mandate to expire on March 25. Art dealers and galleries are likely to benefit from the expiration of mask mandates if foot traffic increases. The US Centers for Disease Control and Prevention's latest guidance recommends that people continue to wear masks indoors in communities with high levels of Covid-19. The agency last week said that more than 90% of US residents are now in a location with low or medium Covid-19 community levels.
                                • Foot traffic at galleries may decrease if new COVID-19 cases continue rising. New COVID-19 case rates increased in late April, with the seven-day rolling average increasing to roughly 85,630 on May 11, up from 72,300 on May 7, 58,000 on May 1 and 30,000 cases per day on April 8, according to a New York Times COVID-19 case tracker. Experts note that the American population has different vaccination rates, levels of previous exposure to the virus, and degrees of underlying health conditions, so the trajectory of new cases could vary. Analysts note that the data regarding new cases are getting less reliable as the public testing infrastructure continues to wind down and home test results are less likely to be reported to officials.
                                • A group of local artists in Detroit responded to pandemic-related exhibition and gallery closures by creating a store for artists to sell their artwork and products. About 30 artists sell their work in The Leaf and Blossom. Some artists say that, even though art fairs and showcases are returning, the effort put into working at the fairs is a lot greater than selling artwork in Leaf and Blossom.
                                • Some businesses that took PPP loans in 2020 but don't apply for forgiveness soon will need to start making payments on the loan plus interest. The PPP loans will automatically convert to a standard loan at 1% interest if a small business does not apply to the SBA for forgiveness within 10 months of the end of the covered period under which they had to spend the money. For some businesses that received a loan when the PPP launched in April 2020, there was an eight-week covered period, which would put the forgiveness application deadline in the middle of July. For most loans operating under the more popular 24-week covered period, that meant a deadline in September 2021.
                                • Businesses and other organizations that received Paycheck Protection Program (PPP) loans can still apply for forgiveness of the loan amount. Borrowers can apply for forgiveness anytime up to the maturity date of the loan. About 96% of 2020 PPP loans and 81% of the 2021 PPP loans have been fully or partially forgiven as of April 24, 2022, according to the latest Small Business Association Forgiveness Platform Lender Submission report. The vast majority of businesses waiting for forgiveness have loans under $150,000.
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