The Inconvenient Truth About Secondary Markets, Part II.

Visual conversation at dada.art

Watch the Working Group discussion: The Inconvenient Truth About Secondary Markets part I.

Introduction

Background

Our Thesis

Data Analysis

  • primary market (sales from the original artist to the first collector): 15% of the fee goes to the gallery and 85% to the artist.
  • secondary market (sales from collector to collector): 10% of royalties to the original artist and 90% to the collector.
  • moreover, there is a simple 3% transaction fee for all primary and secondary purchases, paid by the buyer (collector).
  • the volume earned by artists (artist volume) as the net prices (without fees) of sales on the primary market plus the royalties received by artists on the secondary market;
  • the volume earned by collectors (collector volume) as the net prices (without royalties) of the sales on the secondary market;
  • the overall volume generated by the gallery (gallery volume) as the sum of volumes generated by artists and collectors.
  • is the market concentrated or equidistributed?
  • how did the market concentration evolve over time?
  • what is the share of artist and collector volumes as of today?
  • how did the artist and collector volumes change over time?
  • when in the future are the artist and collector volumes going to break even?
  • what if the royalty percentage for artists would be larger?

Concentration of Volume Among Sellers and Buyers

Artist and Collector Volumes

  • 78% goes to artists (fee-free primary sales plus royalties on secondary sales)
  • 22% goes to collectors (royalty-free secondary sales)
  • 80% of the gallery fees are paid by artists (with the 15% fee of primary market sales) and 20% are paid by collectors (with the 3% transaction fee)
  • of all sales, 85% are primary sales and only 15% are secondary sales (the secondary market is still underdeveloped)
  • out of every 100 artworks bought by collectors only 17 of them are resold (most collectors have strong hands)
  • collectors resell at 1.68 times the price they buy (some collectors are art speculators and buy low to resell high)

Predicting Artists’ Dominance

What If Scenarios

  • assuming an artist royalty of 10%, the slope of the collector regression line becomes 1.25% and the break-even with artists will be 19 months from now.
  • assuming an artist royalty of 20%, the slope of the collector regression line becomes 1.11% and the break-even with artists will be 24 months from now.
  • assuming an artist royalty of 50%, the slope of the collector regression line becomes 0.69% and the break-even with artists will be 64 months (over 5 years) from now.
  • assuming an artist royalty of 90%, the slope of the collector regression line becomes 0.14% and the break-even with artists will be 352 months (29 years) from now.

Conclusion

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A collaborative art platform where people worldwide speak through drawings. Building a blockchain token economy for the arts. https://dada.art

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DADA.art

DADA.art

A collaborative art platform where people worldwide speak through drawings. Building a blockchain token economy for the arts. https://dada.art

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