Droit de Suite revisited

We're back ...Today at Slate, Whitney Kimball tries to make the case for US adoption of resale royalties for visual artists, or droit de suite:

In what would become the first scandalously record-breaking Sotheby’s art auction in 1973, taxi magnate Robert Scull and his wife famously made a fortune on 50 artworks from their collection, which included Robert Rauschenberg’s painting Thaw. There, the artist watched as his piece, which he had initially sold for $900, hammered out for a whopping $85,000. As the story goes, Rauschenberg famously shoved Scull and shouted something along the lines of: “I’ve been working my ass off just for you to make that profit!” (The exact quotevaries, but you get the drift.) Rauschenberg didn’t see a dime from that auction; unlike authors and composers, American artists get no cut of their future sales.

This is because U.S. copyright law protects “published” works, and a work of art is not “published,” simply made and sold—so once a work of art is out of an artist’s hands, the future profits, too, are gone. This system is unique to the art world; in other fields, artists are understood to have the right to a share of the proceeds of their works long after the works are first made. It makes perfect sense, for example, that the Isley Brothers would keep making royalties off “Shout,” even though it wasn’t a chart-topper when they released it in 1959 (it didn’t become iconic until it was featured in Animal House in 1978), or that Joan Didion would keep collecting money off Slouching Towards Bethlehem, which was published when she was 34, before her legend was secure. In the music world, a minor scandal arose when Chuck Berry was cheated out of part of his royalty rights for “Maybellene.” In the art world, everybody is Chuck Berry. …

Sure, for most artists, large secondary markets are a best case scenario. But only amultibillion-dollar-a-year industry would force us to re-examine a kindergartener’s understanding of ethics. Whether artists are successful or unsuccessful, making millions or pennies, they deserve to share in the money their work generates. “The A.R.T. Act won’t benefit every artist, unfortunately, but this is not an anti-poverty program,” Rep. Jerrold Nadler (D-N.Y.), sponsor of the failed 2011 Equity for Visual Artists Act, told me over the phone. “This is a fairness and equity program. Just because we can’t bring in everybody doesn’t mean we should bring in nobody.”

The article misses some key points; droit de suite is more complex than a ‘kindergartener’s understanding of ethics.’

First, recorded works such as songs, films, and essays, that are reproducible at close to zero marginal cost, are not the same as unique works of visual art – they are distributed by different means, through very different intermediaries, and traded in very different markets. To say that we ought to have similar rules governing contracts for music recordings and paintings because they are both ‘art’ doesn’t make any sense (or, if it does, the author certainly hasn’t made the case here, except by assertion).

Second, there are effects beyond what Ms Kimball envisions. Suppose the going price for houses similar to mine is currently $250,000, and I put it on the market. Suppose a law is then passed that says I am entitled to a share of any profits the buyer of my house might reap on a subsequent resale. What happens to that $250,000 market price? Of course it would drop, as the new law has reduced the value of this house as an asset. Paintings are no different. If works are being acquired, at least partly in the hope that they will increase in market value, then the initial price will be impacted by a law that decrees the artist is entitled to a share of future retail profits. Now you might think that effect will be large or small. But if you are writing an article about resale royalties, you should at least address the question.

Third, the author should look at risk and regret. Suppose there are two different schemes by which artists could be rewarded. In regime A, they get little money up front, but are entitled to royalties on resale. In regime B, they get more money up front, but have no rights to resale royalties. If we are in regime B, then of course artists who, in the long run, have made it big, will say ‘we really ought to have regime A,’ just as artists who in the long run are not successful will, after the fact, prefer regime A to regime B. Resale royalties are a mechanism by which artists bear some of the risk in how the value of their works increases over time. If, in the end, the works have become valuable, they will then say ‘I wish I had taken that risk.’ But it doesn’t make it the best system for all artists in the long run.

Markets for all creative goods deal with the issue of uncertainty as to the long run value of works. The risks arising from that uncertainty have to be distributed somehow, and the contractual systems we observe are to a large degree the result of efficient risk-bearing (Richard Caves’ Creative Industries is an excellent source on this topic).

My previous post on the topic (sorry for being repetitive) is here.

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  1. I don’t totally understand the issues. Isn’t there a difference between a work bought directly from the artist (or dealer) and a work sold at auction? It seems to me that buying from a dealer is materially different from the haphazard result of an auction and that that should figure in somehow.

    I would assume that the vast majority of sales do take place with dealers, not at auctions. And auctions get a disproportionate share of the media attention, and usually the biggest prices get the most attention.

    I suppose I’m saying that I can see where droit de suite would apply to auctions rather than private sales.

    Is there a difference?

    Also, can you expand on what you mean when you say “If works are being acquired, at least partly in the hope that they will increase in market value, then the initial price will be impacted by a law that decrees the artist is entitled to a share of future retail profits.”? I don’t understand why that would be so.

    • My understanding of the bill is that it would apply to auctions but not private sales, likely because monitoring private sales is just administratively feasible.

      As for your last question: What I am willing to pay today for an asset depends on what I can gain from resale at some future date. This applies to stocks, real estate, collectibles, and, as in this case, art. The higher I anticipate its future value, the more I am willing to pay now. We pay more for cars known to maintain ‘resale value’; students will pay higher prices for textbooks if they know there is a resale market that exhibits good prices.

      But droit de suite lowers the resale value – if set at 2%, it means that a work that I might have expected, based on my knowledge of the art market, to sell for $200,000 in 2017 will only pay me $196,000, since $4,000 will go to the artist. And I am not willing to pay as much today for a painting I think will be worth $196,000 as I will for a painting I think will be worth $200,000.

      • Thank you.

        It saddens me to think that art is purchased only because it may go up in value. Most art won’t go up in value, and I feel that the buyer should love the work, not the potential for gain. But that may be naive.

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