Artists Resale Royalties: a piece of pie…

The ARR scheme so far has cost taxpayers just over $2.2 million and as of December 2013 has delivered a total of 7,800 royalty payments, to 800 artists (or estates) with a median value of about $105 per payment. The scheme has, in three and a half years, only generated a total of less than $200,000 in management fees. It is unlikely that the scheme will be self-funding any time soon, if ever. And what has this costly public art project delivered? A make-work scheme for arts administrators, a restraint of trade and what is essentially an anti-progressive tax: the more you have, the more you receive. Below is a pie chart of resale royalty distributions by value. Note: the construction of the pie chart needed a few ‘extrapolations’ where information from previous years is used to categorise the latest data. These extrapolations might not be perfect.(see footnote below)

The pie chart makes it clear that royalties on resales of individual artworks for more than $10,000 each, account for 59% of all the money collected, yet these top rank payments – about 550 in total –  only account for just 7% of the total number of individual payments of the scheme. (BTW many thanks to Paul Fritjers for the tasty pie chart.)sales by price

On the other hand the bottom 44% (2,946) of individual payments have only accounted for just 9% of all the money collected. The median value of this bottom bracket of payments is about $55; the average individual transaction cost to CAL, alone, is $30.The only point of these thousands of very small, costly payments is to conceal the real, anti-progressive nature of ARR.

Artists whose work regularly resells for $10,000 or more (let alone $50,000 or more) are mostly artists who have sold a fair number of artworks, for good prices, over a reasonably long time. There are exceptions (notably Van Gogh and some indigenous artists) but they are exceptions; without enough first sales income any emerging artist will struggle to find the time and money needed to do enough of the hard work required to become an established artist. Someone once asked Henry Moore how he became Britain’s greatest sculptor. Moore answered: “all the rest gave up”. Truth is, income from first sales are what really matter for a younger, emerging artist; even a tiny loss of first sales income can mean the difference between success and giving up. The benefits of an ARR go to the old and successful – those who have sold a lot of artwork prior to the introduction of an ARR scheme – but the costs and risks go to those who attempt to make and sell work for a living, after ARR’s introduction.

When I sell an artwork , I like many artists, pay 40% to the costs of sales and marketing and retain 60% as my gross payment for that sale.  If I sell a artwork for $10,000 I net $6,000 in the hand. If buyer nervousness about the resale royalty was to cause me to lose just one $10,000 first sale, I would need the  royalties due on $120,000 of future resales just to claw back that one lost first sale. If you can buy those odds, you probably believe Nigerian emails.

ARR will never pay me for a new artwork; it can only pay me a second time for work I was paid for, in full, years ago. Creativity is the realization of things that have not yet been seen or known and if government policy is really aimed at fostering creativity, then this anti-progressive, ARR scheme is very bad policy.

The millions of dollars of public money that has been wasted on this scheme, is money that was not spent on helping emerging and lesser known artists gain access to public exhibition and potential markets. It is all those lesser known artists that have been really ripped off by the funded lobbyists for their pet ‘art project’.

Footnote

The lack of detailed information about the operations of this compulsory by law and taxpayer subsidised scheme really rankles. The discussion paper for the Post Implementation Review (PIR) of the scheme (issued in May 2013) was very sketchy about hard data. The only reason that we were able to make a more detailed  submission to the review was because Senator Gary Humphries was willing to place our questions on notice! And even then there was a hint of fudge about some of the answers supplied.

The pie chart is based on the information sheet on ARR, as supplied by CAL, and answers supplied to Senator Gary Humphries Questions on notice re: the operations of the ARR  (Feb 2013) and the  chart’s construction needed a few ‘extrapolations’ where information from previous years is used to categorise the latest data. I stress that these extrapolations might not be perfect. However there is no reason to think that the distribution pattern revealed in the answers to Senator Humphries’ questions on notice would have changed much in the past year.

The answers to Senator Humphries’ Questions on notice showed that of the approximately 5,000 royalty payments to December 2012:

  • the bottom 2,000 royalty payments totaled $115,379 ? an average value of $57 each.
  • the top 600 payments had a total value of $296,777- an average value of  $494 each.
  • Therefore mid range of payments, approximately 2,400 royalty payments, had a total value of $396,964- an average value of about $164 each

Data from drawn from CAL’s info sheet:

  • The total value of  resale royalty collections (to dec 2013) is “nearly $2 million”, and the total number of royalty payments is 7,800.
  • 800 artists or their estates have received at least one payment, the average number of individual payments received is 9.7, and going of CAL’s online searchable database of reported sales there is one non-indigenous artist who has had about 500 eligible resales alone and another eminent non-indigenous artist has had about 100, or more, eligible resales. And that should come as no surprise, if you understand market realities.
  • “84% of eligible resales have a sale price between $1000 and $5000.” (The ARR payment on a $5,000 resale is $250. Therefore 84% of the individual payments have been $250 or less.)
  • -“…the highest volume of royalty payments (49%) have been between $101 and $500 for eligible resales valued between $2,001 and $10,000. “
  • “The next highest volume of royalty payments have been between $51 and $100 (2946 royalties: 44%).”
  • 24%  ( about $500,000) of the total royalty money paid to Dec 2013 has gone to dead artists

 

 

 

About john Walker

John R Walker Is a professionally practising artist who has exhibited regularly, nationally and internationally, for more than 30 years. His work is held in the collection of the National Gallery of Australia, most state and regional gallery collections and in private and corporate collections in Australia, Britain and the USA. John R Walker is represented by Utopia Art Sydney. For more information visit johnrwalker.com.au
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5 Responses to Artists Resale Royalties: a piece of pie…

  1. john Walker says:

    In a re-posting of this article on the Art and Artifice a weblog dedicated to everything concerning art and the law IP lawyer and academic Jeremy Phillips asked the following: “Readers may wish consider whether the Australian ARR scheme is (i) right in principle and right in practice, (ii) right in principle but wrong in practice, (iv) wrong in principle and wrong in practice or, improbably but not impossibly, wrong in principle but right in practice. Do let us know!”
    I’d be interested to hear from Troppodilians on this matter.

  2. paul frijters says:

    wrong in practice, clearly, with those enormous transaction costs eating up a large portion of the arts industry.
    Wrong in principle? The main ‘in principle’ rationale for this scheme appears to be that the artist needs to be protected from his own rash selling decisions, and who furthermore cannot ‘undo’ the effect of that rashness later on by means of producing more art later on when his skills turn out to be unexpectedly appreciated. Even the principle is thus an insult to the intelligence of artists.

    • john Walker says:

      Paul this is a new Yale law journal paper on the ARR, as it is proposed for the US. The proposed US law makes it very clear what ARR is really about- According to the papers author, Assoc Prof Guy Rub, who seems to know what he is talking about, under the proposed US ARR scheme, the right would be ‘transferable’. Many lesser known and as well as some established artists are very likely to transfer the resale right to the purchaser in order to secure a better up front payment for their primary sale and that would mean that many of the recipients of the resale payment would, in the future, be whoever bought the picture;I.E. they will pay the royalty to the collection society as the seller, and then get the money back minus the transaction fee!!

      Not Bad??

      • paul frijters says:

        given the transaction fees involved, making this transferable makes much more sense. Mind you though, nothing stops people writing a resale-royalty option into the sale of any other product (like a car or a house), so having the right transferable is already the default under normal contract law. The pressure to introduce ARR’s must be solely from rent-seekers in the art bureaucracy, not artists themselves. Debating ways to make ARR’s less damaging is then a second-best response to this rent-seeking. First-best is tell them to buzz off.

        • john Walker says:

          Australie will not leave until it is ,finished. John Monash

          There is nothing ‘normal’ about the sort of mind that dreams up ARR. For example a situation where the actual right-holder (in the above scenario the owner of the art being resold) has to pay a resale royalty to him/herself takes the biscuit for weirdness, no?

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