R/GA New York
Tue, 19 Jul 2022 11:49:26 GMT
In web3 commerce, you can really have your Klimt and sell it too. Just ask the stakeholders in a new sub-industry.
Museums slowly began to dip their toes into the Web3 marketplace years ago as buyers. But now some have joined the party as sellers, minting digital “editions” of works in their collections at a time when they’ve experienced a staggering financial hit due to the pandemic. This emerging market provides a new opportunity to simultaneously cash in on and hold assets – with implications around issues in Web3 commerce more broadly across all industries, from value to environmental impact, which are only further complicated by the missions and structure of museums.
Minting a new sub-industry?
Museums are being courted by new platforms that make the process of minting and selling NFTs of digital editions easier for them.
“A kind of service industry is emerging,” said Nik Honeysett, CEO of Balboa Park Online Collaborative, a digital strategy company for culture nonprofits.
Venerable institutions have come on board, including the British Museum, the Belvedere, the State Hermitage Museum, and the Uffizi Galleries. The latter led the way in May, 2021 when it sold a €240,000 single-edition digital reproduction of Michelangelo’s Doni Tondo through Cinello, an Italian company that creates high-quality digital reproductions of art in museum collections to financially support institutions
The practice “is going to [become] more mainstream,” Honeysett said. And support from investors, buyers, and cultural stakeholders – even the United Nations – suggests that there is enthusiasm, optimism, and confidence in opening new Web3 markets and commercial opportunities for both sellers and platforms.
Founders of the successful soccer NFT platform Sorare and the cryptocurrency infrastructure tech company Ledger are among the backers of LaCollection, a Paris-based sales platform that has grown from a team of two to more than 20 since August, 2021. It launched last September with a drop of 200 works by Hokusai to mark the British Museum’s major show on the 19th-century Japanese artist. Co-founder Jean-Sébastien Beaucamps, who said he established the platform in large part because of institutions’ financial struggles during lockdown, boldly cold-called the British Museum – which lost more than 90% of its projected visitor-generated income in 2020, The Art Newspaper reported – to propose the partnership.
Similarly, Iconic Moments, an online sales platform that works exclusively with cultural institutions, was founded to offer a model to “help museums to be economically sustainable regardless of foot traffic,” said Joy Wingren, head of business development. The platform, due to launch this year, has already received a U.N. Summit Award for its use of tech to contribute to the U.N.’s Sustainable Development Goals.
Museums “constantly develop new sources of income,” said Katharina Steinbrecher, the Belvedere’s Director of Communications and Marketing. In a novel approach, the museum, which lost nearly 80% (€18.6 million) of its 2020 projected income, dropped NFTs of 10,000 unique individual “pieces” of Gustav Klimt’s The Kiss on Valentine’s Day through artèQ. (The NFT-art dedicated platform was listed on the Swiss market in May.) Thanks to eager pre-release sales, by 8:00 AM on the official launch day, the Belvedere had already sold €3.2 million of the romantic tokens – €1 million more than the Covid aid it received from the government last year to help offset continuing revenue loss.
“When you think about it, [museums] have absolutely no risk” in the process, Beaucamps said. “For them, it's pure margin with absolutely no cost associated. So it's just leveraging their existing assets and engaging with a new community.”
So, could this model provide a new way to engage supporters across the non-profit sector that can be a win-win for both sales platforms and non-profits?
Jean-Sébastien Beaucamps called LaCollection buyers “a new generation of patrons,” and the platform provides perks traditionally offered to museum members and donors, like VIP events and artist lectures. The site, marketed as a community of dedicated collectors, is banking on these offerings to incentivize buyers to hold, not flip, works. “We’re not here to attract speculators,” Beaucamps said. “We’re here to attract art collectors.”
“When you think about it, [museums] have absolutely no risk … It's just leveraging their existing assets.” -Jean-Sébastien Beaucamps, co-founder, LaCollection
But the works, which each come in editions of two, ten, or 100, can be resold on both LaCollection’s platform or OpenSea, with institutions receiving undisclosed secondary sales royalties. Collectors seem eager to turn a profit; one two-edition J.M.W. Turner work initially bought on February 20 for €2,051 was resold four days later and offered by its second owner for €66,000 within a month.
Secondary sales of The Kiss, originally sold for 1,850 € or 0.65 Ether (ETH) each, also cropped up quickly on OpenSea even as thousands of tokens were still coming to the primary market. The 90-day average price from March to June was 0.3946 ETH (only about 61% of the primary market price), but as of early June, the minimum bids for 6 pieces up for auction ranged from 1 ETH ($1,828.36) to a whopping 88.8 ETH ($162,358.37) for a piece the seller acquired on the secondary market in April for 0.7 ETH.
Cinello recently partnered with the gallery Unit London to show six digitally-displayed masterworks from Italian museums, sold for €100,000 and €250,000 in editions of nine, and has plans for future exhibitions. The museums directly benefit from half of the proceeds, and at its core, the show is a new way to generate funds for museums, said the gallery’s director, Joe Kennedy. “It turns the collector into an active patron,” he said.
While Unit London has released the initial 50/50 profit split and the Belvedere has confirmed that it receives 10% of resale proceeds, there is an overall opacity around what sales museums receive from primary and secondary sales. Georgina Adam, author of Dark Side of the Boom: The Excesses Of The Art Market In The 21st Century, acknowledged that this is a new industry, and it’s understandable that museums might not want to heavily invest their own resources, but still lamented that museums have not yet struck out on their own, rather than relying on sales platforms, in order to keep a larger profit of the sales.
She has qualms around the process, for the interests of both the museums and buyers. “My concern is that [these platforms] are making money out of museums with a product that I don’t think has long term value,” said Adam, who sees turning a profit as the primary motivation behind this type of art collecting (a view supported by quick resell rates).
Franco Losi, CEO and Co-Founder of Cinello (left), and Eike Schmidt (right), Director of the Uffizi Gallery, with Cinellos’s digital edition of Michelangelo’s Doni Tondo (credit: Gallerie degli Uffizi and Cinello)
From Beeple to Boticelli
Despite indications that buyers are largely motivated by resale opportunities, there’s more than one way to mint an NFT, and more than one type of collector.
While Beaucamps mentioned the possibility of new audiences for museums, and pointed out that the majority of LaCollection’s members are aged 30 to 40, younger than the average museumgoer, museum-minted works might also be able to bring new audiences to Web3 art commerce, too. From a purely aesthetic standpoint, someone who’s a fan of Renaissance masters, for instance, might not be moved by a “digital collage” by Beeple.
This market makes room for the crypto-averse: all of the works mentioned in this story can be purchased in fiat currency, unlike most NFT art market sales platforms. This may seem like a safer financial bet for both buyers and selling institutions – particularly as recent downturns have again highlighted cryptocurrency’s volatility.
Cinello’s unique approach to this burgeoning NFT market shows that it can also cater to those who prefer their assets as tangible objects and want to hold on to them.
These pictures aren’t for a buyer who wants to easily flip a typical digital art asset, since the image file is not stored on the blockchain; the NFT component only serves as a tracking and sales mechanism. The digital image is instead on a physical file and displayed on Cinello’s proprietary Digital Art Work (DAW®) technology, a scale monitor that closely mimics the appearance of the original work, a carefully-crafted reproduction of the work’s original frame. In addition to this physical limitation, all secondary sales must go through Cinello, not an external platform like OpenSea, explained Serena Tabacchi, the company’s curator, who confirmed that Michelangelo’s Doni Tondo is still with its original owners. And the physical nature of these works means they can’t be hacked – a danger highlighted by the recent $2.8 million theftof Bored Ape Yacht Club NFTs.
Katsushika Hokusai’s Under the Wave off Kanagawa (“The Great Wave”), in the collection of The British Museum, London, which has been minted by LaCollection © 2021, The Trustees of the British Museum
A new wave that’s already controversial
The use of Web3 platforms to support non-profit institutions amplifies the environmental concerns raised across all industries in the space. “As public institutions, [museums] are under pressure to be transparent,” Honeysett said. Institutions globally, including the British Museum, have been fiercely criticized for corporate and private philanthropy linked to fossil fuels, and Steinbrecher said that the Belvedere did receive some negative comments around sustainability issues.
Sales platforms claim to be implementing steps to mitigate this impact. LaCollection will work with an external partner to measure the CO2 it is generating to help offset its carbon footprint. Along with Iconic Moments, it’s also planning to switch to the Ethereum 2.0 blockchain, which purportedly will include a greater than 90% reduction of energy consumption compared with the current version of Ethereum (but has been delayed to a 2023 full launch).
But the financial benefits of selling digital editions could also be a means of avoiding other controversial sponsorships. The British Museum, for instance, is one of many cultural institutions under scrutiny for ties to the Sackler family, members of whom recently agreed to pay over $6 billion in a PurduePharma bankruptcy settlement over damages caused by the opioid crisis, partly fueled by practices of the family-owned company.
“I don’t find the NFTs controversial in the same way as accepting [Sackler] money,” said Georgina Adam, also responding to recent criticism by the art historian Bendor Grovesnor in an op-ed that claimed the British Museum “demeans itself” and “would probably live to regret” the Hokusai sale and the subsequent drop of digital editions of works by Turner.
Grosvenor portrayed these drops as a nearsighted cash cow masquerading as audience engagement. But can it be both? Kennedy feels that Unit’s show is an excellent marketing opportunity for museums that will ultimately bring more visitors to “see the originals in person,” while Steinbrecher suggested those who own “pieces” of The Kiss will feel “more connected to the original.”
There’s an inherent tension in that marketing, however, that feels different than the way most brands reach out to new and existing audiences in Web3, hoping to build credibility, showcase how their brand can provide value, and find new ways of boosting business. “Some art museums have taken great steps to say, ‘you have to come and stand in front of this work of art to really appreciate it,’” Honeysett said. “And so now they need to convey a message of, ‘If you want to be connected to this, you should buy an NFT of it.’ It’s a confusing message.”
“Nobody knows how many projects the market can accommodate.” -Katharina Steinbrecher, Belvedere Museum
To sell and to hold, but for how long?
Above all, selling digital copies of artworks is a way for museums to monetize their greatest asset – their collections – without deaccessioning (selling off) works, a taboo practice in the industry in most cases, Adam said. It also preserves these assets by allowing them to be shown in a way that does not expose them to physical degradation; Beaucamps, for instance, pointed to watercolors by J.M.W. Turner shown online and sold by LaCollection which are virtually never exhibited due to the potential for the works to be damaged by exposure to light.
Although individual digital editions may sell for larger amounts than museum postcards, how profitable are these sales in the long run, compared to licensing agreements and merchandising – think, Uniqlo’s Hokusai or Musée du Louvre tee-shirts? And why should audiences be excited to see or buy NFT recreations, which Jean-Sébastien Beaucamps calls “digital lithography,” of works that already seem ubiquitous?
Adam feels that when contemporary artists sell works made in the digital space, it has value and creativity. “You buy ownership of that,” she said. “But these [digital editions of museum works], you’re just buying ownership of this image, which is already on a thousand postcards and mugs and aprons and jigsaw puzzles.” (And already making museums money in those formats.)
Although some NFTs are currently reselling at a considerable mark-up (with museums benefiting from secondary sales), “for now, nobody knows how many projects the market can accommodate,” Steinbrecher said, adding that the Belvedere has no immediate plans for future NFT drops. The British Museum, meanwhile, dropped its third “exhibition” on LaCollection in April, works by the 18th-century Italian artist Giovanni Battista Piranesi; and the Leopold Museum launched its first sale on the platform in May, with 24 works by Egon Schiele.)
And so far, industry groups that influence museum policy, like the Association of Art Museum Directors (AAMD) in North America, have not issued best practice guidelines around minting NFT editions. According to the AAMD’s executive director Christine Anagnos, group members are having conversations around the issue, but for the moment, “We are watching this phenomenon unfold,” she said.
Honeysett said that while already appealing to board members as a seemingly simple fundraising scheme, selling digital editions of collection works must be done judiciously. “It’s unlikely that museums could just look at their whole collection and just make it all available and think that it’s going to sell,” he said. In other words, they’ll have to plan strategically rather than assuming they can continue to ride the hype wave – an apt lesson that echoes far beyond this specific market. As recent events around the cryptocurrency market demonstrate, that wave can quickly crash.
view more - Trends and InsightR/GA New York, Tue, 19 Jul 2022 11:49:26 GMT