The party lasted many years, and many thought it could keep on going forever. The clientele of the galleries and auction-houses would accept any price -- $70 milion, $100 million, even $135 million. The only difficulty was in keeping a fresh supply of art. But if anyone could scare up a drip painting of Jackson Pollack, he could easily charge $140 million.
Over the last several years, auctioneers have regularly broken records and more and more galleries have opened worldwide -- in cities like Beijing, a new one almost every day. In the new millennium, art seemed to sell itself.
"This market has grown out of the economic reality of the last two years," says Iwan Wirth, 38, who ranks as Europe's most important gallerist and lives in London and Zürich. But now the art market will learn what financial power really means. "The market will be changed by the world economic crisis," predicts Wirth. The ecstasy is cooling off. The boom times are over.
High-flying hubris has marked the entire industry, and nowhere more than at "Art Basel Miami Beach," the world's most thrilling fair of contemporary art. It is, in every respect, the most extroverted event in the art world: here, greed is a virtue, not a sin.
Since its founding in 2002, collectors, including wealthy hedge fund managers, have come to this sunny off-shoot of the Swiss fair "Art Basel" to snatch away the most expensive trophies from one another. Many stalls were sold out after only an hour. This shopping-battle developed into the community's favorite game.
Still, from the beginning the fair has been far more than the sum of its paid out checks. It has been a meeting point for people who feel like they belong to a clique of a very specific jet-set. These are people who relax on their yachts during the summer on the Côte d'Azur and who, during the winter, open their private museums. They used to come to Miami to stock up on goods.
On the fourth of December, the fair will open for a seventh time, and, as always, several German galleries are represented among the 250 exhibiters. And yet, suddenly, everything is completely different. Perhaps now the buying show will become the embodiment of failure, of the kind of fall that follows hubris. A grand collapse seems imminent.
In no other industry do people expend so much energy just to spread optimism. So it comes as almost like a confession of desperation when the American Marc Spiegler, one of the two heads of "Art Basel", announces: "Most galleries will probably not break any records this year." He also lets comments slip out like "Prices have gotten more realistic again," or, "The time for speculators has passed."
The buyers from the so-called emerging markets -- from India, the Middle East, and China -- have now disappeared, says Wirth.
Now, in the era of the financial crisis, a reality check is setting in, and many are not prepared for the painful side effects. Already at the fall auctions in New York in the middle of November, the turbulence was palpable. And New York sets the tone for Miami. Star auctioneer Tobias Meyer, the most important man at Sothebys, ought to know: "the feverish pace of art-buying is done." The very top segment of the market doesn't exist anymore.
No auction-house or artist-idol has been spared: Pieces by Roy Lichtenstein (Soetheby's), Francis Bacon (Christie's), and Damien Hirst (Phillips) have all been left unauctioned, shunned by the public. Unsellable masterpieces. Even a short time ago, they were guarantees for top-prices; as recently as September, Hirst made out like a bandit at an auction in London initiated by him and exclusively featuring his art. The bids totalled almost $200 million. Nothing is certain: one picture from star German painter Gerhard Richter set a record while another fell flat (both were auctioned by Christie's).
A Mass Extinction of Galleries?
The champagne years are over: prices on the auction market have dropped suddenly by 30 percent. Simon de Pury, who has just given a majority-stake in his his auction house, Philips, to a Russian investor, must now adapt his prices to "market reality," despite his new partner.
Ugly cuts are coming at all levels: big US museums have given notice they are trimming their budgets. Sponsors like Deutche Bank are making it known that they don't want to continue with a range of support-activities -- like booking the prestigious German Pavillon at the Venice Biennale.
For Miami, the most important summit for art society, the small talk script is set: everything is about the depression in the art market. It could very will be the same on the night before the opening, when the VIPs will go to the luxury hotel Delano for "hot music" and "cool drinks." Previously, everyone had always been wound up.
One gallerist who is a symbol of the boom of the last 10 years is Gerd Harry Lybke, the famous co-founder of the "New Leipzig School." He represents Neo Rauch, a Leipzig painter whose pieces will sell well even in bad times -- something which allows Lybke to indulge in a certain realism.
He fears that Miami "could turn into a debacle for many people. Whoever depends on it to earn money has a problem. Many would rather spare themselves the expense, but a cancellation would be like admitting to yourself and your mother that you haven't made it."
Collectors, especially American ones, are holding back, and not just because money is running short: "it just looks uncool to go on a big shopping spree in these times."
For many sellers, Miami could mark the beginning of the end. Lybke, at any rate, predicts that many galleries will die out. Many will ride it out for another year, he says: "then it will be drastic, there will be big cuts in Germany and worldwide." Many of Lybke's colleagues also forecast that some 30 to 40 percent of galleries will soon close up shop.
It was all too straight forward -- in recent years it was enough to simply send images of new works to the Blackberries of key American, Asian or Russian customers, and then await news of their interest in buying. "For now, these deals don't work anymore," says Bruno Brunnet, a successful Berlin-based gallerist. Brunnet represents stars like Jonathan Meese and Peter Doig from his CFA gallery, an elegant sand-stone-colored building created by the star-architect David Chipperfield, which boasts views over central Berlin's Museum Island.
Until recently he rented an additional space and commented: "we are paying attention to our costs -- at the end of the day we have responsibility for 24 employees. Personally, I can't look at champagne anymore -- there was too much of it about in the past few years." He also stressed: "The galleries in our league will all survive."
But how long will the danger last? One year, two years? "People still enjoy art and many collectors still have money," says Brunnet.
Artists could be hit the hardest. After every crash, the art world reshuffles, and not every star from the pre-crisis times will make it through the transition. That, in turn, could mean that a sharp decline in the value of many private collections -- if it turns out that collectors had backed the wrong artist.
But regardless of the crisis, one group remains very relaxed -- the new Russian art lovers. They are also the ones maintaining Miami's art show tradition of glamorous parties. Maybe the glossy show is just financed by money on loan, but at least they don't let the downturn spoil their moods.
23-year-old Maria Baibakowa, for example, invited "friends from across the world" to her party in Florida. The millionaire's daughter from Moscow is an art historian and oversees her father Oleg Baibakowa's collection. In December, she will open her own art showroom in an old chocolate factory under the name "Red October." She says that the opening will be big, even by Moscow's standards.
She embodies a new generation of Russian collectors which enjoys life and art but avoids making rash purchases. She suspects that the crisis in the art world will echo that of the financial world -- but with a six month time lag: "in February, the prices could really fall." The only thing that really bothers her is that the quality of the works on offer could decline.
There will be winners from the crisis -- tempting times are afoot for the buyers who have not lost much of their wealth. Art has become more affordable.
The gallerist Iwan Wirth recalls the crash of 1991. Back then he was new to the business and managed to acquire some of his best works. Now, 17 years later, new opportunities have arisen: "The current art market situation opens up amazing chances. We bought some major works during fall auctions in New York."
And Miami? "The show in Miami will be the litmus test. As the speculators hold back, the art show will be a dream for serious collectors and they won't let the opportunity pass them by." He adds that a "buyers market" has developed overnight.
But when the prices fall, it doesn't mean that content and idealism automatically reclaim centre stage -- many of the cost saving measures will impact the wrong people, perhaps especially the institutions that are the most ambitious, the sponsors who take the biggest risks, and the artists who are the most daring.
There is much at stake. And not just money.