Bringing It All Together
Anyone (like me) who has walked away from his ouija board convinced that online sales are poised to become the next great art market frontier got another booster shot in the past 24 hours, as Bloomberg’s Katya Kazakina broke the story that billionaire art collector Leon Black has officially acquired online marketplace Artspace for an as-yet undisclosed price.
Artspace qualifies as what I’ve previously termed an online middleman: an e-commerce platform that partners with existing physical galleries and dealers rather than directly with artists. I’ve been bearish on that model up to now, but Black’s involvement could eventually wrinkle the fabric enough to make me reconsider.
Before we get into that aspect, though, let’s quickly cover why this acquisition is a no-brainer for Black. Kazakina previously reported that Artspace’s brain trust had been in acquisition negotiations with online auctioneer Auctionata, which offers a variety of goods and collectibles beyond fine art. Though the talks eventually disintegrated, they had apparently been centered on a $5M valuation for Artspace.
In all likelihood, Black got an even more favorable deal thanks to his art world connections and reputation. (Being the 299th richest cat in the world, at a $5.1B net worth per Forbes, will do that for you.) But even if he didn’t, that valuation means he could have gained a controlling interest in Artspace for a measly $2.5M. Even if he bought them outright at the Auctionata valuation (which I sincerely doubt happened), $5M would be 1/24th of the $120M he paid for Munch’s 1895 version of The Scream in 2012.
In short: Artspace is a total flier for an investor like Black. If he can scale it into a dominant player, it becomes one among a string of assets in his portfolio that looks wildly undervalued in retrospect. If not, it’s a microscopic dust mote that he swallows with his caviar and craps out harmlessly in no time.
But I think Black has an opportunity here, and it’s specifically because of what else is in his portfolio.
The coverage of the deal I’ve seen so far all rightly identifies Black’s other investment in the larval online art sector: his family friend Alexandra Chemla’s mobile presentation and database app ArtBinder, which I just wrote about last week. However, what I haven’t seen anyone else specifically call out yet is the obvious next move: the inevitable merger of ArtBinder and Artspace.
ArtBinder’s recent headlines have all been spurred by the close of $3.17M in Series A funding, much of which will reportedly go toward supercharging the ArtBinder Viewer app. Currently, the app allows the general public to log on and browse to their heart’s content through the offerings of ArtBinder’s subscriber galleries.
And while today ArtBinder Viewer lacks either a baked-in e-commerce platform or an announced plan to develop one, I speculated last week that "ArtBinder Viewer would seem to position its parent on an inevitable collision course with existing online fine art middlemen like Artsy, Artspace, and artnet."
Well, go ahead and knock the middle term out of that equation. Because Black’s involvement with both parties should mean it’s only a matter of time before he’s officiating the arranged marriage of Artspace and ArtBinder.
What are the advantages? The merger would combine Artspace’s reported 150,000-strong mailing list of "active art collectors,” per Artspace’s co-founder and CEO Catherine Levene, with ArtBinder’s 300 reported international gallery subscribers to form a vertically integrated Voltron capable of battling the online sector’s other major players.
And once all the pieces officially lock in, the truly devastating weapon would be if Black, Chemla, and company can use their relationships to cripple both Artspace’s and ArtBinder’s respective competitors.
Theoretically, they could do this by pressuring all of ArtBinder’s current subscriber galleries behind the scenes to migrate their online middlemanning portfolios exclusively to Artspace, while Artspace begins offering their other existing clients some kind of elevated integration capabilities with ArtBinder and the ArtBinder Viewer. Both entities could also promote cross-platform price break opportunities for any clients buying into both sides of the system–reduced subscription prices and/or reduced commission fees, depending on their model–to try to undercut their rivals.
Together, Artspace/ArtBinder’s resulting combination of e-commerce, inventory management, and branding exclusivity would shift the paradigm of the online middleman market into something markedly different. More intertwined, more substantive, more appealing–and more like the in-house e-commerce platforms I was expecting to dominate the blue chip gallery landscape in the coming years.
Will it work? It’s too early to tell. But if I’m right about the strategy, I like it, especially at the price Black likely paid to build this mech. And years from now, we might look back on his acquisition of Artspace as the first strike in what eventually becomes a successful campaign to conquer the online art sales sector.