Tech Start-Up aims to get artists royalties for resale

Even before artist Robert Rauschenberg famously protested against seeing a 1958 painting he originally sold for $ 900 flip for $ 85,000 in 1973, artists have been frustrated at not receiving royalties for their work when it changes hands.

Past efforts to address this over the years have failed. But now that musicians and other creative producers claim more control over their future sales and blockchain technology has made it easier to track intellectual property, two Stanford alumni have started a business to help visual artists reap the financial rewards when their works are resold privately or privately. come up for auction, in some cases at many multiples of the original price.

“There has been exponential growth in the secondary market, but artists have largely been left behind, even though they are essential to it,” said Max Kendrick, one of the founders. “How do we create a more sustainable model for the artist and the galleries that support them?”

Charlie Jarvis, 24, a computer scientist, and Kendrick, 36, a former diplomat and son of sculptor Mel Kendrick, started the company, called Fairchain, in 2019. Little by little, it is gaining traction with artists and gallery owners.

“If it’s widely adopted, as it should be, it could be quite revolutionary,” said artist Hank Willis Thomas, a consultant for the company. “So many artists who died poor spent their entire careers giving away what they produced.

“In the music industry, that’s expected,” Thomas added. “I have friends on ‘Law and Order’ who, after 20 years, still receive royalty checks. Outside of live performances, we are the only art form that does not have any kind of remnants. “

Kendrick got the idea for Fairchain when an artist’s nerve was forced to choose between paying the rent at her studio and getting a dental job (she chose the studio).

Kendrick received a management degree in 2019 from Stanford Business School, where he joined Jarvis, who was working on a master’s degree in computer science after obtaining a bachelor’s degree there. She stopped getting her master to start Fairchain. “I was fascinated by the impact of technology on a creative industry,” she said.

Fairchain enables artists or their galleries to generate digital certificates of title and authenticity, which are encrypted and recorded on blockchain. When a work is sold or resold, the certificate is only transferred to the new buyer after he has signed an agreement that undertakes to transfer a percentage of the transaction value to the artist who created the work.

The royalty percentage is set by the artist or their gallery when the work is first sold, and artists may choose to commit a portion of their future royalties to the gallery that first sold the work. Fairchain has so far generally seen royalties for resale set between zero and 10 percent, Kendrick said. Fairchain gets paid $ 10 every time the title changes hands.

Each of Fairchain’s advisors – about 10 people involved part-time in the company based on their expertise – has some form of stock or stock options in the platform, which is registered as a Public Benefit Corporation, Kendrick said.

The company has also established a nonprofit arm, the Fairchain Fund for Working Artists, which donates 1 percent to 1.5 percent of each sale to a fund that provides small relief supplies to artists in need.

The blockchain registration allows buyers to verify the origin of a work forever, to establish its authenticity and to document transactions, presumably avoiding ownership disputes. Kendrick described it as a “digital catalog raisonné.”

“Many times you see works of art and you do not know where they came from,” said Paula Volent, chief investment officer at Rockefeller University and a founding board member of the Fairchains nonprofit fund.

Artist Eric Fischl said Fairchain’s technology was crucial at a time when legal disputes have caused artists’ property – like the Andy Warhol Foundation – to withdraw from the authentication fee. “It must work,” he said of the venture. “What has become most problematic is authentication. No funds want to authenticate anything. “

By turning their attention to the issue of artists’ royalties, Fairchain creators have taken advantage of a long-standing problem for working artists: Most of them are only paid from a first sale.

“I have long said that remaining payments to visual artists are delayed,” said artist Frank Stella in a statement Fairchain gave to The New York Times. “The benefits of appreciating works of art accrue solely to others, despite the artist’s significant and sustained work in developing their practice and building the value of their works.”

This affects all levels of the art market, from new to established names. In 2018, David Hockney’s painting, “Portrait of an Artist (Pool With Two Figures),” went for $ 90.3 million at Christie’s; the artist originally sold it for $ 18,000 in 1972.

That same year, when the city of Chicago decided to sell a Kerry James Marshall mural at auction – it was estimated to go for $ 10-15 million after it was ordered for $ 10,000 in 1993 – the sale was eventually canceled, after that the artist publicly criticized the city for wringing “every bit of value they could, from the fruits of my labor.”

Through Fairchain, an artist’s original gallery can also share in the proceeds of a large secondary sale, even though it no longer represents the artist.

“Smaller galleries are penalized for their success by launching artists and then not reaping any of the benefits of discovering them,” Kendrick said.

Some artists say Fairchain would make them more comfortable interacting with galleries. “I have a lot of friends who do not even want to be a part of the art market,” said Bronx-based artist Alteronce Gumby, an investor in the company. Although Fairchain may introduce “a lot of paperwork and a lot of language we are not used to,” he added, “I think it’s important for us to understand this ecosystem and the power we have.”

Fairchain, which started in December, is likely to be slow to become the standard operating procedure, given ingrained resistance in the art market and the results of previous attempts. The 1977 California Resale Royalties Act, for example, was overturned by a federal appeals court in 2018 on the grounds that it was in violation of federal copyright law.

“There’s a mountain to climb here,” said dealer James Cohan. “Artists will have to insist – ‘if you want to buy my art, do it this way’.”

Still, Fairchain said it has attracted support from prominent investors who have also funded start-ups like Postmates and Superhuman. Fairchain was recently included in the Deciders Issue by ARTnews, highlighting “individuals and institutions currently contributing to the cultural conversation”, which was guest edited by Thomas.

And some experts in the art world believe that the moral argument has gained more support and that this time the industry will feel compelled to get on the field.

“It just seems obvious that it’s fair,” said artist Carroll Dunham. “People claim it will stifle the resale market and make the entire art industry less fluid. But there has to be a turning point.”

Given that galleries closely guard the details of their agreements, Fairchain keeps collector identities and terms of sale private from third parties. At the same time, Fairchain believes the art market is ripe for change, given that technology-friendly millennials now account for 52 percent of high-value collectors, according to the 2021 Art Basel and UBS report, and they are the highest art consumers overall.

“It’s a paradigm shift in what it means to assemble,” Kendrick said.

“We are aware of the need to respect norms,” ​​he added. “We do not bring transparency to the market. We bring clarity to these transactions.”

Leave a Comment