The consensus of estimates surrounding the price potential of Leonardo da Vinci's Salvator Mundi was nowhere near the mark and the final result of $450.3 million left a lot of dropped jaws. As the instigator of the concept of a “Museum Industry® revolutionizing the economic model of the Art Market”, it is natural that Artprice, acutely aware of the intensifying interaction between the Art Market and the world of finance, should comment on this latest result.

Artprice – the world leader in art market services, solicited by hundreds of media organisations around world for the quality of its information about the Art Market – hereby wishes to explain that the price paid for Leonardo da Vinci's Salvator Mundi is in fact the culmination of a perfectly logical and sober price construction process that has nothing to do with flights of emotion or reckless risk-taking.

thierry Ehrmann founder and ceo of Artprice: “If you look carefully at each of our press releases on the AMF's (France's Financial Market's Authority) approved website and our studies of the Museum Industry® (whose economic model Artprice fully conceptualised in 2005), you will see that our econometrics and statistics department has been preparing the Art market for this price for years. As reported by AOF press agency, Artprice predicted that Leonardo da Vinci's Salvator Mundi would fetch as much as $450 to 500 million.

In fact, Artprice has been the only organisation to repeatedly predict in studies (AMF reference document) that the global Fine Art auction record will inexorably head towards the billion dollar level, after a pause at the $500 million level. We have now reached the halfway stage with Leonardo da Vinci's Salvator Mundi.

We have discussed this price evolution since February 2015. We are now almost halfway there and it seems inevitable that our forecast will be confirmed by 2020.” Meanwhile the enormous gap that has appeared between Pablo Picasso's Les Femmes d'Alger ($179.4 million in 2015) and Leonardo da Vinci's Salvator Mundi ($450.3 million) will no doubt diminish progressively over the coming months.

The latest auction records in the Contemporary Art segment (formerly the smallest of the Art Market) have promoted Jean-Michel Basquiat into an ever-expanding club of artists who have exceeded $100 million at auction.

Basquiat is the first Contemporary to join a club that already includes the Modern artists Picasso, Modigliani, Bacon, Giacometti, Munch and Warhol! Taking all parameters into account, the latest Basquiat result represents a genuinely important economic marker and an unprecedented economic performance that the Contemporary Art Market is highly likely to exceed again this year.

Indeed, Christie's idea of integrating Leonardo da Vinci's Salvator Mundi into a Contemporary Art instead of a traditional Old Masters sale was a stroke of genius reflecting their understanding that the Contemporary Art market now has very close ties with the FINANCIAL sector and the banking sector.

As an American photographer told France's Europe 1 radio station, “the crazy 19-minute sequence crashed through thresholds that were inconceivable in an art auction context, even for art market specialists, and the tension in the room was reminiscent of Wall Street trading.”

For Artprice, the price paid for the da Vinci painting is a perfectly logical result because it matches the economic and financial concept of the Museum Industry® that Artprice (alone) formalized and IP-protected many years ago.

Artprice has been the global leader in Art Market information for 20 years and possesses the most comprehensive art market information bank in the world. With its databases and its longstanding partnership with Artron (China's powerful State-sponsored Art Market Information group) Artprice developed the innovative concept of a Museum Industry®. Nowadays this concept is universally accepted and taught everyday throughout the world, and its validity is regularly confirmed by the Art Market's evolution.

According to thierry Ehrmann, “this new economic science within the Art Market is relentlessly inflating prices. We were quick to understand the exponential nature of museum openings around the world. Our meta-data revealed that more museums were built between January 2000 and December 2014 than during the entire 19th and 20th centuries.

The industry is producing no less than 700 museums a year on five continents, all with “international” vocations and a minimum of 4,500 works of art. The Soft Power race between major powers (with China now dominating the USA on the Art market) is a powerful geopolitical motor of the exponential development of the Museum Industry®.”

It is therefore this new industry – with its appetite for museum quality works – that is the primary driving factor in the spectacular growth of the Art Market. The Art Market is now mature, liquid and efficient, offering yields of 12% to 15% per annum on works acquired over $100,000. On museum pieces costing over a million dollars, the yields are outstanding, and works priced over a million dollars are now commonplace in public sales.

Faced with a negative interest-rate environment and seeing the Art Market's excellent resistance to the worst financial and economic crises of the past 17 years, lots of investments funds and wealth managers are directing big money towards the Museum Industry® at the heart of the Art Market.

In short, top-bracket investment funds and wealth managers have found a level of profitability in the Art Market that has become increasingly difficult to generate elsewhere, and they are reassured by the Art Market's maturity, efficiency and liquidity. 

With its decision-support tool that functions much like Bloomberg's financial trading screens, Artprice is now selling “Artprice Screen®” to financial institutions and banks throughout the world. The figures speak for themselves: in 2005, financial institutions and banks represented 7,000 of Artprice's client accounts and these were essentially Private Banking and Family Office accounts.

Today we have more than 36,000 major accounts, including ordinary deposit banks, who have adopted Artprice's screens in their IT systems. This undoubtedly represents a revolution for the Art Market.

Our current sales projections concerning subscriptions to “Artprice Screen®” from the financial and banking sector suggest a massive increase in Artprice's turnover.

Our current sales projections concerning subscriptions to “Artprice Screen®” from the financial and banking sector suggest a massive increase in Artprice's turnover. Artprice is the only player on the financialised Art Market, and its proprietary R&D and intellectual property rights give it a perfectly legal monopoly resulting from years of innovation, research and development. Our state-awarded BPI status (for “innovative” companies) reflects this effort.

As well as trading rooms around the globe, Artprice notes that major museums have acquired dozens of screens (Artprice Screen Multi User), turning themselves into financial operators.

In strict compliance with European, US and French domestic laws on personal data, Artprice uses its Big Data and its algorithms (pre AI) to analyse more than 18 billion free or paid real-time searches every year.

Since the 1980s when the Art Market started to accelerate, we have seen an impressive series of museum constructions, extensions and renovations in metropolises and smaller cities around the world, often involving the most famous architects.

In addition, as of the 1990s, a whole generation of industrialists has MADE lasting impressions on the cultural lives of their respective countries by building an incredible number of Contemporary Art museums particularly in the USA, Europe, Middle East and China.

Museums are increasingly monumental... with grand and spectacular architecture. The latest to open was the Louvre in Abu Dhabi, designed by famous architect Jean Nouvel.

Museum now have an industrial vision of their own profitability because they need to know how long it will take to get a return on their investments. That is the fundamental reality underlying the Museum Industry® developed by Artprice.

Conversely, the economy of live performances is governed by a very different logic. According to Baumol and Bowen's analysis, the performing arts suffer from a substantial productivity disadvantage: to put on a play by Molière in 1664 you needed two hours and twelve actors. In 2017, it stall takes two hours and twelve actors: i.e. no productivity gain over more than three centuries.

The Museum Industry® is based on a fundamental data

The Museum Industry® is based on a fundamental data: the transformation of the role of the museum. In the past, museums developed in the spirit of French “enlightenment” where the primary function was to confiscate artworks from the aristocrats and the church and show them to the people (such was the will of Napoléon Bonaparte...). Today French sociologists refers to this model as having generated a particular museum malady... the curator's migraine.

Since the 1980s, Peggy Guggenheim, preceded by the visionary André Malraux, began the historic transformation of this function, and of the very definition of a museum.

Artprice has argued that museum malady is essentially caused by holding immutable and fixed collections focused on the period 1850/1980, and that this malady has now been permanently cured by the “cultural revolution” of museums.

No longer content with providing homes for the dusty treasures of bygone empires, the new museum concept offers a dynamic response to the public's free time in spaces where spectacular collections rub shoulders with all types of mass media expressions, real and virtual artworks and rewarding cultural activities... an exciting and often interactive spatial experience. These new spaces attract millions of visitors on every continent.

Artprice was the first to coin the phrase “Museum Industry®”. Indeed a museum, freed from its State-imposed constraint state of “preservation for posterity”, can now be regarded as an industry, particularly from an investment point of view. Generally speaking, the design, construction and development of a museum's collection requires heavy investment over an 8 to 10-year period.

Once these heavy investments have been made, public attendance is not limited in the same way that it is with the performing arts, and structural expenses mainly boil down to insurance, maintenance, marketing and occasional restoration work on the collection. Once up and running, a museum can intervene in the Art Market as a key player.

This business logic has been extensively exploited by the Louvre Museum which has marketed its brand to wealthy countries like the USA and UAE. However, Artprice's presentation of the Museum Industry® in 2017 must end with a superb quote from André Malraux's Imaginary Museum (1947) in which the author analyses the whole museological phenomenon:

“The role of museums in our relationship with art is so important we can hardly imagine a world without them, or that they have existed for just two centuries. The 19th century lived by them; we are still living by them and we forget that they imposed on visitors an entirely whole new relationship with art. They helped to release from their original functions the artworks they brought together.”

Elsewhere in its Imaginary Museum Malraux makes the visionary prediction that “the museums of the 21st century will be the unique places for all art forms, where all cultures, generations and different social strata will converge.”

These considerations are undoubtedly at the root of the logic that prompted the buyer (and his pool of investors) to acquire Leonardo da Vinci's Salvator Mundi. They also underpin Christie's extraordinary audacity last week... an audacity that has given the auction house a very substantial advantage over its rival Sotheby's. Indeed, according to a reliable source, the latter is planning a rapid and equally stunning commercial response to Christie's feat by offering the Art Market another priceless and historic piece.

Although the price paid for the da Vinci work may seem excessive to some, this impression recedes when put into perspective with other figures and the tangible economic reasoning underlying today's global Art Market.

In terms of perspective... it is interesting to note that stock exchanges around the world traded 780 million euros on Altice shares alone last week.

The price paid for da Vinci's work was apparently roughly equivalent to cost of a new Airbus A380. But consider the maintenance costs of an aircraft throughout its working life and its limited lifespan... only to end up in an airplane cemetery, abandoned. Such a comparison is therefore both irrelevant and ridiculous.

Leonardo da Vinci's painting, on the other hand, is eternal and will not require a huge budget to maintain. Moreover it will probably grow in value over the years. The millions of visitors it will attract will generate a financial cash flow and it is very likely to generate all kinds of ‘derivative' incomes whether exhibited in its usual place or toured around the world (a strategy increasingly employed by museums).

This is the kind of clear-sighted logic that today motivates investors, with clearly defined ROI schedule. The acquisition is therefore everything but an irrational act. It is a highly organized investment in the medium to long term; in accounting terms (ifrs / IAS), it's a tangible asset generating a free cash flow.

thierry Ehrmann: “Artprice's added value stems from its ownership of the world's most extensive database of listed artists (700,000 artists) with the highest number of auction results (126 million, from 1700 to the present day). This information, combined with our market indicators and econometric tools developed over many years, enables us to anticipate the price constructions of artists... as we did before this latest historic sale.

It is this unique added-value that has made Artprice the global leader in art market information and it is this unique added-value that is highly prized by the world's leading museums, particularly with respect to their future purchases. In short, we help museums and buyers all over the world to fine-tune their economic model and calculate the expected profitability of their new acquisitions.”

The sum paid for Leonardo da Vinci's Salvator Mundi has propelled the Art Market into a new era quite simply by reflecting the reality of a new scale now being used to calculate the value of artworks. After raising the auction record so much higher, it is inevitable that existing auction prices for many prestigious artists will have to the revised upwards. We may soon see a Basquiat work reach more than $200 million... in short, everything is now possible after this latest auction record of 15 November 2017.

In 2018, Artprice, creator of the Museum Industry® concept since 1999, is planning to launch the world's largest Fine Art Museum Databank.

Artprice is the author and sole creator of the Museum Industry® concept. For nearly 20 years Artprice has been helping Fine Art Museums –now one of its core economic target– transform their models. Museum demand is primarily focused on migration to digital, internet and social media.

Artprice has thirty DNSs on Museums, including the world's best generic DNSs since 1996, that generate a large volume of activity. It is worth remembering that Artprice is perfectly familiar with the Museum world and its modus operandi since its headquarters are located within the famous Organ Museum of Contemporary Art which manages La Demeure du Chaos (Abode of Chaos dixit The New York Times).

This now-established Contemporary Art Museum (with 3,600 documentaries in 18 years) was the first French museum to be registered with the Commercial Register of Companies in 1999 and has been ranked as the top private Contemporary Art Museum in Rhône Alpes/Auvergne region with 120,000 visitors per year.

With a high number of customers for this new Museum databank in 2018, Artprice believes this new service will become one of its strategic activities. The turnover potential from the Museum Industry® is colossal. With its know-how from the Organ Museum at its headquarters and its own R&D, Artprice possesses a range of digital products and services covering the entire spectrum of applications for Museums anywhere in the world in 2018.

Artprice will allow its Museum customers for its database to benefit from the its 4.5 million highly-qualified members. Artprice's numerous patents and intellectual property rights give it an undisputed world leader position in the Museum Industry® and a substantial head-start.

An extremely detailed financial communiqué will be released in early December 2017 as regulated information.

Copyright thierry Ehrmann 1987/2017

About Artprice:

Artprice celebrates its 20th birthday, editorial by thierry Ehrmann, founder and CEO of Artprice. https://www.actusnews.com/fr/ARTPRICE/cp/2017/10/04/artprice-celebrates-its-20th-birthday-editorial-by-thierry-ehrmann-founder-and-ceo-of-artprice

Artprice is listed on the Eurolist by Euronext Paris, srd long only and Euroclear: 7478 - Bloomberg: PRC - Reuters: ARTF.

Artprice is the global leader in art price and art index databanks. It has over 30 million indices and auction results covering more than 700,000 artists. Artprice Images(R) gives unlimited access to the largest Art Market resource in the world: a library of 126 million images or prints of artworks from the year 1700 to the present day, along with comments by Artprice's art historians.

Artprice permanently enriches its databanks with information from 6,300 auctioneers and it publishes a constant flow of art market trends for the world's principal news agencies and approximately 7,200 international press publications. For its 4,500,000 members, Artprice gives access to the world's leading Standardised Marketplace for buying and selling art. Artprice is preparing its blockchain for the Art Market. It is BPI-labelled (scientific national French label).

Artprice's Global Art Market Annual report for 2016 published last March 2017: http://imgpublic.artprice.com/pdf/rama2016_en.pdf

Artprice's Contemporary Art Market Annual Report for 2016 - free access at https://www.artprice.com/artprice-reports/the-art-market-in-2016

The text presented hereafter is a translation of Arte Creative's online presentation: ARTE: A gigantic Christmas tree in the guise of a butt plug, a machine that defecates five-star meals, an icon immersed in urine and staged corpses - subversive, trash, provocative or insulting? Thierry Ehrmann, the man behind The Abode of Chaos dixit "The New York Times", an artist and the founder of Artprice, is the mouthpiece for scandal and discloses the workings of the most striking controversies in contemporary art. And scandal sells. 9 episodes are online: http://www.arte.tv/guide/en/weekly-highlight

Artprice's press releases: http://serveur.serveur.com/Press_Release/pressreleaseen.htm and https://twitter.com/artpricedotcom

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Discover the Alchemy and the universe of Artprice http://web.artprice.com/video, which headquarters are the famous Museum of Contemporary Art, the Abode of Chaos http://goo.gl/zJssdhttps://vimeo.com/124643720

The Contemporary Art Museum The Abode of Chaos on Facebook: https://www.facebook.com/la.demeure.du.chaos.theabodeofchaos999

The Abode of Chaos/Demeure du Chaos Contemporary Art Museum by thierry Ehrmann,author, sculptor, artist, photograph https://www.flickr.com/photos/home_of_chaos/sets/72157676803169034