Johnny Blogger

The Price of Art

Art World News had the questionable judgment to publish a guest article from me in their current issue, as follows:

I’m a capitalist, which means I believe in the free market, which means I (have to) believe in competition. My economics courses taught that competition forces prices down, an easy theoretic concept to digest. During my 21 years (so far) in the art business, Reality corroborates Theory beyond any shadow of a doubt. To overstate the obvious, price does matter, yet the actions of our industry suggest we forget to compute the enormous cost of “competitive” pricing, in other words, reducing prices.

For years industry guru Jay Goltz has been pounding on custom framers to maintain their prices and in turn profitability. The inconvenient truth is that math is math whether you are a retailer, a framer or a publisher and that skipping the step to calculate the cost and effect of pricing decisions can be disastrous. Each level in the food chain buys into the idea that the lower the price, the more units you’ll sell. Everybody knows this but do they really know the effect of lower prices on profitability? Something to keep in mind is that you have to sell a lot more units to make up for the lower price. If your business runs on a 40% gross margin, and you lower your price 10%, do you realize you have to sell 33% more units to make the same gross profit?

If your gross margin is lower, the effect gets worse. This example assumes that your Cost of Sales per unit is entirely fixed, but even if it is partially variable, the percentage increase in unit sales required will be greater than the percentage decrease in price to make the same gross profit. The calculations are shown below.

Again, I emphasize that the same analysis applies to retailers and framers, not just whiny art publishers. And even though I know the math, there’s nothing like competition to keep me and my prices competitive.

Your price		10% Discount
$1.00	Price/Unit	$0.90
-$0.60	Cost of Sales/Unit	-$0.60
$0.40	Gross Profit/Unit	$0.30
x 100	Units sold	x 133, a 33.3% unit increase
$40.00	Total Gross Profit	$39.90

Powerful Tool to Fight Illegal Copies

Google has made it very easy to find uses (legal and illegal) of a specific image on the web. On Google's main site, click Images at the top of the page, then click the camera icon in the search box. You can paste a URL or browse to the image you want to search. (Detailed instructions here.)

This will make it a lot easier to police illegal artwork out there. The more artists, publishers, and retailers who know about it the better; transparency will help keep people honest. So spread the word.

Special thanks to Cedric H. who wrote about this on LinkedIn's Art of Licensing group.

Resilience

After the flooding in Vermont two weeks ago, our town is recovering. Wild Apple was unscathed (except for a torn up parking lot and a few days of no power), but for some families and a few local businesses it is very slow progress. Woodstock has pulled together just the way one would hope and imagine a small town can.

Yesterday's 9/11 coverage reminded me how much the man-made incident a decade ago dwarfed our recent natural disaster. Yet many of the emotions are similar - anxiety, loss, fear, frustration, and the need to reach out to give and receive comfort.

I remember the need to get home right after 9/11. Four of us from Wild Apple were stranded in Chicago where we were attending a printing technology trade show. We couldn't fly, couldn't get a rental car, no trains, so we ended up buying a used minivan and driving all night. Certainly not the most dramatic story, but all of us have our personal memories of that day.

The traumas experienced by our national and local communities demonstrate human resilience, and serve as a reminder not to sweat the small stuff.