Even before the artist Robert Rauschenberg famously objected to seeing a 1958 painting he originally sold for $900 flip for $85,000 in 1973, artists were frustrated by not receiving royalties for their work when it changes hands.
Previous attempts to address this over the years have failed. But as musicians and other creative producers gain more control over their future sales and blockchain technology has made it easier to trace intellectual property, two Stanford alumni have started a company to help visual artists reap the financial rewards when their work becomes private or private. auctioned, 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, 25, a computer scientist, and Kendrick, 36, a former diplomat and son of sculptor Mel Kendrick, started Fairchain in 2019. Little by little it is gaining popularity among artists and gallerists.
“If widely adopted, as it should be, it could be quite revolutionary,” said artist Hank Willis Thomas, a consultant to the company. “So many artists who died poor have spent their entire career giving away what they produced.
“In the music industry, it’s expected,” Thomas added. “I have friends on Law and Order who, after 20 years, are still getting royalties. Outside of live performance, we are the only art form that has no form of rest.”
Kendrick got the idea for Fairchain when an artist friend had to choose between paying the rent of his studio and getting dental work (he chose the studio).
Kendrick received a management degree from Stanford Business School in 2019, where he connected with Jarvis, who was pursuing a master’s degree in computer science after earning a bachelor’s degree. She stopped getting her master to start Fairchain. “I was fascinated by the impact of technology on a creative industry,” she says.
Fairchain enables artists or their galleries to generate digital certificates of title and authenticity, which are encrypted and recorded on the blockchain. When a work is sold or resold, the certificate is not transferred to the new buyer until they sign an agreement in which they commit to transfer a percentage of the transaction value to the artist who created the work.
The royalty percentage is determined by the artist or his gallery when the work is first sold, and artists may choose to allocate a portion of their future royalties to the gallery that first sold the work. Fairchain has so far generally set resale royalties 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 who are involved with the company part-time based on their expertise — have 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 non-profit organization, the Fairchain Fund for Working Artists, which donates 1 to 1.5 percent of every sale to a fund that provides small relief funds to artists in need.
The blockchain registration allows buyers to forever verify the provenance of a work, establish its authenticity and document transactions, thus avoiding suspected ownership disputes. Kendrick described it as a ‘digital catalog raisonné.
“You often see works of art and you don’t know where they came from,” said Paula Volent, chief investment officer at Rockefeller University and one of the founders of the Fairchain nonprofit fund.
The artist Eric Fischl said Fairchain’s technology was crucial at a time when legal disputes have pushed artists’ estates, such as the Andy Warhol Foundation, to pull out of the authentication swamp. “It has to work,” he said of the venture. “What has become most problematic is authentication. No foundation wants to verify anything.”
By drawing attention to the issue of artists’ royalties, the makers of Fairchain have tapped into a long-standing problem for working artists: most of them are only paid on a first sale.
“I’ve long said that residual payments for visual artists are overdue,” artist Frank Stella said in a statement that Fairchain provided to DailyExpertNews. “Benefits from the appreciation of works of art accrue entirely to others, despite the artist’s essential and ongoing work to develop their practice and build the value of their works.”
This affects all levels of the art market, from emerging to established names. For example, 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 — an estimated $10 million to $15 million, after the $10,000 commission was ordered in 1993 — the sale was eventually canceled after the artist went public. the city had criticized the city for wringing out “every bit of value they could from the fruits of my labor.”
Fairchain also allows an artist’s original gallery to share in the proceeds of a large secondary sale, even if it no longer represents the artist.
“Smaller galleries are penalized for their success by launching artists and then failing to reap 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 don’t even want to be a part of the art market,” says Bronx-based artist Alternce Gumby, an investor in the company. While Fairchain will “introduce a lot of paperwork and a lot of language that we’re not used to,” he added, “I think it’s important for us to understand this ecosystem and the power we have.”
Fairchain, which launched in December, is likely to slowly become standard operating procedure, given the persistent resistance in the art market and the track record of previous efforts. For example, the California Resale Royalties Act of 1977 was quashed in 2018 by a federal appeals court on the grounds that it violated 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 gained the backing of prominent investors who have also funded start-ups such as Postmates and Superhuman. Fairchain was recently featured in ARTnews’ Deciders Issue, which focuses on “individuals and institutions currently contributing to the cultural conversation”, edited by Thomas as a guest.
And some experts in the art world believe the moral argument has gained more support and the industry will feel compelled to get involved this time around.
“It just seems obvious that it’s fair,” said the artist Carroll Dunham. “People are saying it will stifle the resale market and make the entire art business less fluid. But there has to be an inflection point.”
Mindful that galleries closely monitor the details of their deals, Fairchain keeps collectors’ identities and terms of sale a secret from third parties. At the same time, Fairchain believes the art market is ripe for change, as tech-friendly millennials now account for 52 percent of wealthy collectors, according to the 2021 Art Basel and UBS report, and are the top art spenders. general.
“It’s a paradigm shift in what it means to collect,” Kendrick said.
“We are clear about the need to respect standards,” he added. “We do not market transparency. We are clarifying these transactions.”