PARIS, August 20, 2014 /PRNewswire/ --
A study by Tradingandipo.com
In the French electricity sector a "disrupteur" is a circuit
breaker. In English, the verb to disrupt means to throw into
turmoil or disorder, to upset, to disturb.
Over recent years, and within an astonishingly short timeframe,
technological innovation and the Internet have triggered major
upheavals of the established order of things with the emergence of
new economic and social players that are today unavoidable global
players. In many respects, the existence of these players looks
like a logical - albeit accelerated - evolution in the direction
that globalization has been heading for over a century. New
vertical markets have appeared sweeping away or modifying the
markets that served as their original foundation, generating
unprecedented shareholder value in the process.
The Internet has profoundly modified global trade. Lots of firms
that have been unwilling or unable to embrace the digital era have
disappeared.
It is in fact impossible to resist the natural evolution of the
economy and today's economy has become a "disruptive" economy.
According to Clayton Christensen
(1), Professor of Economics at Harvard
Business School, capitalism is currently in the throes of a
major and fundamental evolution. He first explored this theme in
his book The Innovator's Dilemma: When New
Technologies Cause Great Firms to Fail. The history of
Kodak is an obvious example. With the arrival of digital
photography, the company almost went under and only managed to
escape bankruptcy by selling off its "Photos" activity in
extremis, precisely the activity on which its reputation was
originally founded.
To qualify as a "disruptor", a firm needs to be subject to the
laws of Robert Metcalfe (2) (founder
of 3Com) and Gordon Earle Moore (3)
simultaneously. According to Metcalfe the utility of a network is
proportional to the squared number of its users, and according to
Moore, the performance of IT tools is improving at an exponential
rate (doubling every 18 months). The combination of these two laws
allows the disruptor to reduce its operating costs over time
on the back of the "ever-improving" performance of digital and IT
tools, and thus to create more and more shareholder value. We will
now analyze whether Artprice is a pure disruptor in the Art
Market.
Economic systems evolve incrementally whereas technology evolves
exponentially, becoming the primary fuel of disruptors. Disruption
manifests itself via the imaginative will of its instigator to
break through the conformism that sets in either by habit or by
monopoly, or both. Technological change thus allows the
materialization of disruptive projects. Thirty years ago, who would
have thought that we would one day be able to perform stock market
transactions from our homes in a fraction of a second?
Nowadays the natural targets for disruptors are activities that
can be dematerialized, where service costs can be substantially
reduced, particularly those costs related to intermediation. One of
the most recent examples is Uber, which is completely modifying the
urban transport and taxi sector and is today valued at over
17 billion dollars.
The profitability of such projects is facilitated by
ever-diminishing operating costs resulting from the combined impact
of the Metcalfe and Moore Laws. As a result, investment risks are
lower and profit targets are reached in much shorter timeframes. In
this context, investor behavior follows a common-sense logic that
favors disruptive projects at the expense of traditional ones, as
the recent large-scale capital raising operations by Uber and
Airbnb (4) have amply demonstrated. The high levels of market
valuation reached by disruptive firms are therefore a perfectly
understandable expression of this investment logic.
However, this logic does require a radical change in investment
philosophy. Once obsessed with short-term profitability, capital is
now targeting projects with the potential to create leaders that
can generate very substantial profits in the medium to long term.
The disruptor is an ideal and natural vehicle for this type of
investment.
The disruptor short-circuits markets by placing demand in direct
contact with supply. But to do so, the two sides of the market need
to be standardized. The digital revolution and the Internet have
allowed this standardization by offering an intuitively ergonomic
environment that combines the description of the product or service
with the necessary actions to complete the transaction. More
importantly, the description and the actions are available in
almost any language so that nationality is no longer a barrier to
the market.
Through the capillarity of the Internet, these new players and
these new networks and circuits have shown exponential growth
rates. They ignore the notion of the Nation-State. The growth of
the delocalized, dematerialized and virtual economy is giving birth
to a common and unifying world. The driving forces of this
evolution are global players like Artprice.
Social networks are an integral part of the disruptive economy
and they play a decisive role by effectively acting as global
advertising agencies for new services, concepts and ideas. Indeed,
they act as unprecedented accelerators and are themselves
disruptors.
There are plenty of other examples of disruptive activities:
"crowdfunding" is a concept that is revolutionizing the banking
sector by short-circuiting traditional calls to the market by banks
and by considerably reducing the fees and commissions associated
with such operations. Moreover, it gives donors freedom of choice
by simultaneously offering a broad range of different projects.
Crowdfunding offers a capital raising success potential
proportional to the project's global exposure and it attracts new
investors precisely because of this unlimited horizon.
In the accommodation sector, the AirBnB website has challenged
the historical players of the hotel sector by offering hundreds of
thousands of short-term rental solutions all over the world at
prices way below hotel tariffs, simply by bringing supply and
demand into direct contact with each other on its website, and
without the inertia and operating costs of a hotel group.
Every time a disruptor has appeared, the traditional players,
disturbed by the sudden arrival of an unexpected competitor, put
pressure on governments. They try to slow the development of the
disruptor by calling for the adoption of restrictive regulations,
or by initiating legal actions or by engaging in intensive lobbying
in rear-guard actions that are more often than not lost before they
even begin. Because as Clayton
Christensen emphasized "disruption represents an
irreversible transformation of capitalism".
(1) Clayton
Christensen, born in 1952, author of "The
Innovator's Dilemma: when new technologies cause great firms to
fall » In 2011, Forbes considered him "one of the most
famous business theorists of the last fifty years".
(2) Robert
Metcalfe, born in 1946, engineer and inventor of
the Ethernet and founder of 3Com.
(3) Gordon Earle
Moore, born in 1929, co-founder of
Intel.
(4) Uber raised $1.2 billion in June
2014 and Airbnb raised
$450 million in April 2014 with respective market valuations of
$17 billion and $10 billion.
Trading and Ipo will analyse why Artprice is the disruptor
of the Art Market ahead of the activation
of artmarket.com. Trading and Ipo
will conduct regular studies and analyses focused on the major
disruptors of their respective sectors.
The art market has been a global market for centuries and
ARTPRICE is, according to news agencies and the major references in
the international media, the global leader in art market
information. ARTPRICE permanently enriches its databanks with
information from 4,500 partner auction operators and it publishes a
constant stream of art market trends for the main news agencies and
7,200 print and audiovisual media organizations. ARTPRICE has 3.2
million free and paid subscribers, having adopted the freemium
mode.
This digital model - which is experiencing very strong growth
all over the world - is called "freemium". Much of the data is
available free, but the value-added information is paid.
ARTPRICE's interim report on the art market, distributed by
Agence France Presse (AFP) in August
2014, shows that the art market is booming. The title of the
long press release by AFP summarizes the condition of the market,
"Global art market: sales jump 17% in the first half of the year,
to a new absolute record."
Trading And Ipo confronts the
theories of Clayton Christensen with
those of Thierry Ehrmann, CEO and
founder of ARTPRICE, to confirm, point by point, ARTPRICE's
position within the precepts of the "disruptive
economy".
Trading And Ipo: According to Clayton Christensen, disruptive innovation is
primarily a way of defining the transformation of a market. An
innovation that is disruptive allows a whole new population of
consumers at the bottom of a market access to a product or service
that was historically only accessible to consumers with a lot of
money or a lot of skill. How does ARTPRICE justify its position as
a disruptor?
Thierry Ehrmann: ARTPRICE
is exactly that: the disruptor of the Art Market. We went
from 500,000 avid collectors of postwar art to 70 million
professional and non-professional art consumers thanks to
information instantly available online. ARTPRICE has by far the
largest art market information database in the world and provides
unlimited access for less than $100
per year.
Trading And Ipo: According to Clayton Christensen, "the potential for the
emergence of new companies of this type is substantial… and
growing. Wherever there are activities that can dematerialized and
reintermediated, there is room for new business models."
Thierry Ehrmann:
That's exactly how ARTPRICE built its monopoly, in full respect of
the law. We "standardized" 108 million works of art and more than a
million artists with unique identifiers and perfect traceability, a
task that involved over a million hours of work by art historians.
The dominant disruptor cannot dematerialize and reintermediate
without standardizing the market it wishes to monopolize. Once that
was in place, it was easy for ARTPRICE to bring supply and demand
into direct and ultra-rapid contact, either on its standardized
fixed-price marketplace or on its standardized auction platform,
allowing millions of people the opportunity to buy and sell
artworks in just a fraction of a second.
Trading And Ipo: According to Clayton Christensen, "disruption helps new
models to emerge and creates larger markets by making products and
services cheaper and more accessible in markets that have been
dominated by non-transparent oligopolies or companies that enjoy
"status quo profits"". This involves a fundamental, radical and
irreversible transformation of the capitalist system. "Disruptors
are innovators seeking solutions to the problems they
encounter."
Thierry Ehrmann: We
were very lucky to arrive on an art market whose players, of all
sizes, were still operating with nineteenth century practices with
a high level of distrust for computers, no standardization
whatsoever, opaque information closely guarded by a veritable
caste, often with hidden agreements between them and incestuous
relations with those in power. And that had been going on for more
than five centuries. On top of that you had a large market of
"willing victims" who would buy artworks at somewhere between 7 to
9 times the price paid by the seller. Now, with ARTPRICE and its
capillarity on Internet via principally GOOGLE and subsequently
BAIDU (number 1 in China) and BING
(Microsoft), and after making 540 million data available online in
six languages, the margins have mechanically collapsed. To
summarize Clayton Christensen, we
found "solutions to ancestral problems" via innovation.
Trading And Ipo: According to Clayton Christensen, "disruptive innovation is
quickly becoming the cruel and brutal rule of capitalism." As
a result of this new context, the companies and institutions of the
"old economy" literally buckle under the weight of regulations,
overhead expenses, the immediacy of the market, the financial
results demanded by financial markets, the jobs that need to be
maintained, etc. ... and try to pressurize governments to throw
regulatory batons into the wheels of the disruptors, often with
little or no effect, and above all, often increasing their exposure
to long-term risk. They can also imitate the disruptors in an
attempt to grab the remaining market shares with the hope of
benefiting from the overall increase in the size of the market. As
a last resort, they can buy up newcomers, if they can afford it,
which is not always the case.
Thierry Ehrmann:
Clayton Christensen's analysis
applies to ARTPRICE in every respect. The old economy of the Art
Market has launched nearly a hundred legal actions, all of them
futile and some of them extremely vindictive. Our legal response
was equally ruthless and much blood has been shed…. but you can't
stop the train of history.
70% of the art market's players are dying, crushed by overhead
costs, auction room closures, real estate costs… with thousands of
employees being made redundant.
In France, the business
community and the State have a visceral fear of disruption. This
has been amply demonstrated in the telecom, hotel bookings and taxi
sectors… amongst many others.
After 500 years of monopoly (since 1556 in fact), the old French
art market appealed to the legislator to pass reforms (2001) and
then prompted the "reform of the reform" in 2012, under which, in
2014, they managed, quite simply, to get the term "online auction"
banned from the Internet. In fact, they dreamed up practically
everything possible and imaginable to kill off any kind of market
disruption, which is why we are leaving for the United States (New York) via our subsidiary Artmarket.com,
formerly Artprice Inc. / Sound View Press (1973).
Our strength is the full standardization of the Art Market
across the entire value chain. This standardization is protected
under intellectual property rights and is absolutely essential for
dematerialization. After many years of under-valuation, we have
decided to get the true value of our client base recognized via an
IPO on the US market. We have a preference for the Nasdaq which
incidentally has just crossed the 4,500 threshold. French
accounting methodology is closely linked to the old economy. The
concept of the digital economy is non-existent in France and hence an appropriate valuation in
that country is impossible.
Trading And Ipo: ARTPRICE claims to have 3.2
million members and targets 12 million members. AirBnB claims 11
million members and its value exceeds $10
billion. What is the difference between and an AirBnB member
and an ARTPRICE member?
Thierry Ehrmann: A
huge difference: unlike an AirBnB member, an ARTPRICE member cannot
be substituted by another member. In fact, ARTPRICE members are
extremely well defined (qualified) from a commercial perspective
(logs, Big Data) which allows us, in strict compliance with
European and American legislation, to know what they are looking
for, possess, or wish to sell in terms of art (fine art). Even if
the leading three auction houses in the world combined their
databases, they wouldn't be able to simultaneously achieve such a
deep level of information or compete with the number of members
that ARTPRICE has. To answer your question about a comparison with
AirBnB, their members are substitutable because they are
homogeneous. In the case of ARTPRICE, our members are not
interchangeable because they are heterogeneous. It is therefore
obvious that the value of ARTPRICE is much higher than that of
AirBnB based on the specificity ("qualification") of its
members.
Trading And Ipo: It may be helpful to briefly
overview the two main activities of ARTPRICE's business: the first,
that we are most familiar with, is that of providing all
information regarding the art market, along with all indices,
statistics and price levels; and the second axis is the
Standardized Marketplace. Can we talk about the first historical
activity?
Thierry Ehrmann:
Yes, we come with a considerable advantage over a pure start-up
because we have the position of world leader in art market
information with over 3.2 million "qualified" members and more than
30 million indices and statistics. Moreover, we are the only group
to produce highly reliable data covering a very broad input base
with highly-targeted surveys. Our methodology is built around the
analysis of repeat sales. This method consists in following the
history of an artwork, leaving no room for doubt, and calculating
its price index over time. Previously the main method used was the
comparison method, which, in the Art Market, gives extremely poor
results. To construct this perfectly legal monopoly, we had to buy
almost all of the historical companies operating in the publishing
sector of the Art Market, i.e. all the companies that produced the
price guides, artists' biographies and descriptive catalogs
(catalogues raisonnés) in Europe and the USA.
For example in the USA we
acquired Sound View Press, America's leading publisher of art price
guides, artist biographies, including the famous Who was Who in
American Art. Sound View Press, which includes forty funds, was
created in 1973 by Peter Hastings
Falk who is still with us today.
We also acquired the US fund Signatures & Monograms
from Caplan & Creps and the American Bayer database on the
Anglo-Saxon art market from 1700 to 1913.
In Europe, we acquired about
thirty funds including the famous Enrique Mayer Guide (1962-1987),
the H. Mireur Dictionary of Art
Sales (1700-1900) and the Franck Van Wilder publications. We
also purchased 450,000 manuscripts and auction catalogs that our
historians have fully updated for 18 years by standardizing
hundreds of millions of data. Today, after the work conducted by
ARTPRICE, an artwork possesses a veritable I-D that allows it to
participate in dematerialized trading because you can be certain
that it is indeed what it pretends to be, which of course reflects
exactly what Clayton Christensen
said.
Trading And Ipo: Can you tell us now about your
Standardized Marketplace, which, according to our analysis and
research, was set up in 2004.
Thierry Ehrmann:
Yes, since 2004, we have created and protected under Intellectual
Property rights the first standardized fixed-price marketplace in
the world via, on which, every day, buyers and sellers alike can
find between 70,000 and 90,000 works of art with an average price
of around $11,000.
This standardized fixed-price marketplace was completely
redesigned to be combined with our standardized auction marketplace
that we launched in 2012 and which, the day it opened, had more
than 500 million dollars' worth of artworks for sale. At that
moment, the Council of Voluntary Sales, the French auction market
authority that is strongly resisting the disruptive economy, gave a
major press conference during which it indicated its intention to
initiate a lawsuit against ARTPRICE for having launched its
Standardized Auction Marketplace.
In the end, it turned out to be completely false and the Council
of Voluntary Sales was forced to admit that there is no lawsuit
against ARTPRICE. It's pathetic, but that is France.
Nevertheless, the Council of Voluntary Sales continued to harass
ARTPRICE with recurrent public statements such as "the internet
giants ARTPRICE and Ebay have created confusion among consumers",
and this harassment has contributed to our decision, announced at
ARTPRICE's AGM, to move our standardized fixed-price and
standardized auction marketplaces to the
United States. Between them, the Asia-Pacific region and United States account for more than 75% of the
global art market, and we expect this figure to rise to 80% by
2015.
Trading And Ipo: Can you remind us of your share
price when you launched your online standardized auction
marketplace in January 2012?
Thierry Ehrmann:
The market is highly instinctive and was paying a fair price. It
reached EUR 67 after an increase of
EUR 50 and four times the turnover of
the entire freefloat of 63%, i.e. more than twice Artprice's entire
capital. We therefore have an extremely reliable reference price
and the market had priced in the reality of our online offer and
not that of a business plan. This is why the IPO of
Artmarket.com will use very real market data based on models
that have already been validated. We believe we can offer, in the
light of independent studies, exponential growth, a perfectly legal
monopoly on the standardization of art market data and the
certainty that in 2012 we achieved our goal, a goal that was
blocked by France's morbid fear of
disruptors and particularly by the "non-transparent oligopolies
earning privileged position profits" as described by Clayton Christensen.
Trading And Ipo: Do you see the IPO of
Artmarket.com in New York as some
kind of revenge?
Thierry Ehrmann:
You cannot fight against fear and stupidity. I am pragmatic like
most Americans, I go where the market goes and where the
authorities allow me to do my business and where investors are
willing to pay a fair market price. The market will be very happy
to buy a phenomenal growth rate, as described by all the
independent market research on Artprice, with the additional
security of a world leader that has benchmarked all of its models
and owns a perfectly legal monopoly built on innovation, hard work,
external growth and intellectual property rights.
Trading And
Ipo: Artmarket.com is obviously
the ideal generic that all art and economics journals have dreamt
of possessing. Is that because it refers to the Art Market?
Thierry Ehrmann:
Yes, our acquisition of that name allows us to come up at the top
of any Google search involving "Art Market" out of a total of 425
million results. Recall that Artprice's parent company Server
Group, has been on the Internet since 1987 and we have always filed
or acquired generic domain names. As a trained lawyer, I consider
that a generic name does not infringe the rights of any third
parties, wherever we may be in the world. I usually explain that
Anglo-Saxon generic domain names are more powerful than global
brand names that will inevitably encounter obstacles in certain
countries. ARTPRICE has also blocked potential infringers by owning
Artmarket.net that will be our dedicated intranet to the
4,500 Auction Houses that have been our partners for many years.
Artmarket.org will publish news from our news agency Art
Market Insight. These are key assets that are already
generating a very substantial volume of traffic.
Trading And Ipo: Clayton
Christensen describes how the disruptive economy is
establishing itself as "the cruel and brutal rule of the continuity
of capitalism." Can you explain the art market from that angle in a
few words?
Thierry Ehrmann: I
often say that the art market is like the financial market, but ten
times more cruel and intelligent because its players have mastered
all the rules of the financial markets since many of them started
off in the financial sector. According to historians, the art
market is the oldest market in the world.
Trading And Ipo: Why have you decided to move to
New York?
Thierry Ehrmann: As
I have warned and repeated continually for many years, France is losing its standing in the global
art market. In 1950, France
accounted for more than 50% of the global art. Today, according to
our latest interim report on the global art market, it accounts for
less than 4%. The Americans, who started from scratch, understood
the only thing that needed to be understood: control of the global
art market constitutes a powerful political objective - somewhere
in the realm between earthly power and spiritual power - hence the
fierce struggle which saw China
overtake the United States in
2010. But the United States has
managed, with a strong dose of patriotism, to react quickly and
effectively to regain its leader position in the first half of
2014. The second half of the year will no doubt see be a fierce
battle between the USA and
China.
Trading And Ipo: You are talking about America,
but our question was really "why New
York?"
Thierry Ehrmann:
It's very simple; New York is the
leading art marketplace in the world, ahead of Beijing, London and Hong
Kong. In fact, 90% of the entire American art market changes
hands in New York.
Trading And Ipo: In some interviews,
particularly in the international press like Time Magazine
and Le Monde in France, you
were already talking a long time ago about a "disruptive economy
as a continuation of a capitalism that has merged its two main two
main currents, the Rhineland current and
the Anglo-Saxon current ". Today, how do you react to a vision
that has, in effect, became a doctrine?
Thierry Ehrmann:
You can only understand the Internet (which we pioneered in
France as of 1987) if you admit
that we are facing a veritable paradigm. Based on this assumption,
the Christensen doctrine becomes perfectly clear. In my view, in
2014 we have arrived at less than 10% of the history of the
Internet. As a pioneer of the Internet in Europe, I see the internet as one of the most
exciting engines for historical change that we have ever
experienced. That's why we want to pursue the rest of this digital
revolution in the USA.
Trading And Ipo: It has to be said that this cold
and hard economic analysis leaves little room for emotion.
Thierry Ehrmann:
That may be so, but do you know that aside from my role as CEO and
founder of my industrial groups, I managed to organize a 30-year
retrospective of my monumental sculptures (1982 to 2012) at the
Contemporary art museum which I founded in Lyon, the Musée l'Organe,
also known as La Demeure du Chaos, or, as the New York Times called it, the Abode of
Chaos. So we can reconcile industry, finance and art…
because art will always be the bridge between the material and the
spiritual.
http://www.tradingandipo.com
About Artprice:
Artprice is the global leader in art price and art index
databanks. It has over 30 million indices and auction results
covering more than 500,000 artists around the world. Artprice
Images(R) gives unlimited access to the largest Art Market resource
in the world: a library of 108 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 4,500 auctioneers and it publishes a constant flow of art
market trends for the world's principal news agencies and
approximately 6,300 international press publications. For its
3,200,000 members (members log in), Artprice gives access to ads
posted by members. This space represents the world's leading
Standardised Marketplace® for buying and selling art. These sales
take place under two systems: either fixed price sales or
auction-sales (regulated by paragraphs 2 and 3 of Article L 321.3
of the French Code of Commerce).
Artprice is listed on the Euronext Paris SRD L.O. (Euroclear:
7478 - Bloomberg: PRC - Reuters: ARTF)
Press Releases:
http://serveur.serveur.com/press_release/pressreleaseen.htm
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/mwsqp
https://vimeo.com/87859684
http://twitter.com/artpricedotcom
https://www.facebook.com/artpricedotcom
Contact : Josette Mey : e-mail :
ir@artprice.com