Drawing a Blank: Why Is Congress Going to Reward Wealthy Artists?

Right now, while everyone in social media is arguing over other things, a horrible little law is making its way through Congress which you ought to be aware of – if you happen to love art and care about capitalism, as I do.

The Art Newspaper reports today that a bill known as “The American Royalties Too Act” or “A.R.T.”, has gained six co-sponsors over the last three weeks.  The bill would impose a resale royalty on works of art meeting certain sales criteria, and is modeled after a European concept known as “droit de suite”.  Since my time at Sotheby’s Institute back in graduate school, the concept of droit de suite has struck me as both nonsensical and typical of those who, in order to solve a perceived problem, decide to create another one.  I’ve warned about it on the blog before, as you can read here.

The wincingly awful use of the word, “Too”, aside, here’s what I promise you will happen over the next decade, if this “A.R.T.” bill passes:

1. The law will do little or nothing to aid most artists – and may actually hurt them.

In theory, this law is designed to protect struggling, up-and-coming artists.  As Christopher Rauschenberg, son of the late artist Robert Rauschenberg wrote on HuffPo yesterday, those pushing this legislation believe we “should foster and support young artists if we want them to continue to create. Implementing legislation that equitably distributes the proceeds of creative output will cost taxpayers absolutely nothing, yet would mean a great deal to the artistic community.”  [Helpful hint: any time you read the words, “equitable distribution” as a justification for anything, raise an eyebrow.]

In reality, if passed this law will largely operate for the benefit of already wealthy artists, their foundations, or their estates, such as that of Mr. Rauschenberg, by pouring additional thousands of dollars into their coffers every time a work of theirs is sold for up to 70 years after their death.  At the same time, with a resale payment tacked onto every sale, those artists who are not already household names will find that prices for their work will remain artificially depressed, keeping sales turnovers of their work low.  Most artists, in fact, never see their work come up for auction at any of the big auction houses, and this law will do nothing to encourage that to change.

2.  The law will turn out to be a great tax-raising scheme.

While the law appears on the surface to be designed to help the poor and struggling artist, what is lost in the emotional component of the argument being made largely by those on the left – natch – is the fact that this is not free money, nor an act of beneficence on the part of Congress.

For royalty payments, you see, whether from sales or licensing of intellectual property, constitute taxable income.  What Congress is proposing is really a way of imposing an additional income tax, without actually calling it that.  The royalty payment will be taken by the auction house at the time of sale, and then the artist or his estate will be sent these payments, quarterly.  Once that royalty payment makes it to the end point – the artist or his estate – the government can tax that income.  So in truth, this is a way of squeezing art buyers out of just that little bit more of their money, even though the collection of said money will take place at a different end of the revenue stream.

3. The law will cause the market for Modern and Contemporary Art sales to shift away from the U.S.

Decades ago, Paris lost its primacy in both art gallery and art auction sales to London, in part because of the passage of draconian French laws regarding droit de suite and other forms of taxation.  Over the past fifteen years however, and particularly after Britain adopted EU regulations, the center of the international art market has shifted from London to New York.   With the implementation of this proposed A.R.T. Act, sellers are going to be faced with paying royalties – up to a cap of $35,000, depending on the resale price – on every piece of art falling under the protection of the law that is sold: a cost which they will pass along to the buyers.

Now yes, plenty of high-value auctions still take place in London today, and if this law passes they will still take place in New York, as well.  However over time, markets tend to seek environments where they experience the fewest restrictions on their ability to engage in commerce, which is why sales at Sotheby’s in New York eclipsed those of the home office in London years ago, and also why the socks you are wearing right now were probably not made in America.  If Europe suddenly became a (comparatively) cheaper place than the U.S. to engage in the art trade, the bulk of the buying and selling in the Modern and Contemporary art market could easily shift back to London.  Rather than making things better for everyone, Congress could actually be making everything worse.

4.  Is this bill really about achieving fairness? For whom?

In defense of this bill, co-sponsor Congressman Jerrold Nadler (D-NY) recently told The New York Times that, “To me, the bill is a question of fundamental fairness.”  However under scrutiny, this moral argument falls to pieces in the face of reality.  Under the European version of this law one of the wealthiest artists in the world, Pablo Picasso, is still collecting droit de suite payments – or rather, his already very wealthy children are, because he’s been dead since 1973.  Does that seem, on a common-sense basis, to be “fair”?

What about a living, wealthy American artist, such as Jeff Koons, who will directly benefit from the American version of this law?  Koons makes millions of dollars in commissions for creating things such as giant topiary puppies.  Is he so disadvantaged that getting a check for $35,000 every time some subsequent purchaser buys one of his sculptures, such as his metallic balloon animals, will “fundamentally” address a wrong done to him in some way?

By way of conclusion, I would point out that readers are of course most welcome to disagree with anything I’ve written in the comment section of this post, as indeed you always are.  Yet it seems to me that, from a purely rational, analytical point of view, one cannot deny the fact that those who will benefit most from the passage of this law are wealthy artists, and the government.  Little or any benefit will be shown to accrue to the group of individuals which the A.R.T. Act was allegedly designed to help, but Congress will once again have found a clever way to tax American business while wrapping itself in a cloak of moral superiority.

Detail of "Elevation of the Dome of the U.S. Capitol" by Thomas Walter (1859) Library of Congress

Detail of “Elevation of the Dome of the U.S. Capitol” by Thomas Walter (1859)
Library of Congress, Washington D.C.


Selling Superman: How the Man of Steel’s Creators Lost Him

Today would be the 100th birthday of artist and Superman co-creator Joe Shuster (1914-1992).  Shuster and his friend writer Jerry Siegel (1914-1996) famously sold their rights to the Man of Steel to what later became DC Comics, for the princely sum of $130.  In exchange, they received a ten-year contract to write and illustrate the Superman series of comic books.  For Shuster and Siegel, this would turn out to be one of the biggest blunders in the history of business, akin to Decca records passing on signing The Beatles back in 1961.

Although the story of the sale of Superman is often repeated as a factoid, many are unaware of the legal wranglings that followed, as the pair tried to remedy their mistake.  And well they might rue the day that they had signed over their giant boy scout to the publisher, for Superman has been a huge money-maker for quite a long time.  During World War II for example, Superman comic books were selling at the rate of one million copies a week.  The development of other revenue streams from the character, including radio shows, short and feature-length films, and later the various television series, as well as all kinds of consumer products, continues to pour money into the coffers of DC Comics and their parent company Time-Warner to this day.

Back in 1947, Shuster and Siegel sued National Allied Publications to regain control over their giant offspring, since National Allied now owned not only Superman, but the entire character universe which had been created around him, as well as in the Superboy comics which premiered a few years after the Man of Steel’s debut.  The former group included such familiar figures as Lois Lane, Jimmy Olsen, and Perry White.  The latter series filled out details of the now-familiar mythology, regarding his relationship with his adoptive parents, Ma and Pa Kent, his growing up in Smallville, and so forth.

This first lawsuit by Superman’s creators was not hugely successful, since the trial judge ruled that National Allied was the legitimate owner of Superman, because Shuster and Siegel had sold him in exchange for valuable consideration.  The parties to the suit eventually entered into a stipulation agreement in 1948, which was approved by the court, in which in exchange for relinquishing any further claims they might make regarding ownership of Superman, the pair agreed to a lump-sum payment of $94,000 – a little under $1 million in today’s dollars – in settlement of their disputes.  And that might have been that, except that Superman the money-making machine showed no signs of stopping, as the decades rolled by.

When Superman’s intellectual property protections were about to go the way of the planet Krypton, Shuster and Siegel decided to try again to assert their rights over the character.  This time, the trigger was the renewal of the copyright to the Man of Steel.  Works created prior to the Copyright Act of 1976 typically had an initial 28-year period of protection from the time of publication, which could later be renewed by the rightful owner.  Superman’s first published appearance in 1939, although Shuster and Siegel had been working on him since their college days in Ohio, meant that he was going to slip into the public domain in 1967, unless that copyright was renewed by his rightful owner.

Shuster and Siegel filed suit in federal district court in New York, alleging that they, and not National Periodical Publications, the successor of National Allied, held the right to seek copyright renewal for their creation, under various theories.  While the pair were ultimately unsuccessful, the court’s decision to grant summary judgment in favor of National Periodical is a great example of a judge (or his law clerk) having a little fun when writing an opinion. something which during my legal career to date I have only experienced on a few occasions.  In the opening sentence of his ruling, Judge Morris E. Lasker of New York’s Southern District notes one of the key differences between the Man of Steel and the people before him:

Although Clark Kent, generally known as Superman, is happily capable of solving all problems without going to court, his creators and exploiters, mere mortals like the rest of us, are not so fortunate.

Siegel v. National Periodical Publications, Inc., et al.,
364 F.Supp. at 1032 (S.D.N.Y., 1973)

Although part of Judge Lasker’s findings were reversed on appeal the following year, the dismissal itself was ultimately affirmed on other grounds.  In their ruling, like their brother on the bench below, the judges of the 2nd Circuit couldn’t resist injecting some superlatives about Superman into their written opinion.  They described the Last Son of Krypton as “a person of unprecedented physical prowess dedicated to acts of derring-do in the public interest,” Siegel v. National Periodical Publications, Inc., et al., 508 F.2d at 909 (2nd. Cir., 1974).  Subsequently the legal wranglings over ownership of Superman have continued, with the heirs of Shuster and Siegel experiencing some more losses and even a minor victory or two.

Aside from these interesting legal citations however, the real lesson to be drawn here is quite simple.  If you really, really believe in your product, whatever that product may be, think very carefully before signing away your rights to it.  In the case of Joe Shuster, although he was able to have a steady job as a comic book artist for a decade, in exchange for relinquishing his big blue and red baby, he later sank into obscurity.  Imagine how different things might have been, had he been willing to haggle just a bit more to retain at least some right of ownership over his very profitable offspring.

Superman comic cover by Joe Shuster (1940)

Superman comic cover by Joe Shuster (1940)

Detroit’s Art Collection: Under the Hammer?

As if Detroit didn’t have enough problems already…

In the latest chapter on the ongoing woes of the Motor City, the entire collection of the Detroit Institute of Arts (“DIA”) is now being targeted by creditors.  You may recall that late last year, Christie’s auction house was retained to value the roughly 1,700 works in the collection which had been purchased using public funds.  They concluded that these pieces were worth somewhere in the range of $454 to $867 million, depending on the often widely-ranging vagaries of the art market.

Not satisfied with that outcome, two different groups of creditors are now going on what we in the legal profession like to refer to as a “fishing expedition”, on the assumption that assets are being hidden.  One rather ridiculous demand is that the DIA give a full accounting of all of its financial and visitor records, going back to the founding of the museum nearly a century ago – which hardly seems germane to the issue at hand.  Another  is insisting that the DIA and Christie’s provide a valuation of the museum’s entire collection of well over 60,000 items, not simply valuing those objects purchased using taxpayer money.  You can read more about the details of these subpoenas, and why things have reached this point by reading this overview from The Detroit Free Press.

From a legal perspective, the attorneys for the creditors are simply doing their job.  There’s nothing at all strange about requesting thousands of pages of documents in a case, particularly when you are dealing with an unprecedented and enormous municipal bankruptcy such as this.  These are uncharted waters for everyone, not just the parties themselves, even though the bankruptcy rules themselves are quite plain.  Attorneys and courts have an obligation to clients and to the public in any bankruptcy proceeding to make sure that no assets are being hidden or left unvalued.

Yet lost in the shuffle here is the very sad fact that should these efforts lead to a massive sell-off of the DIA’s collection, it is the people of Detroit who are going to lose.  If the DIA is dismembered and sold on the open market, no amount of return will really be enough.  To paraphrase Aristotle, the value of an art museum as a whole is far greater than the sum of its parts.

As an institution, an art museum preserves the past artistic achievements of mankind, while serving to educate and inspire those who want to admire and learn from such achievements both at present and in the future.  The study of art is just as much the study of our own history, as it is the appreciation of beauty.  When we go to a museum and look at a painting or a sculpture, we learn not only who made it, but how, when, where, and why it was made.  We all benefit, general public and scholars alike, from the work that they do to remind us of who we are, and where we come from.

It is a pity that so many decades of incompetent management, corruption, and single-party governance have led Detroit to this point, where the haunting eyes of Constanza da Sommaia, one of the elegant Mannerist painter Bronzino’s favorite muses, may be about to disappear into some collector’s Swiss bank vault.

Detail of "Portrait of Constanza da Sommaia" by Agnolo Bronzino (c. 1540) Detroit Institute of Arts

Detail of “Portrait of Constanza da Sommaia” by Agnolo Bronzino (c. 1540)
Detroit Institute of Arts