An investment flash: the rate of return for photographs.

• Author: Pompe, Jeffrey

From today, painting is dead. Paul Delaroche, 1839, upon seeing a daguerreotype for the first time

1. Introduction

   Although the general public has not completely recognized photography as an investment alternative, art collectors are snapping up the work of photographic masters at record prices. In October 1993, a vintage photograph by Alfred Stieglitz, Georgia O'Keeffe: A Portrait -- Hands with Thimble, sold for $398,500 at Christie's International auction house.(1) This bettered the previous record price of $193,895 set in May 1993 by a Man Ray photograph. Even if these prices do not approach the millions of dollars paid in recent years for work of impressionistic painters, these record prices have attracted investors' attention.

   The objective of this study is to examine the investment value of photographic prints. The market for collectible photographs boomed in the 1980s as investors became aware of the value of photographs as an investment, especially as an alternative to the high prices of paintings and sculpture. Although various studies have investigated the investment value of collectibles such as paintings [1; 2; 9; 18; 26], prints [20; 22], coins [6], Stradivarius violins [24], wine [16], and antique furniture [12], there have been no detailed studies of the performance of photographs as financial assets.

   The research completed generally concludes that paintings and prints are a poor long-term investment. Baumol [2] calculated the average annual real rate of return for painting at .55 percent, concluding that art was a "floating crap game," and a poor investment alternative in general. Frey and Pommerehne [9] extended Baumol's study and found an average real rate of return of 1.5 percent. Stein [26] calculated the geometric average real rate of return for paintings sold in the United States and United Kingdom between 1946 and 1968 to be about 8 percent. Pesando [22] estimated a mean real return of 1.51 percent for prints between 1977 and 1992. Mok, et al. [18] find a high yield of 52.9 percent for Chinese paintings from 1980 to 1990, although they conclude that investing in stock market portfolios offer better alternatives.

2. The Market for Photography

   Despite Delaroche's ominous and inaccurate pronouncement on the demise of painting, photography was not immediately accepted as a true art form. Indeed, the debate over whether photography was art continued for many years after Daguerre first made public the photographic process in 1839. It was not until 1859 that photographs first won the right to be exhibited as "art" next to paintings [8, 1]. Peter Henry Emerson in the 1880s and Alfred Stieglitz in the first half of the 20th century persuasively argued that photography was a legitimate art form. The acceptance of photographs as art may have lagged because the technology and chemistry used to create a photograph make the process seem impersonal and mechanical. With modern technology providing numerous ways (e.g., digital imaging) to produce visual images, a work of art is now more accepted for the significance of the final image, rather than the process (e.g., computers) used to achieve the end result. Today, photographs appear in nearly all of the major museums and galleries, and the question as to whether or not photography is a legitimate art form has clearly been answered in the affirmative.

   Although the legitimacy of photography as art has been resolved for some time, it was not until 1975 when major auction houses began to regularly schedule fall and spring photography sales. The development of the photographic art market in the late 1970s was coincident with the growth in the number of photographic exhibitions at influential museums. In the 1979-80 auction year, of the total of $434 million in art sales at the twelve largest auction firms in the United States, slightly over 1 percent of total sales were for photographs, a 100% increase over the previous year [8, 7]. The market for photography boomed in the 1980s, partly as a result of the inflated prices that were being paid for paintings and sculpture.(2) Prices are generally more affordable for photographs, and some works have shown remarkable price gains over recent years. For example, a set of The Native American Indian by Edward Curtis sold for $650 in 1953 was purchased for $662,500 in 1993 [10].

   Although similar to the market for other art objects such as painting and sculpture, photography has characteristics that make it different. Theoretically, unlimited numbers of photographs could be created from a single negative, making the price for any single photograph much less than the price paid for a one-of-a-kind painting.(3) The possibility of unlimited use of a negative to produce numerous prints is of major concern to collectors, since the importance of scarcity is recognized by potential buyers. A Richard Avedon photograph, "Dovima," sold for $19,800 in 1991, partly because the negative had been destroyed [19].

   In addition to the photographer, the printer of a negative can affect the value of the photograph. For example, an Edward Weston negative printed by the photographer is more valuable than the same negative printed by Brett Weston, Edward's son. Less expensive still are posthumous Edward Weston prints done by Cole Weston, another son [4, 16]. In general a photograph is most valuable if the photographer used the original negative and made the print at the time the negative was taken. Other factors that determine the value of a photograph include print quality, importance of the photographer and of a particular photograph within the photographer's work, beauty of composition, physical condition, authenticity...