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The formula for selling a million-dollar work of art

Artwork, specifically paintings, can seem like it should be moderately cheap. How long could it take to screen print some tomato soup cans, right? Many websites I found during my research into art pricing coached new artists to think of time spent on the paintings like any part-time job, counting by the hour. But how do you know if your time is worth $20, $2,000, or even $20,000?

In the book The $12 Million Stuffed Shark, Don Thompson writes:

In a market where information is scarce and not trustworthy, the first rule is the price level signals the reputation of the artist, the status of the dealer, and the status of the intended purchaser. Prices reflect a size of a work, not its quality or artistic merit.

This means the biggest factor in the price of art often isn't quality, or effort – it's branding. Most consumers gladly pay a few more bucks to get a certain brand of shampoo even though it probably has the same formula as the cheaper generic version. But when a new artist steps into the art market, he or she has no reputation – no branding.

That's where art dealers come in. They promote, educate, and help artists to gain fame and success. On top of that, having the backing of an art industry giant like Charles Saatchi or Larry Gagosian boosts your value almost instantaneously.

Watch the video above to learn more about how art pricing really works.