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EVALUATING THE IMPACT OF ANAUSTRALIAN RESALE ROYALTYON ELIGIBLE VISUAL ARTISTSREPORT BYACCESS ECONOMICS PTY LIMITEDFORVISCOPY LTDThis research was made possible with support from CAL's Research & Development Cultural Fund.OCTOBER 2004

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsTABLE OF CONTENTSEXECUTIVE SUMMARY / CONCLUSION 1Conclusions .........................................................................................................................................11. BACKGROUND 42. DESIGN FEATURES OF AN RRR 62.1 Coverage.................................................................................................................................62.1.1 Commercial gallery sales ...............................................................................................62.2 Duration...................................................................................................................................72.3 Rate.........................................................................................................................................72.4 Minimum Threshold.................................................................................................................72.5 Inalienability ............................................................................................................................72.6 Administration .........................................................................................................................73. MODELLING METHODOLOGY 93.1 Art sales data ..........................................................................................................................93.2 Behavioural change and Economic incidence of RRR ...........................................................93.3 Substitutability of art in the secondary market ......................................................................113.3.1 Art as an ‘investment’ good ..........................................................................................113.3.2 Art as a ‘consumption’ good .........................................................................................123.4 Elasticities assumed in the modelling ...................................................................................133.5 Transition period ...................................................................................................................133.6 Avoidance opportunities........................................................................................................144. MODELLING RESULTS 154.1 Option one – 5% rate and no threshold ................................................................................174.1.1 5% rate and no threshold - perfectly elastic demand ...................................................174.1.2 5% rate and no threshold - perfectly inelastic demand ................................................184.1.3 5% rate and no threshold - unitary elasticity ................................................................194.2 Option two– 5% rate and $1,000 threshold...........................................................................204.2.1 5% rate and $1,000 threshold - perfectly elastic demand............................................204.2.2 5% rate and $1,000 threshold - perfectly inelastic demand .........................................214.2.3 5% rate and $1,000 threshold - unitary elasticity .........................................................224.3 Option three – 5% rate and $2,000 threshold.......................................................................234.3.1 5% rate and $2,000 threshold - perfectly elastic demand............................................234.3.2 5% rate and $2,000 threshold - perfectly inelastic demand .........................................244.3.3 5% rate and $2,000 threshold - Unitary elasticity.........................................................254.4 Option four – 5% rate and $3,000 threshold.........................................................................264.4.1 5% rate and $3,000 threshold - perfectly elastic demand............................................264.4.2 5% rate and $3,000 threshold - perfectly inelastic demand .........................................274.4.3 5% rate and $3,000 threshold - unitary elasticity .........................................................284.5 Option five – 5% rate and $4,000 threshold..........................................................................29While every effort has been made to ensure the accuracy of this document, the uncertain nature of economicdata, forecasting and analysis means that Access Economics Pty Limited is unable to make any warranties inrelation to the information contained herein. Access Economics Pty Limited, its employees and agents disclaimliability for any loss or damage which may arise as a consequence of any person relying on the informationcontained in this document.

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.5.1 5% rate and $4,000 threshold - perfectly elastic demand............................................294.5.2 5% rate and $4,000 threshold - perfectly inelastic demand .........................................304.5.3 5% rate and $4,000 threshold - unitary elasticity .........................................................314.6 Option six – 5% rate and $5,000 threshold...........................................................................324.6.1 5% rate and $5,000 threshold - perfectly elastic demand............................................324.6.2 5% rate and $5,000 threshold - perfectly inelastic demand .........................................334.6.3 5% rate and $5,000 threshold - unitary elasticity .........................................................34

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsEXECUTIVE SUMMARY / CONCLUSIONViscopy Ltd (Viscopy) has engaged Access Economics to undertake an independentanalysis attempting to model the impact of a resale royalty right (RRR) on eligible visualartists if such a system were introduced in the Australian market as a copyright payment. Inparticular, the modelling is to present the effects of different RRR rate and threshold options.In July, Access Economics prepared a brief critique of the Australian Government’sDiscussion Paper on this matter. As stated in that report:There is a good case, in principle, for recognising resale royalty rights (RRRs)consistently across all forms of artistic product. Visual artists in Australia and someother countries miss out in this respect at present.The only really credible rationale for RRRs as a separate system is recognition ofcopyright: that is, as a recognition of property rights. This is consistent with thewording of the Berne Convention. The various manifestations of the ‘struggling artist’rationale are not good bases for RRRs – especially in developed economies withextensive and well-established ‘social safety net’ welfare systems. Moreover,operational RRRs perform very poorly against such welfare-based criteria anyway.European practice with RRRs is mixed and, based on EU Directive prescriptions,unnecessarily complex.This report considers the effects of a number of rate and threshold options consistent withwhat we consider to be ‘good’ design principles for a system based on protecting copyright,rather than a system aimed at income support. These include:implementation of an RRR under a fully legislated scheme;a broad definition of visual art and secondary sales, recognising the existence ofcopyright for all visual artists;a minimum threshold, to reduce administration and compliance costs; and a rate of royalty as a flat percentage of the price. There is no rationale for a slidingscale on higher priced artwork, under a rights-based system.Results reported include different assumptions regarding the price elasticity of demand in thesecondary market.In all cases, the key focus is primarily the net impact of an RRR on eligible visual artists.Only if it can be demonstrated that such artists receive more in terms of net income from theintroduction of an RRR scheme, than would otherwise be the case, is the case in principle forsuch a scheme also justifiable in practice.CONCLUSIONSThe impact of an RRR on the Australian art market is difficult to determine because of apaucity of relevant empirical data about relevant behavioural responses to its introduction.While the size and distribution of RRR payments can be estimated, the critical question ofwho bears the actual economic cost of the royalty, and, most importantly whether eligibleartists would be net beneficiaries of such an arrangement is not at all clear.1

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsWhile there is a lack of empirical data of the type necessary to allow concrete conclusions tobe reached, we have sought to illustrate the implications of different assumed marketresponses.There are two key extreme market responses:1. the situation where final purchasers of art are very price-sensitive, greatly reducing theirdemand for art in response to any price increase (such as that associated with an attemptto pass on any RRR in higher prices). This is the extreme scenario sometimes assumedto apply by those arguing that an RRR is impractical and not likely to be of any net benefitto eligible artists;2. the situation where final purchasers of art are very price-insensitive, not changing theirdemand for art in response to any price increase (such as that associated with an attemptto pass on any RRR in higher prices). This is the extreme scenario implicitly assumed toapply in the Department’s Discussion Paper.The modelling results for these extreme cases can be summarised as follows:In the case of perfectly price-sensitive (elastic) final purchaser demand (where none ofthe economic burden of the RRR is borne by the purchaser), in theory a large portion ofthe RRR payment is likely to be offset by reduced income in the primary market,particularly if artists are in a weak bargaining position compared to dealers. In thiscase, and allowing also for the costs of administering any RRR (assumed to be adeduction from gross RRR revenues), it is unlikely that eligible artists will benefit fromintroduction of an RRR.Alternatively, a RRR system is likely to produce a significant net benefit for eligibleartists in the case of perfectly inelastic final purchaser demand (where all of theeconomic burden of the RRR is borne by the purchaser). In this case, even allowingfor reduced gross revenue to finance the cost of administering the RRR, eligible artistswould be likely to receive a net benefit from any RRR.For intermediate scenarios, where there is some price sensitivity of demand on the partof final purchasers, the situation is not clear. However, in such cases (other thingsbeing equal):– the more price sensitive is final demand to art prices; and– the higher the administrative cost of the RRR system as a proportion of grossrevenue collected– the lower the gross RRR benefit to eligible artists, and the higher the chancesthat the net benefits to eligible artists will be small, zero, or even negative.At the end of the day, determining the merits of an RRR requires empirical evidence of theprice-sensitivity of purchaser demand to changes in art prices:It is quite possible that, for established artists in demand, purchasers are relativelyprice-insensitive. If so, such artists might be net beneficiaries of an RRR. In suchcases, this would suggest that artists, especially established artists, are able toexercise a degree of market power.2

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsHowever, for artists not yet established – probably the vast majority – purchaserdemand may be much more price-sensitive. If so, these artists may end up with little orno net benefit from an RRR.The final answer to the question – is an RRR a worthwhile practical proposition? – dependscrucially upon these empirical questions on which more research is needed.Beyond these core empirical questions, a number of practical issues would need to beresolved as well:What transition/grandfathering arrangements would be implemented? These could beextremely controversial if retrospectivity was involved.What can be done to maximise the comprehensiveness on any RRR? If large parts ofthe market are excluded, revenue leakages become a major issue.What can be done to fill international coverage gaps and maximise reciprocalrecognition?While these practical details are important, they are still secondary to quantification of therelevant demand parameters for the reasons set out above.3

The Impact of an Australian Resale Royaltyon Eligible Visual Artists1. BACKGROUNDViscopy Ltd (Viscopy) has engaged Access Economics to undertake an independentanalysis attempting to model the impact of a resale royalty right (RRR) on eligible visualartists if such a system were introduced in the Australian market as a copyright payment. Inparticular, the modelling is to present the effects of different RRR rate and threshold options.The Australian Government recently released a discussion paper regarding RRRs, titledProposed Resale Royalty Arrangement (the Paper). 1In July, Access Economics was engaged by Viscopy to prepare a brief evaluation of theAustralian Government’s Discussion Paper. In our previous report, we commented that:There is a good case, in principle, for recognising resale royalty rights (RRRs)consistently across all forms of artistic product. Visual artists in Australia and someother countries miss out in this respect at present.The only really credible rationale for RRRs as a separate system is recognition ofcopyright: that is, as a recognition of property rights. This is consistent with thewording of the Berne Convention. The various manifestations of the ‘struggling artist’rationale are not good bases for RRRs – especially in developed economies withextensive and well-established ‘social safety net’ welfare systems. Moreover,operational RRRs perform very poorly against such welfare-based criteria anyway.European practice with RRRs is mixed and, based on EU Directive prescriptions,unnecessarily complex.The economic analysis in the Paper is (i) based on selective assumed coverage ofRRRs were they to be applied in Australia, and (ii) based on extremely unrealisticassumptions – in particular the assumption that seller and buyer behaviour would becompletely unaffected by the introduction of RRRs. Access Economics considers thatthe results of this analysis are both unhelpful and, potentially, quite misleading.Of the four RRR options considered in the Paper, should an RRR arrangement beimplemented, the most sensible is the fully legislated scheme which would constitutean extension of the Copyright Act.Rather than comment further on the policy rationale for RRRs in Australia, this report focuseson modelling the impact if RRRs were to be introduced in Australia.This report considers the effects of a number of rate and threshold options consistent withwhat we consider to be ‘good’ design principles for a system based on protecting copyright,rather than a system aimed at income support. These include:implementation of an RRR under a fully legislated scheme;a broad definition of visual art and secondary sales, recognising the existence ofcopyright for all visual artists;1Proposed Resale Royalty Arrangement: Discussion Paper Australian Government, Department of Communications,Information Technology and the Arts, released in July 2004.4

The Impact of an Australian Resale Royaltyon Eligible Visual Artistsa minimum threshold, to reduce administration and compliance costs; anda rate of royalty as a flat percentage of the price. There is no rationale for a slidingscale on higher priced artwork, under a rights-based system.Results reported include different assumptions regarding the price elasticity of demand in thesecondary market.In all cases, the key focus is primarily the net impact of a RRR on eligible visual artists.Only if it can be demonstrated that such artists receive more in terms of net income from theintroduction of an RRR scheme, than would otherwise be the case, is the case in principle forsuch a scheme also justifiable in practice.The remainder of this report is structured as follows:Section 2 outlines the design features of an RRR underpinning the modelling analysis.Section 3 outlines the modelling methodology.Section 4 contains the modelling results, across different rate and threshold options.5

The Impact of an Australian Resale Royaltyon Eligible Visual Artists2. DESIGN FEATURES OF AN RRRIn modelling the impact of a new RRR in Australia, we need to make a number ofassumptions about how such an arrangement would be implemented. Our modellinganalysis is consistent with an RRR as outlined below.2.1 COVERAGEWe have assumed any RRR applies to:all visual art as defined in the Copyright Act 1968, including paintings, sculpture,watercolours, oil paintings, prints and graphics, ceramics and drawings;works sold publicly - our modelling includes works sold at auction and throughcommercial galleries; andAustralian and foreign artworks.2.1.1 COMMERCIAL GALLERY SALESOur modelling is based on three years of auction house data (2003, 2002 and 2001) from theAustralian Art Sales Digest (AASD). Commercial gallery sales were not included in themodelling presented in the Government’s discussion paper: 2Detailed information about commercial gallery sales – such as the balancebetween sales of Australian and non-Australian art or contemporary and noncontemporaryart, or details of individual sales – is not publicly available. For thisreason it has not been possible to include secondary sales from commercialgalleries in analysis and modelling of possible resale royalty schemes.We have not been able to obtain detailed data regarding the price and volume distribution ofvisual art sold in the commercial gallery sector. As noted in the discussion paper, the1999-00 ABS survey of commercial art galleries 3 estimated sales at $218 million, over doublethe value sold at auction.Of this $218 million in total sales, $111 million related to secondary sales ($38 million oncommission and $73 million of works owned by galleries). In 2003 terms, this equates toaround $133 million of secondary sales in the commercial gallery sector. 4Given the lack of price distribution data in the commercial gallery sector, distributional results(such as the percentage payable to the top five artists) in section 4 are reported based on theauction data alone. However, the total level of royalties payable has been grossed up to2Proposed Resale Royalty Arrangement: Discussion Paper Australian Government, Department ofCommunications, Information Technology and the Arts, released in July 2004.3 ABS 8651.0, Commercial Art Galleries, 1999-2000.4 Assuming growth of just over 6% per year, consistent with average growth in the total auction sales between1999-2000 and 2002-03.6

The Impact of an Australian Resale Royaltyon Eligible Visual Artistsinclude $133 million in commercial gallery sales. In the case of modelling specific scenarios,this has also been adjusted for the proportion of works in copyright and value excluded bythe threshold, based on the parameters revealed in the auction data.2.2 DURATIONExisting provisions of the Copyright Act 1968 provide for a copyright term of life plus 50years. However, our modelling is consistent with the provisions of the United States FreeTrade Agreement whereby the RRR would apply for 70 years after death.2.3 RATEOur modelling assumes the RRR applies at a flat rate (5%) on the sale price in thesecondary market. We have not been able to separate out any buyers’ premium or GSTfrom AASD data, so to the extent the AASD data includes these factors (and assuming thatthey are not to be included in the base for the purpose of calculating the RRR ifimplemented) our modelling will tend to overestimate the magnitude of the royalty. 5We have not modelled a (declining) sliding scale royalty. As outlined in our preliminaryreport, a flat rate is consistent with a copyright (rather than a ‘need’ or distributive) rationalefor a RRR, as well as bring simpler to administer.2.4 MINIMUM THRESHOLDVarious minimum thresholds have been modelled, ranging from $0 to $5,000. Specifying aminimum threshold is a trade off between ensuring artists receive their copyright paymentand reducing administration and compliance costs.2.5 INALIENABILITYOur modelling assumes that the property right underlying the RRR is inalienable. That is, theright cannot be waived, sold or transferred to another party.2.6 ADMINISTRATIONWe have assumed that the RRR would be implemented by Commonwealth statute, as a fullylegislated scheme.Consistent with the Australian Government discussion paper, for the purposes of ourmodelling, we have assumed that 18 per cent of the royalty amount is deducted foradministration expenses. 65For more information on sale prices in the AASD database, see the AASD website athttp://www.aasd.com.au/using07.cfm6Proposed Resale Royalty Arrangement: Discussion Paper Australian Government, Department ofCommunications, Information Technology and the Arts, released in July 2004 (page 26).7

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsWe note that administration costs may vary from this amount, depending on how an RRR isimplemented in Australia.8

The Impact of an Australian Resale Royaltyon Eligible Visual Artists3. MODELLING METHODOLOGY3.1 ART SALES DATAOur analysis is based on three years of auction house data (2003, 2002 and 2001) from theAustralian Art Sales Digest (AASD).These 3 years have been used to derive a ‘composite’ dataset, to analyse the full year effectof an RRR.3.2 BEHAVIOURAL CHANGE AND ECONOMIC INCIDENCE OFRRRContrary to the assumption in the Government’s Discussion Paper, the imposition of an RRRin Australia could be expected to have an impact on behaviour in the Australian art market.This covers responses by visual artists, dealers and art buyers.It is beyond the scope of this report to provide a comprehensive analysis of the efficiency andwelfare implications of the introduction of an RRR. However, it is necessary to present someeconomic background to inform the assumptions underlying our modelling.In particular, ‘who pays’ for the RRR will depend on the difference between the legal andactual economic incidence of the royalty. Legal incidence refers to which party has a formal,legal liability to remit the payment. Economic incidence refers to which party, given supplyand demand conditions, actually bears the cost of the RRR as reflected in changes to pricesand/or quantities in the market.For example, under the GST legislation, GST-registered ‘suppliers’ or sellers have a legalliability to remit 1/11 th of the price of GST-liable products sold to the Australian TaxationOffice. However, in reality the economic cost of the GST may be borne by the supplier, bythose supplying inputs to the supplier, or the purchaser of the product concerned. In fact,despite the legal incidence, value added taxes such as GST are designed to fall onconsumers, as a tax on the value of ‘private final consumption’. That is, they are intended tobe shifted forward to the final purchaser.In simple terms, there are 3 main players in the art market who may bear a proportion of theeconomic cost of the RRR – the artists, ‘dealers’ 7 (who may buy in the primary market andsell in the secondary market, or sell on commission) or purchasers (who buy in thesecondary market).The legal incidence of RRR is assumed, under the enabling legislation, to rest with thedealer. At the point the artwork is sold on the secondary market to the purchaser, the dealerhas a legal liability to remit a certain percentage of the price to the collection agency, fordistribution to the relevant artist.7 Such as the auction house or commercial gallery.9

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsHowever, in theory, and in practice the economic incidence of an RRR may be borne by thedealer, purchaser, or artist, or a combination of any two or all three of these parties.In the long term, the actual burden or incidence depends upon the difference between theelasticity (or price responsiveness) of demand of purchasers in the secondary market, andthe elasticity of supply of artists in the primary market. Depending on the relevantelasticities, the economic incidence may be passed ‘back’ to the artist (reflected in a lowerprice and/or quantity of art in the primary market) or ‘forward’ to the purchaser (reflected in ahigher price and/or lower quantity in the secondary market).The ultimate purchaser of art is less likely to bear the economic incidence if they are highlysensitive to price changes (their demand is price ‘elastic’). In this case, the cost would beborne most, or entirely, by the dealer and/or artist. Alternatively, if purchasers are notsensitive to price changes (their demand is price-inelastic) the cost is more likely to bepassed forward and borne by the purchaser.It is primarily in this latter case – where final art buyers are almost completely priceinsensitive– that any RRR is likely to produce something like the intended outcome:increase net income received by the eligible artists.Ultimately, the values of the relevant elasticities is an empirical question.Unfortunately, given the paucity of empirical studies on demand for art, and in particulardemand for the types of artworks included in any feasible RRR regime, as concluded by theMyers review:On balance, it can probably be concluded that, ‘given the state of the empiricalevidence in hand, intelligent, well meaning persons, equally well informed abouteconomic theory, may well disagree about the efficiency of artists’ resale rights’Other analyses can be found that choose between possible extreme elasticity values, withoutadducing hard empirical evidence to support the choices made.For example, although the Australian Government discussion paper makes reference to thepotential impacts on the Australian art market, the modelling in the paper implicitly makes theextreme assumption that final buyer demand for art is perfectly inelastic (or perfectlyinsensitive to price movements). For example with a 5% RRR, a painting worth $100 willsimply rise in price to $105, with the purchaser paying the new higher price. This suggeststhat the full economic incidence of the RRR is borne by the purchaser.This assumption is a ‘best case’ scenario if any RRR is to be a practical scheme – that is,one the increases visual artists’ net income.By concentrating, instead, on the extent to which the RRR is borne by the dealer or artist,some economic commentators 8 make the simplifying assumption (and assertion) that theRRR is not borne at all by the purchaser. This is another limiting and (opposite) assumption,which implies demand for art is perfectly elastic.8 For example, Kirstein, R., and Schmidtchen, D. (2000), Do Artists Benefit from Resale Royalties? An EconomicAnalysis of a New EU Directive Center for the Study of Law and Economics, Universitat des Saarlandes.10

The Impact of an Australian Resale Royaltyon Eligible Visual Artists3.3 SUBSTITUTABILITY OF ART IN THE SECONDARY MARKETOur focus is on behaviour in the secondary market, as price or quantity changes in thismarket will impact on our estimates of RRR revenue. The actual elasticity of demand in thesecondary market probably lies somewhere between the extremes presented above. (Notehowever, that this is also a simplifying and potentially unrealistic assumption. In a rational artmarket, primary purchase prices will be affected by buyer awareness of likely effects of anyRRR in the secondary market.)Whether the demand of the final purchaser is sensitive to price movements depends in parton the degree to which art is a substitutable product (see subsections 3.3.1 and 3.3.2 below).In this context, the limiting assumptions above can be characterised by two opposing viewsof secondary sales of art.3.3.1 ART AS AN ‘INVESTMENT’ GOODThe first views art as a highly substitutable investment good – it is simply an investmentasset, with a particular risk profile. As such, given the availability of other financial assets(such as bonds, equities or real estate), purchasers are highly sensitive to price changes(price elastic) because these affect expected rates of return on the investment.As such, any price increase associated with the introduction of an RRR is likely to reduce thedemand for artwork as the expected rate of return has declined relative to holding otherfinancial assets. In this scenario, the RRR-inclusive price to purchasers will remain largelyunchanged, with the cost of the RRR borne by the dealer, or, if it is able to be passed back tothe primary market, the eligible artist. The argument that the purchaser does not bear theincidence of the tax relies on a high own-price elasticity of demand, as if art were acommodity product with a wide range of substitutes.There are a number of factors which might support the contention that art is largely an‘investment good’ with a range of substitutes, implying that demand for art is relatively (ownprice)elastic:The art market is becoming ‘deeper’ – increasingly art is traded globally with goodmarket information available to rationally assess relative financial risks and returns.A particular piece of art is able to be substituted with art by the same artist, works byother artists, (including, possibly art where no RRR applies) or, more broadly, otherinvestment goods.Art may be regarded as a discretionary or ‘luxury’ purchase, and therefore thepurchaser is likely to be sensitive to price movements.Professional investors may hold a portfolio of assets which includes artworks in orderto diversify risk. Such investors are sensitive to relative rates of return, for a given riskprofile.3.3.1.1 IMPACT ON THE PRIMARY MARKETSimilarly, there is a range of rationales often put forward to suggest that, if not borne by thepurchaser, the incidence of the RRR will be passed back to artists in the form of lower pricesand/or quantities in the primary market (that is, the supply of art is relatively inelastic orunresponsive to price changes). In this sense, the artist receives a lower price in the primary11

The Impact of an Australian Resale Royaltyon Eligible Visual Artistsmarket, but receives the value of any RRR in the future. Arguments that the RRR will bepassed back to the artist include:compared to dealers who tend to be richer and hold a diversified portfolio of art, artistsare relatively risk averse or less able to diversify risk;they have high discount rates (value money now in preference to money later) relatedto their inability to access capital markets (or borrow against expected future incomes);there is an oversupply of art, and generally artists are not in a good bargaining positioncompared to dealers.It should be noted that, to the extent artists bear the economic incidence of a RRR throughlower prices or demand in the primary market, it will tend to partially, wholly, or more thanfully offset the benefit of receiving a RRR payment. For example, it may simply result in thesubstitution of certain income now, for an uncertain claim on future income, contingent on thework being resold.3.3.2 ART AS A ‘CONSUMPTION’ GOODThe second view is that, while art is an investment, it is primarily purchased for its aestheticvalue. It is not a homogenous investment good, but rather a highly differentiated goodprimarily or substantially purchased for aesthetic or other values beyond financial return.In this scenario, the price to purchasers in the secondary market will tend to rise with theintroduction of the RRR, with a substantial part of the economic cost of the RRR borne by thepurchaser in the secondary market. A number of factors might support the contention thatart is largely a ‘consumption good’ without a good range of specific substitutes, implying thatdemand for art is relatively inelastic:Many purchasers of art in the secondary market are ‘collectors’. They wish to expandtheir collection by including a particular artwork, or work by a particular artist, school, ortype. As well as individuals, public galleries will be attempting to complement orexpand their existing collection, by purchasing particular artworks, not simply artworksof a particular value or risk profile.Art in the secondary market tends to be ‘better quality’, created by artists with anestablished reputation. This suggests artists selling work into the secondary markethave a degree of market power. Especially when considered in value terms, mostroyalty payments apply to artworks by artists that are relatively well regarded. Thiswould tend to suggest it has few if any substitutes.Compared to financial assets such as equities, art is indivisible and illiquid, withrelatively large transaction costs. This may reduce the degree of substitution betweenfinancial assets and art as an investment good.As well as financial factors, the ‘value’ of art is highly subjective and may be related toartist’s reputation, or the work’s size, colour, content or style. Demand is influenced byunpredictable changes in tastes, fashion, desire for status or prestige, and othersubjective considerations.As described above, it is often assumed that there is an oversupply of art, and that artists donot possess substantial market power. However, while this may be more accurate for theprimary art market as a whole, it may not be equally true for the type of art subject to RRR,sold in the secondary market. As suggested by Throsby, the art market can be more12

The Impact of an Australian Resale Royaltyon Eligible Visual Artistsaccurately described as a series of sub-markets, with many artists and dealers in a highlydecentralised primary market, and a more concentrated secondary market. 9Market structure varies between these levels. At the lowest level, competition iswidespread. Universally there are more artists and would-be artists than thereare buyers interested in acquiring their work, so prices are low…the secondarymarket is considerably more concentrated on both buying and selling sides. Onlya relatively small proportion of artists make the transition from the primarymarket, so that in any one center there is only a restricted number of artistsrepresented in the market at any one time. Given the resources required to enterthe market on the buying side and the somewhat arcane nature of the product,the number of buyers, both individual and institutional, is similarly constrained.Considerable market power can be exercised by the galleries and dealers whohandle most of the sales in this market…over time, galleries and dealers whohandle the most successful artists and buyers from other allegiances to theirstable; such key players in the market can exert a powerful influence on the riseand fall of artists’ reputations, and hence on the future price expectations for theirwork.The existence of market power in the secondary market suggests that demand for art sold inthe secondary market may be relatively inelastic compared with the average product sold onthe primary market.3.4 ELASTICITIES ASSUMED IN THE MODELLINGIdeally, we would like to know with certainty the value of these demand elasticities to informour modelling.However, as previously indicated there is a paucity of empirical evidence about own-priceelasticities of demand (and supply) for art beyond conjecture of the sort presented above.Given this uncertainty and the range of qualitative views as to what the elasticities are, wehave presented results assuming both the cases of:perfectly elastic final purchaser demand, where the economic incidence of the RRRwould be borne by the dealer or artist;perfectly inelastic final purchaser demand, where the full economic incidence of theRRR would be borne by the purchaser; andunitary final purchaser demand elasticity (a one per cent increase in price results in aone per cent decrease in demand). In this case, the economic incidence is sharedbetween the purchaser, and the dealer and/or artist combined.3.5 TRANSITION PERIODWhen an RRR is introduced, an implementation issue is the extent to which any transitionperiod or ‘grandfathering’ occurs. There are precedents for grandfathering assets (such as9 Throsby, D., (1994) The Production and Consumption of the arts: A view of Cultural Economics, Journal ofEconomic Literature, Vol. 32, No. 1 (Mar 1994), 1-29.13

The Impact of an Australian Resale Royaltyon Eligible Visual Artiststhe capital gains tax exemption on assets purchased before 1985). However, there are otherexamples (such as the GST) where there was only limited grandfathering.We note that, to the extent the RRR is not known (or ‘anticipated’) at the time of the primarysale, and applies to stock that has already passed through a primary sale (and been paidfor), the economic incidence of the RRR on these existing works will be borne by either thedealer or purchaser (and not the artist) – unless the introduction of the RRR prevents thesale of the product (in which case the artist might still have to lower the RRR-inclusive priceand therefore accept some of the burden). This could be regarded as delivering on thepolicy intention to the extent there is no prospect of the cost being directly ‘passed back’ tothe artist concerned. Similarly, if grandfathering of existing stocks were implemented, allholders would receive a windfall gain, to the extent the price of these artworks rises in linewith those artworks subsequently subject to the RRR.Consistent with the Australian Government modelling, we have assumed that the RRRapplies to the full stock of artworks, based on the annual AASD data.We note, however, potential objections to which such draconian retrospectivity would giverise. It would be akin to applying capital gains tax to all pre-September 1985 assetacquisitions. This constitutes a major practical blockage for implementing any RRR on thisbasis.3.6 AVOIDANCE OPPORTUNITIESParticularly at high rates of royalty, or for artworks of particularly high value, there may be anincentive to ‘forum shop’ (and, if the artists themselves are so minded, ‘forum supply’) toavoid payment of the RRR. The potential for avoidance within Australia will be reduced if theRRR is applied comprehensively to all public sales (auction houses and commercialgalleries). Even then, there will be an increased incentive to deal via private sales.A relatively low royalty rate reduces the incentive to conduct sales in another jurisdiction,which may come at an additional cost. Similarly, the existence of RRR systems in Europeand other comparable jurisdictions decreases avenues for avoidance. But only if the sameRRR system applied throughout the world, with full reciprocal recognition arrangements, willthis problem be completely eliminated.For the purposes of our modelling we have assumed that an RRR system can beappropriately policed to prevent large scale avoidance. This would include ensuring thatthere are adequate record keeping, auditing and reporting requirements in place.We make this as an assumption. We do not know whether it is a realistic assumption.As with almost any system of this kind, there is likely to be some avoidance. To the extentthere is avoidance activity, our results will be an overestimate of likely net benefits to eligiblevisual artists.14

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4. MODELLING RESULTSModelling results are presented below, based on a five per cent royalty rate and differentminimum thresholds. Results are also reported for different assumptions regarding the priceelasticity of demand for art in the secondary market. The three scenarios shown areperfectly inelastic (where the economic incidence of the royalty is fully passed forwardto the purchaser);perfectly elastic (where none of the economic incidence of the royalty is passedforward to the purchaser); andunitary elasticity (where the economic incidence of the royalty is shared between theartist and purchaser).Distributional analysis is based on AASD auction data only for 2003, 2002 and 2001. Acomposite dataset has been calculated using data from these three years. As such, thedistributional analysis reflects artists production over the whole three year period. Similarlyartist numbers are over the three year period. The total number of artists is estimated ataround 4,885 over this period, of which around 2,372 receive royalty revenue with nominimum threshold. All monetary values are in 2003 dollar terms.The AASD database contains a number of unknown artists and artists for which the date ofbirth and/or death are not known. As such, it is not clear in these cases whether they wouldbe covered by the copyright term. Such artists and their artwork have not been included inthe royalty base. Works by these artists tend to be of lower value, accounting for around 2.5per cent of the total value of sales. In addition:‘Total sales’ refers to the total annual value of visual art sales in auction houses, andgrossed up for the estimated value of commercial gallery sales.‘% of Sales Captured’ refers to the value of total sales included in the royalty base,divided by the value of total sales. Artists not within the copyright period, unknownartists, and artists where the death date is not known are also excluded.Consistent with the results reported in the Government’s discussion paper, ‘TotalRoyalties Collected’ are net of an assumed 18% administration cost, which is alsoreported separately .Distributions are shown for the market overall, as well as for artists receiving RRRs.‘Net benefit’ makes the simplifying assumption that in the longer term dealers are pureintermediaries, with the economic incidence borne by the final purchaser or artist. Werecognise that the actual impact on the market is more complex than this, as discussedpreviously, relating to the power relationship between artists and dealers. However,timing issues aside, it is useful to illustrate the fact that, in some cases, there is likely tobe an impact on artists’ income in the primary as well as secondary market.Given the relatively low royalty rate, the different elasticity assumptions do not producesignificantly different levels of total royalty payments collected. However the ‘net benefit’result varies, based on our simplifying assumption that either the purchaser or the artist(rather than the dealer) bears the economic incidence.15

The Impact of an Australian Resale Royaltyon Eligible Visual ArtistsIn the case of perfectly elastic demand (where none of the economic incidence is borne bythe purchaser), in the longer term a large portion of the RRR payment is likely to be offset byreduced income in the primary market, particularly where artists are in a weak bargainingposition compared to dealers as discussed in section 3.3.1.Alternatively, an RRR system is likely to produce a large net benefit for eligible artists in thecase of perfectly inelastic demand (where all of the economic incidence is borne by thepurchaser). This would reflect a degree of market power, especially among establishedartists , as discussed in section 3.3.2.In the case of unitary elasticity under our assumptions, there is some price sensitivity ofdemand on the part of final purchasers. Artists are not net beneficiaries in this case as therevenue loss from the quantity reduction in the secondary market, the partial reduction inincome in the primary market, and administration costs more than offset the value of theroyalty payments they receive.More generally, in such intermediate cases (other things being equal):the more price sensitive is final demand to art prices; andthe higher the administrative cost of the RRR system as a proportion of gross revenuecollectedthen the lower the gross RRR benefit to eligible artists, and the higher the chances thatthe net benefits to eligible artists will be small, zero, or even negative.The reverse also holds – the less sensitive is final demand to art prices and the loweradministration costs, then the higher the gross RRR benefit to eligible artists, and the higherthe chances that the net benefits to eligible artists will be positive or large.16

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.1 OPTION ONE – 5% RATE AND NO THRESHOLD4.1.1 5% RATE AND NO THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 90%Total Value of Work Sold ($m) $191.72Total Royalties Collected ($m) $7.86Administration ($m) $1.54Net benefit ($m) -$1.54DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 2372Top 5 Artists 27.60%Top 5-10 Artists 14.20%Other Artists 58.20%Average royalty $3,875Distribution of Royalty Income - Composite Year58.2%6.9%6.8%6.0%4.2%3.9%14.2%RoyaltiesCollected:$9,190,517Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:2,36217

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.1.2 5% RATE AND NO THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $222.68% of Sales Captured 91%Total Value of Work Sold ($m) $202.18Total Royalties Collected $8.29Administration ($m) $1.62Net benefit ($m) $8.29DistributionTop 5 Artists 25.10%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 2372Top 5 Artists 27.60%Top 5-10 Artists 14.20%Other Artists 58.20%Average royalty $4,079Distribution of Royalty Income - Composite Year58.2%6.9%6.8%6.0%4.2%3.9%14.2%RoyaltiesCollected:$9,674,229Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:2,36218

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.1.3 5% RATE AND NO THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.53% of Sales Captured 90%Total Value of Work Sold ($m) $191.87Total Royalties Collected $7.87Administration ($m) $1.54Net benefit ($m) -$1.81DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 2372Top 5 Artists 27.60%Top 5-10 Artists 14.20%Other Artists 58.20%Average royalty $3,872Distribution of Royalty Income - Composite Year58.2%6.9%6.8%6.0%4.2%3.9%14.2%RoyaltiesCollected:$9,184,475Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:2,36219

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.2 OPTION TWO– 5% RATE AND $1,000 THRESHOLD4.2.1 5% RATE AND $1,000 THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 89%Total Value of Work Sold ($m) $189.31Total Royalties Collected $7.76Administration ($m) $1.52Net benefit ($m) -$1.52DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 1546Top 5 Artists 27.90%Top 5-10 Artists 14.40%Other Artists 57.70%Average royalty $5,857Distribution of Royalty Income - Composite Year57.7%6.9%6.9%6.0%4.2%3.9%14.4%RoyaltiesCollected:$9,054,171Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,53620

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.2.2 5% RATE AND $1,000 THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $222.55% of Sales Captured 90%Total Value of Work Sold ($m) $199.40Total Royalties Collected $8.18Administration ($m) $1.60Net benefit ($m) $8.18DistributionTop 5 Artists 25.10%Top 5-10 Artists 12.90%Other Artists 62.00%Distribution of Net Royalty RevenueNumber of Artists 1571Top 5 Artists 27.90%Top 5-10 Artists 14.40%Other Artists 57.70%Average royalty $6,073Distribution of Royalty Income - Composite Year57.7%6.9%6.9%6.0%4.2%3.9%14.4%RoyaltiesCollected:$9,541,288Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,56121

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.2.3 5% RATE AND $1,000 THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.46% of Sales Captured 89%Total Value of Work Sold ($m) $189.10Total Royalties Collected ($m) $7.75Administration ($m) $1.51Net benefit ($m) -$1.79DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 1553Top 5 Artists 27.90%Top 5-10 Artists 14.40%Other Artists 57.70%Average royalty $5,829Distribution of Royalty Income - Composite Year57.7%6.9%6.9%6.0%4.2%3.9%14.4%RoyaltiesCollected:$9,051,737Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,54322

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.3 OPTION THREE – 5% RATE AND $2,000 THRESHOLD4.3.1 5% RATE AND $2,000 THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 87%Total Value of Work Sold ($m) $185.27Total Royalties Collected $7.60Administration ($m) $1.48Net benefit ($m) -$1.48DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 1232Top 5 Artists 28.20%Top 5-10 Artists 14.60%Other Artists 57.20%Average royalty $7,205Distribution of Royalty Income - Composite Year57.2%7.0%7.0%6.1%4.2%3.9%14.6%RoyaltiesCollected:$8,877,146Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,22223

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.3.2 5% RATE AND $2,000 THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $222.37% of Sales Captured 88%Total Value of Work Sold ($m) $195.68Total Royalties Collected ($m) $8.02Administration ($m) $1.57Net benefit ($m) $8.02DistributionTop 5 Artists 25.10%Top 5-10 Artists 12.90%Other Artists 62.00%Distribution of Net Royalty RevenueNumber of Artists 1258Top 5 Artists 28.20%Top 5-10 Artists 14.60%Other Artists 57.20%Average royalty $7,443Distribution of Royalty Income - Composite Year57.2%7.0%7.0%6.1%4.2%3.9%14.6%RoyaltiesCollected:$9,363,437Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,24824

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.3.3 5% RATE AND $2,000 THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.37% of Sales Captured 88%Total Value of Work Sold ($m) $185.50Total Royalties Collected ($m) $7.61Administration ($m) $1.49Net benefit ($m) -$1.75DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 1242Top 5 Artists 28.20%Top 5-10 Artists 14.60%Other Artists 57.20%Average royalty $7,149Distribution of Royalty Income - Composite Year57.2%7.0%7.0%6.1%4.2%3.9%14.6%RoyaltiesCollected:$8,879,249Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,23225

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.4 OPTION FOUR – 5% RATE AND $3,000 THRESHOLD4.4.1 5% RATE AND $3,000 THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 86%Total Value of Work Sold ($m) $182.58Total Royalties Collected ($m) $7.49Administration ($m) $1.46Net benefit ($m) -$1.46DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 1029Top 5 Artists 28.50%Top 5-10 Artists 14.80%Other Artists 56.70%Average royalty $8,461Distribution of Royalty Income - Composite Year56.7%7.1%7.1%6.1%4.2%4.0%14.8%RoyaltiesCollected:$8,706,518Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,01926

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.4.2 5% RATE AND $3,000 THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $222.19% of Sales Captured 86%Total Value of Work Sold ($m) $192.02Total Royalties Collected ($m) $7.87Administration ($m) $1.54Net benefit ($m) $7.87DistributionTop 5 Artists 25.10%Top 5-10 Artists 12.90%Other Artists 62.00%Distribution of Net Royalty RevenueNumber of Artists 1051Top 5 Artists 28.50%Top 5-10 Artists 14.80%Other Artists 56.70%Average royalty $8,742Distribution of Royalty Income - Composite Year56.7%7.1%7.1%6.1%4.2%4.0%14.8%RoyaltiesCollected:$9,188,324Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,04127

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.4.3 5% RATE AND $3,000 THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.28% of Sales Captured 86%Total Value of Work Sold ($m) $181.99Total Royalties Collected ($m) $7.46Administration ($m) $1.46Net benefit ($m) -$1.71DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 1039Top 5 Artists 28.50%Top 5-10 Artists 14.80%Other Artists 56.70%Average royalty $8,384Distribution of Royalty Income - Composite Year56.7%7.1%7.1%6.1%4.2%4.0%14.8%RoyaltiesCollected:$8,711,453Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:1,02928

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.5 OPTION FIVE – 5% RATE AND $4,000 THRESHOLD4.5.1 5% RATE AND $4,000 THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 84%Total Value of Work Sold ($m) $178.41Total Royalties Collected ($m) $7.31Administration ($m) $1.43Net benefit ($m) -$1.43DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 869Top 5 Artists 28.80%Top 5-10 Artists 15.10%Other Artists 56.10%Average royalty $9,796Distribution of Royalty Income - Composite Year7.3%56.1%7.3%6.2%4.2%3.9%15.1%RoyaltiesCollected:$8,512,446Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:85929

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.5.2 5% RATE AND $4,000 THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $221.98% of Sales Captured 85%Total Value of Work Sold ($m) $187.84Total Royalties Collected ($m) $7.70Administration ($m) $1.50Net benefit ($m) $7.70DistributionTop 5 Artists 25.10%Top 5-10 Artists 12.90%Other Artists 61.90%Distribution of Net Royalty RevenueNumber of Artists 891Top 5 Artists 28.80%Top 5-10 Artists 15.10%Other Artists 56.10%Average royalty $10,088Distribution of Royalty Income - Composite Year7.3%56.1%7.2%6.2%4.2%3.9%15.1%RoyaltiesCollected:$8,988,091Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:88130

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.5.3 5% RATE AND $4,000 THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.18% of Sales Captured 84%Total Value of Work Sold ($m) $178.01Total Royalties Collected ($m) $7.30Administration ($m) $1.43Net benefit ($m) -$1.67DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 882Top 5 Artists 28.80%Top 5-10 Artists 15.10%Other Artists 56.10%Average royalty $9,661Distribution of Royalty Income - Composite Year7.3%56.1%7.2%6.2%4.2%3.9%15.1%RoyaltiesCollected:$8,520,917Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther ArtistsTotal Number ofOther Artists:87231

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.6 OPTION SIX – 5% RATE AND $5,000 THRESHOLD4.6.1 5% RATE AND $5,000 THRESHOLD - PERFECTLY ELASTIC DEMANDAggregatesTotal Sales ($m) $212.78% of Sales Captured 82%Total Value of Work Sold ($m) $174.24Total Royalties Collected ($m) $7.14Administration ($m) $1.40Net benefit ($m) -$1.40DistributionTop 5 Artists 24.90%Top 5-10 Artists 12.80%Other Artists 62.20%Distribution of Net Royalty RevenueNumber of Artists 756Top 5 Artists 29.20%Top 5-10 Artists 15.30%Other Artists 55.40%Average royalty $11,004Distribution of Royalty Income - Composite Year7.4%7.4%RoyaltiesCollected:$8,319,30555.4%6.2%4.2%4.0%Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther Artists15.3%Total Number ofOther Artists:74632

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.6.2 5% RATE AND $5,000 THRESHOLD - PERFECTLY INELASTIC DEMANDAggregatesTotal Sales ($m) $221.80% of Sales Captured 83%Total Value of Work Sold ($m) $184.18Total Royalties Collected ($m) $7.55Administration ($m) $1.48Net benefit ($m) $7.55DistributionTop 5 Artists 25.20%Top 5-10 Artists 12.90%Other Artists 61.90%Distribution of Net Royalty RevenueNumber of Artists 792Top 5 Artists 29.10%Top 5-10 Artists 15.30%Other Artists 55.60%Average royalty $11,128Distribution of Royalty Income - Composite Year7.4%7.3%RoyaltiesCollected:$8,813,14955.6%6.2%4.2%4.0%Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther Artists15.3%Total Number ofOther Artists:78233

The Impact of an Australian Resale Royaltyon Eligible Visual Artists4.6.3 5% RATE AND $5,000 THRESHOLD - UNITARY ELASTICITYAggregatesTotal Sales ($m) $217.09% of Sales Captured 82%Total Value of Work Sold ($m) $174.33Total Royalties Collected ($m) $7.15Administration ($m) $1.40Net benefit ($m) -$1.63DistributionTop 5 Artists 25.00%Top 5-10 Artists 12.90%Other Artists 62.10%Distribution of Net Royalty RevenueNumber of Artists 781Top 5 Artists 29.20%Top 5-10 Artists 15.30%Other Artists 55.50%Average royalty $10,684Distribution of Royalty Income - Composite Year7.4%7.4%RoyaltiesCollected:$8,344,30455.5%6.2%4.2%4.0%Arthur Merric Bloomfield BoydBrett WhiteleySidney Robert NolanCharles BlackmanNorman Alfred Williams LindsayTop 5-10 ArtistsOther Artists15.3%Total Number ofOther Artists:77134