evaluating the impact of an australian resale ... - Office for the Arts

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