Building community and ensuring NFT success: Insights for artists

The importance of building community cannot be understated in the rapidly changing world of art, driven by technology and the explosion of non-fungible tokens (NFT) in the last two years. An audience is a social media following, but a community is a group of people working toward a common goal.

Art market economist and academic Magnus Resch has done a lot of research on the importance of community and networks for artists.

Resch has a Ph.D. in economics and has studied at the University of St. Gallen, the London School of Economics and Harvard. In addition to lecturing at Yale, he has produced several publications on the economics of the art world. He has appeared in academic journals and major publications such as The Wall Street Journal, The New York Times and Vanity Fair.

Resch recently spoke with Cointelegraph about his latest book, How to Make and Sell NFTs – A Guide for All Artistswhich explores the importance of building meaningful communities for artists, and how to create and sell NFTs compatible with their artwork.

Cointelegraph: Dr. Resch, how important is community building for artists in today’s rapidly changing art world?

Magnus Resch: Community in the art world is important to the success of any artist, but being in the right one is even more important. In one of my recent studies, I looked at thousands of communities in the art world to evaluate their impact on the success of any artist. The results were surprising: 99.9% of artist communities have no positive effect on an artist’s career.

These communities – I call them “island networks” – are made up of museums, galleries, other artists at the same level and fans or supporters. These groups mean well but will never make a real impact at the higher end of the market. Instead, only one network leads to success. For an artist who strives to succeed, the goal must be to become a part of it. I call it “the holy land”.

CT: Can you share some important strategies for artists to successfully break into this one community you call “The Holy Land?”

MRI: My study shows that the art world is a human enterprise. Who you know matters more than what you make. In the absence of objective criteria that define what “good art” is, the network steps in to decide what good art is and what is not. This is why networking is so important.

For artists, this means you don’t spend all your time in the studio. Go out and meet the right people, preferably those who are part of the Holy Land. Or to put it bluntly, artists are on their own and must accept that they are entrepreneurs running a business. Branding, marketing and self-promotion are critical to their success and are more important than their art. Artists who wait to be discovered will fail.

CT: What role do social media and digital platforms play in helping artists connect with audiences and create a sense of community?

MRI: Social media is the most relevant marketing tool for artists. They cannot rely on galleries to do the work, as most galleries are part of island networks and close down after a few years. A third of all galleries never actually make a profit.

It is difficult to enter the Holy Land, as there are only a few places per year available. This is why it is so important for artists to build a brand. The easiest way to do this is through social media: 45% of art buyers consider social media the most important channel for discovering and finding artists. Visits to offline galleries follow only in second place. I contend that any artist serious about making it in the art world needs Instagram.

CT: Has this changed with the rise of NFTs?

MRI: Not at all. NFT projects have allowed artists to learn what it takes to make it without gallery support. We have seen that the most important pillar in any NFT project is the community. Failed projects have misinterpreted the community as an “audience”.

An audience is a following on social media. A community is a close circle, a close-knit and active group of people working towards the same goal. They can gather on social media, but it goes beyond that. Building a community is about building loyal members who support an artist’s idea. I believe in the future where artists will give the community a voice, let them participate in projects and exchange ideas and assets. This is significantly different from today’s audience who only “like” and follow but do not participate.

CT: Can you share some successful examples of traditional art institutions and galleries that have embraced NFTs and the impact it has had on their businesses?

MRI: The biggest winner of the NFT hype was digital artists like Beeple, Justin Aversano and Jen Stark. Digital art never played a major role in the art market, being the least popular medium after paintings, sculptures and photography. And suddenly some of these digital artists who were neglected by the market were making significant money and selling for record prices. However, the real impact of NFTs is yet to come. NFTs will be the underlying technology to authenticate all works of art – and not just digital art. This will fundamentally change how art is traded. Without an NFT to prove the work is genuine, no one will buy the painting.

CT: What are the main implications of NFTs on the art market?

MRI: So far there have been none. We are only at the beginning of what is to come. I predict that NFTs will have a lasting impact, which is fourfold: Artists will exercise more control over their work and earn royalties from resale; more collectors will populate the market as it has become more transparent; institutions will find it easier to engage their local communities, and give them ownership through participation and involvement in governance. And finally, the art market will become more regulated for the better and thus increase in value. Obviously, this will not happen overnight, as changes in the art world take time. We are looking at 5-10 years until NFTs become the standard for how artworks are transacted and authenticated.

CT: Can you discuss some common mistakes artists should avoid when entering the NFT space and how they can set themselves up for long-term success?

MRI: Most artists will never enter the NFT space as NFTs are not art. And the overpriced, celebrity-endorsed JPEGs often associated with NFTs will disappear. I don’t think we’ll even be talking about the term “NFTs” in five years, just like we won’t be talking about mp3s anymore.

NFTs are the underlying technology that will be used when artwork is transacted. In the future, it is not unlikely that the artist will record every painting that leaves a studio on the blockchain. So when it is traded, the artist not only gets the royalties, but also knows who the new owner is. This allows them to work more independently and not rely on galleries to solely promote or authenticate their works. As a consequence, artists will earn more on each piece they sell.

CT: How can collectors effectively determine the value of artwork in today’s dynamic market, especially with the rise of NFTs?

MRI: Most art is not a good investment. Almost all artists are stuck in island networks and will not see value increase. For collectors who are solely interested in making money, they should focus solely on the artists and galleries that make up the population of the Holy Land. But if they are interested in collecting art for a different motive (and consider it a cherry on top if the artist increases in value), the entire art market can be their hunting ground.

CT: Has the price transparency and liquidity facilitated by NFTs changed this?

MRI: Many of those who bought NFTs as an investment failed to make money with them. They have moved on to other investments. And as the hype faded, the true winners were those who bought works that they liked and wanted to live with. Another phenomenon is also visible; we are currently seeing the merging of the traditional art market and a few digital artists who were successful during the NFT hype. Beeple, Dmitri Cherniak, Tyler Hobbs, Casey Reas and Artblocks, who sold exclusively on digital platforms such as OpenSea and addressed a crypto-native audience, have now begun to show their works with established traditional players in the art market, such as Pace Gallery. A representation of Pace Gallery, which is part of the Holy Land, will help them manifest their value even after the hype and their crypto buyers are gone.

CT: If art is not a good investment, why should we buy it?

MRI: After doing a lot of data analysis on the art market, one collecting strategy that has proven to be the most effective is to buy what you like, since you will most likely never make money on the art you buy. I call it “responsible buying”—the notion that buying art is not just an exchange of monetary value, but also an act of philanthropy. Instead of putting money into an asset, I donate it, knowing that in all likelihood I won’t be able to resell the piece. But by buying it, I’m supporting the artist so she can continue to create art, which inspires her community to continue this essential form of human creativity. For me, it’s a way to do good, and it comes with an object I love and a story to tell.