From chandelier bidding to money laundering to the idea that “only a small share of artists are allowed to succeed,” this video will seemto anyone who is involved in the art market to get just about everything hilariously wrong in a defensive, resentful way. But then you look at a series like this and wonder if the art market isn’t a little in love with the idea of its own supposed bad behavior.
Bonhams held a $2.27m sale of California and Western art on August 1st which followed the annual Coeur d’Alene Auction which made $16.08m in sales when 95% of the 323 lots found buyers. The top lot in Idaho was William Leigh’s A Close Call which sold for $1.15m.
Other top lots were works by Carl Rungius, Thomas Moran, Charles M. Russell and Howard Terpning.
Bonhams led with a $223k painting of the Jungfrau in Switzerland by Edgar Payne.
A few weeks ago, we were all fixated on Christie’s release of its category breakdown for the first half of 2017. Sotheby’s included their own auction breakdown in their quarterly earnings. Currency fluctuations pulled back the sales total by $97m leaving the total 2% off the previous years auction totals.
Old Master, British paintings, Asian art, Jewelry, Wine, Watches, and other categories all saw drops for $241.8m from 2016. Those were offset by the $298m rise in Impressionist, Modern and Contemporary art.
During Sotheby’s earnings call late last week the firm commented twice on the state of the art market. It’s worth highlighting these two comments, which reinforce each other, because they seem relevant in a number of ways to both understanding what happened in the first half of 2017 and what might happen later this year and beyond.
In his prepared remarks, Sotheby’s CEO, Tad Smith had this to say about the overall market:
The things we sell fall largely into two groups:
- The first group is masterpieces that are fresh to the market and are in excellent condition. Demand for works in this first group is robust and pieces sell at very high – some would say “eye-popping” prices. However, that is only a small part of the market story.
- If a piece we sell is not fresh, not the best example of an artist’s oeuvre, or not the most desirable artist, then demand for the piece is quite discerning and the price will need to be realistic in order for it to sell. In other words, the market for fine objects is healthy and efficient but neither frothy nor depressed.
- One consequence is that we are working hard to get prospective consignors either to part with their masterpieces we described in group one or to realize that their favorite work of art is really in group two and they need to be realistic about price expectations for it to sell.
Later in the call, Smith passed off a question from an analyst about the market to Amy Cappellazzo who re-stated Smith’s position in her own way:
I would say we’re seeing the market step-up for what it’s very excited for and wants. It doesn’t feel any sort of positive hesitation about where it should land—if the quality of the object is very, very high. As Tad said earlier in his comments if the object is just a notch below that top quality, we’re seeing a more predictable outcome in value.
So, things have a greater known value and a less unknown value if the object is sort of ordinary, or just one of these or one of those. But quality continues to drive our market at the high end and that’s where we see the most participation and the most percentage increase and the most excited buyers.
Late last week, two journalists who cover the art market enthusiastically retweeted Lee Rosenbaum’s exposé on the slow payment by the buyer of Sotheby’s massive pink diamond that was sold twice in Asia, once in 2013 and again, after the original bidder backed out of the deal, in 2017.
Although it is understandable that after an embarrassing turn of events for the auction house, which guaranteed the stone for the 2013 sale and then brought in financial partners to reduce the balance sheet load until the diamond could be sold again four years later, Rosenbaum might want to look closely at the sale. After all, the buyer seems to be having trouble paying just like the one before.
Here’s how Rosenbaum tells it:
The specific time limit to “collect the money from the [April] buyer” is disclosed in Sotheby’s latest Form 10-Q quarterly report, filed yesterday with the SEC: It reveals that “the purchaser of the Pink Diamond, who is one of the largest jewelry retailers in the world [identified in the sale’s press release as Chow Tai Fook], is legally obligated to pay the purchase price by no later than Apr. 4, 2018.” The previous quarter’s 10-Q, dated May 10, did not mention the possibility of a year-long payment delay.
The key words in Rosenbaum’s own report are “legally obligated to pay.” In other words, there’s always a chance that Sotheby’s will have to go to court to try to obtain the payment but it is more likely than not that Chow Tai Fook will pay for the stone. They’ve agreed to do it. That’s a far cry from what happened in 2013.Continue Reading
Sotheby’s reported earnings this morning that show flat revenue despite an increase in auction and private sales. The culprit seems to be incentive compensation costs which were paid this year when they were not last year in a belt-tightening situation.
For the three months ended June 30, 2017, Sotheby’s reported net income of $76.9 million, representing av$12.1 million (14%) decrease when compared to the same period in the prior year, as a higher level of Agency commissions and fees and a lower effective income tax rate are more than offset by a higher level of indirect expenses. Although second quarter net income decreased by 14%, diluted earnings per share decreased by only 6%, from $1.52 to $1.43, due to a lower number of common stock shares outstanding as a result of our share repurchase program. Total revenues for the second quarter of 2017 are up 5% from $298.7 million to $314.9 million, largely due to increased inventory sales from the prior period.
For the six months ended June 30, 2017, Sotheby’s reported net income of $65.6 million, or $1.21 per diluted share, representing a $2.5 million (4%) or $0.18 per diluted share (17%) improvement when compared to the same period in the prior year. After excluding certain charges in the current and prior periods, Adjusted Net Income* decreased $2.8 million (4%), from $68.9 million to $66.1 million, as a $21.5 million (6%) increase in Agency commissions and fees was offset by a higher level of indirect expenses and a $3.4 million (11%) decrease in revenues from Sotheby’s Financial Services, our art financing company. Despite this decrease in Adjusted Net Income*, Adjusted Diluted EPS* increased $0.09 (8%) from $1.13 to $1.22, as a result of the significant level of common stock repurchases made over the last 18 months.
During this period, we have reduced the number of shares outstanding from 65.8 million to 52.7 million shares (20%). Total revenues for the first half of 2017 are up 24% from $405.2 million to $502.4 million, largely due to a significant increase in inventory sales over the period.
Down in the details there a number of countervailing forces—inventory sales were up as Sotheby’s cleared storage and took some losses to free up its balance sheet, private sales were up, currency fluctuations had an effect on results and some travel and entertainment expenses were up—but the essential takeaway from these numbers is that this is what Sotheby’s can earn in a strong art market.
We will have more a detailed discussion of Sotheby’s business for AMMpro subscribers next week.
Earlier this week, we asked if Leonardo DiCaprio’s charity auctions held in the South of France—the most recent one raising $30m mostly from art sales—were a good thing for the artists who donated work. After all, US artists make a greater contribution when they donate than buyers do when they purchase at a charity auction because US artists can only deduct the value of their materials as a charitable donation, whereas the buyers can deduct the purchase in excess of fair market value as charitable donation. DiCaprio has done a remarkable job garnering auction records at his charity sales partially for this reason (and partially for the social status conferred on charity buyers who often bid conspicuously.)
All of this is to DiCaprio’s credit. Nonetheless, the actor’s art advisor, Lisa Schiff, asked to address this question. She made the case directly that what was not being reported was far more interesting than the big names mentioned in Vanity Fair. She points out:
Record prices were set for: Sanya Kantarovsky, Andrea Bowers, an Urs Fischer painting, Yukimasa Ida, Ben Quilty, Camillo Restrepo, an Adrian Ghenie collage, Paola Pivi, Max Hooper Schneider, Lawrence Weiner, Tracey Emin neon, a Lynda Benglis edition, Rashid Johnson, a Cecily Brown work on paper.It was an important night for female artists who for the first time figured largely in the auction: The only work bought by the great Japanese collector Yusaka Maezawa was the Jenny Holzer painting.Artists from Nigeria, Columbia, Italy, Australia, Japan and Brazil were auctioned for first time in live.
Intrigued by the case Schiff made, we asked her to explain a bit more about how the Leonardo DiCaprio Foundation views its relationship to the artists it auctions and promotes:Continue Reading
On Monday, August 7, HBO will debut Lisanne Skyler’s documentary Brillo (3¢ Off) about the Andy Warhol sculpture her father bought in 1969 from Ivan Karp at the OK Harris Gallery. The smaller, yellow Brillo box sculpture was only $1000 but even then buying it was an act of cultural courage.
The film is framed as a wistful search for lost opportunity and a study of how works of art increase in value. The Skyler’s Brillo Box, which sat in a protective plexiglass case in the family living room, was eventually sold to Charles Saatchi. He, in turn, sold it to a collector who also gave the work up to the dealer Robert Shapazian who ran Larry Gagosian’s LA outpost until his death in 2010.
When Shapazian’s estate was sold at Christie’s later that year, there was a bidding war for the Brillo Box driving the price to $3m. Would the Skylers have gotten so much money for their Brillo Box had they held on to it? After all, Saatchi and Shapazian are big names to conjure with in the art market.Continue Reading