It’s the quiet season in the art market. Time for reflection on what’s happened and what’s to come. Surprisingly, the word in the air seems to be one of moderation and retreat. Scott Reyburn channels some of that in his International New York Times column. He points to Sotheby’s weak stock price as a signal that the booming art market isn’t necessarily a boon to auction houses:

“Auction houses aren’t scalable businesses. They can’t expand by multiples like dealerships,” said Michael Hutter, a cultural economist who is director of the Cultural Sources of Newness research unit at the WZB Berlin Social Science Center in Germany. “Profits are crumbling at the top of the market. They can’t charge 50 percent, which is partly why they’re turning to online sales.”

Evidence of that auction houses have bumped into a ceiling, Reyburn says, can be seen in Sotheby’s stock price having slid from $55 to $40 in recent months.

“There’s a feeling among financial analysts that the valuations of art-related companies are peaking,” said Fabian Bocart, the director of quantitative research at the Brussels-based art investment advisers Tutela Capital. “These valuations are based on expected volumes at auction. Very expensive items have almost no impact.”

In other words, the headline sales don’t translate into operating margin for the auction houses and their growth prospects are limited by the seeming lack of a middle market:

“There are definitely fewer art buyers than there were in 2008,” said Mr. Bocart, the research director. “The cards have been redistributed by the financial crisis. Fewer people have more money, and they do spend more, but the base has been diminished. Art needs to be refreshed. We’re waiting for something to happen.”

Meanwhile, something is happening with Sotheby’s stock which has sharply recovered the crucial $40 threshold. Let’s see if it can hold above that price.

Scratches in the Art Market Gilding  (NYTimes.com)