There’s a lot to think about in John Gapper’s excellent Financial Times piece on the curious state of the auction houses as they face a future with new CEOS and potentially new strategies:
Executives and specialists believe that Mr Murphy’s departure will ease the intense competition and allow the margins to expand at the top end. But that may be an idle hope. Not only could Sotheby’s itself become more aggressive under a new leader, with a more ambitious board, but the auction houses do not operate in a hermetically sealed world. They have to keep proving themselves against the new breed of contemporary art “superdealers”, such as Larry Gagosian and David Zwirner.
Gapper doesn’t say it. But the issue of guarantees is bound up in this competition between auction houses and dealers for market share. Direct guarantees from the auction house are a way to take sales away from secondary market dealers.
Some of these guarantees are laid off by auction houses to dealers, who try to support their own stock by ensuring that public sale prices stay at an elevated level. But although the auction houses and dealers embrace each other, they also compete for the attentions of the biggest collectors. “It is a symbiotic relationship, but the real juice is selling primary works to a guy like me, and the auction houses are not remotely in that business,” says one wealthy collector.
It’s not clear that Gapper’s source is right here. The money in the art market these last few years has come from secondary dealing, not representing artists for their primary deals which can be very expensive for the galleries. Gagosian, the pre-eminent dealer has built an empire as much on secondary dealing and market-making as anything else. But here’s where Gapper really gets down to brass tacks.
“There is deflation in a bull market, so God knows what happens when the next crash comes,” says one investor, referring to the narrowing margins at contemporary art auctions. In Miami this week, the champagne flowed and the incredible prices paid at the Christie’s and Sotheby’s sales last month kept the art market in good cheer. But in an industry where images mean everything, the reputations of these two companies will be on the block next year.
There’s no telling what direction either house will take under new leadership. At the moment, they’re quite far apart in their approaches to the business. Will they converge again or move more sharply apart in search of a viable long-term business.
Auction houses: Troubleshooters (FT.com)
