How Much Does AAP Contribute to Sotheby’s Revenue?

Sotheby's Rev 2012-2016 Since Sotheby’s purchased the art advisory business Art Agency Partners, there has been some amount of interest in how much revenue that business generates.

Two of AAP’s partners have expanded their roles at Sotheby’s. Adam Chinn is now the Chief Operating Officer and their overall roles are somewhat blurred within the company. Nonetheless, now that the firm has been incorporated into Sotheby’s, we can see some hints from the yearly numbers.

The ‘All Other’ category, where Sotheby’s reports the fees paid by AAP’s advisory clients, rose ~$7.5m (see update below) in the first year that AAP’s revenue was included. That’s a good ballpark figure to work with.

Let’s be clear. These statements do not show the exact revenue from AAP as the note below illustrates. ‘All Other’ includes several other businesses that Sotheby’s participates in. For example, the trend over the five years has been for the All Other category to grow steadily. Presuming the All Other numbers would have risen anywhere from 4-20% as it had in the previous years, AAP’s revenue would be closer to $6.5m.

On the other hand, if we look closely at the All Other category’s constituent parts, there is some volatility. Take the AMA partnership shown in ‘All Other.’ It contributed $2.8m in 2015 and $1.3m in 2016. That would leave room for AAP’s revenue to be as high as $9m or more. That’s a pretty wide margin of error $6.5m to $9m but it at least gives those who are curious a benchmark to measure this important venture’s future growth.

Here is the language from Sotheby’s 10-K explaining what revenues are covered by the All Other category.

Art Agency Partners (“AAP”), through which we offer art advisory services, provides clients strategic guidance on collection identity and development, acquisitions, and short and long-term planning. AAP was acquired on January 11, 2016 (see Note 3). Our advisory services are classified within All Other for segment reporting purposes, along with our retail wine business, brand licensing activities, the activities of Acquavella Modern Art (“AMA”), an equity investee (see Note 5 ), and sales of the remaining inventory of Noortman Master Paintings, an art dealer that was owned and operated by us from its acquisition in 2006 until its closure in December 2013.

Update: Reading further into Sotheby’s 10-k, we can see that the overall $17.96m reported in the All Other segment can be reduced by $9.1m for the SIR royalty from Realogy; $1.3m in sales from the Acquavella partnership; and, $2m in equity earnings from RM Sotheby’s. Taken together, that’s $12.4m out of the $17.96m leaving AAP with a maximum potential revenue of $5.56m presuming there were no earnings from the wine business.