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:

1. 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.
2. 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.
3. 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.

Sotheby’s Q2 2017 Earnings Call