Sotheby's advisory business's flat revenues; Christie's uses 1st Dibs for leverage; Bidding up a Raphael drawing at Druout.

This commentary by Marion Maneker is available to AMMpro subscribers. (The first month of AMMpro is free and subscribers are welcome to sign up for the first month and cancel before they are billed.)

Sotheby’s Advisory Strategy Quietly Stalls

Buried in Sotheby’s annual report released in late February and synopsized in Kelly Crow’s story in the Wall Street Journal about Gagosian Gallery establishing an advisory firm are the revenues for Sotheby’s Art Agency Partners advisory division.

• “Sotheby’s is in the art-advisory business, having paid up to $85 million three years ago for Art Agency, Partners, a firm founded in 2014 by a trio of art advisers. But the jury is still out on the long-term effect of its performance. In its latest financial disclosure, Sotheby’s said the firm made $6.1 million last year, up from $5.8 million the year before but down from $6.6 million in 2016.”

The WSJ goes on to include Sotheby’s positioning on the division; namely, AAP was able to drive significant auction and private sales through its client base that made the company real money from the buyer’s premium in addition to the advisory fees outlined above.

Leading with the $85m purchase price, the WSJ seems to want to weigh the immediate financial value of the AAP acquisition. In balance, it is probably a wash. Sotheby’s got more than revenue from AAP and art to sell from AAP’s clients when it bought the firm. It acquired talent that played an important role in the company over the last three years (although one of the AAP principals has now left.)

What these numbers reveal is that AAP has no visible path toward growth. AAP’s flat revenues suggest the strategy to expand Sotheby’s into a new line of business advising collectors, artists’ estates and institutions has made little progress. That’s a shame. The original concept, that Sotheby’s could become more like a financial services company with a trading floor (auctions), advisory services (private bank), credit facility (art loans) and proprietary trading desk (direct and third-party guarantees), seemed like a good one designed to capitalize on art having become an asset for many collectors.