Auction houses tear up the rule book
Covid-19 has forced auctioneers to rethink their businesses, both for the present and the post-crisis era
When Charles Stewart walked into Sotheby’s New York sale rooms earlier this month, he paused to take in the sight of promotional posters from an art auction held in March, just as the city was frantically pulling down the shutters in the coronavirus crisis.
“It was frozen in time,” the chief executive of Sotheby’s says. “It brought it all back to me.”
The sale of South Asian art on March 16 was the last to take place there before the US hit the pause button on its economy — and left the auction market scrambling to salvage its business plans under a ban on public gatherings and travel.
Auction houses furloughed staff, postponed events and moved sales online. Directors and specialists were forced to question how they sourced, marketed and sold works in a global health emergency. The past three months have been a concentrated phase of experimentation, accelerating shifts that most had assumed would take years. But as the world tentatively emerges from lockdown, will the auction houses and their clients embrace innovations that were forged in adversity — or demand a return to the status quo ante?
As with so many businesses lashed by the crisis, the internet has been the port in a storm.
“The crisis has brought a moment of truth for online sales”, says Guillaume Cerutti, chief executive of Christie’s. After a decade of talk about digital sales being “the new frontier for the art market”, he says, progress had nonetheless been slow-going. Now the barrier has been broken: Christie’s, like most auction houses, is replacing live sales with online versions, and many of these switches will stay for good, he says — “even in the post-Covid era”.
Stewart says the crisis has swept away the last redoubts of online scepticism among in-house specialists who feared resistance from longstanding clients. Since the beginning of the year, Sotheby’s has conducted more than 80 internet sales, twice as many as in the same period in 2019 and with three times as many lots. These sales raised $139m in the year to June 2, versus around $23m over the same period in 2019. Christie’s has 83 scheduled for the year and more in the pipeline.
The growth rates are eye-catching. However, online sales start from a very low base, providing less than 10 per cent of overall sales revenues last year for the top houses. And there is a big gap to make up: Sotheby’s overall sales dropped by around 75 per cent in the year to the end of May, from $2.2bn in 2019 to $541m this year, according to Arts Economics, a research company. It estimates Christie’s sales fell from $2.3bn over the same period in 2019 to $364m this year, including an online component of $32.2m.
Some of this ground may be made up when the crucial evening sales — postponed from May — take place in late June and July. These glittering occasions are normally the highlights of the auction calendar, when the most coveted works are dangled in front of the richest collectors. It’s unlikely that any buyers will be in the room, so the houses are looking to technology to recreate the pizzazz of a live auction and the competitive bidding it fosters.
In its “One” sale on July 10, Christie’s will stage a “relay” auction, streamed online, as four auctioneers pick up the hammer in sequence in Hong Kong, Paris, London and New York over the course of around three hours. Unusually, the auction will sell works in different categories such as Impressionist, contemporary and design alongside one another including highlights by Picasso, Lichtenstein and Zao Wou-Ki.
Sotheby’s is splitting its evening auctions across a series of locations. Its June 29 sale will be the first time an auctioneer takes to the rostrum in London to preside over a New York evening sale. A bank of video screens will connect Oliver Barker to colleagues manning phone banks in New York and Hong Kong, as well as online bidders. The top lot is a Francis Bacon triptych, carrying an estimate of $60m.
Even in the excitement of a live event, multimillion-dollar bids do not arrive out of the blue. In the weeks leading up to a sale, works may be flown around the world to be shown to the handful of people with the money and inclination to bid on them. Pre-Covid, collectors would attend parties or private lunches organised by the auction house, attended by specialists, friends and their own art advisers. This activity is likely to remain stilted even as lockdown rules begin to ease.
Anders Petterson, founder of art market research group ArtTactic, says the crisis has exposed the vulnerability that stems from auction houses’ reliance on a few big live events, each containing hundreds of works. Simply placing these online risks overwhelming the potential buyer. Instead, the industry is reconsidering its model and moving towards a “flow” of art and objects. “Houses are curating more frequent, smaller, targeted sales, with maybe 25 lots rather than packing everything into a 300-lot sale,” he says.
Convincing buyers to stump up millions of dollars for works of art is one thing. Private sales, which offer confidentiality for vendors, are booming. But many owners are sitting on their hands. The bigger challenge is persuading sellers to put their objects up for sale at a time of deep economic uncertainty. “Why would you sell now? That’s the problem. That top end is so discretionary,” says Melanie Gerlis, editor at large at The Art Newspaper and an FT columnist.
Auction sales tend to follow the political and economic cycle, falling 17 per cent last year amid broader fears over trade wars and the market outlook, according to Arts Economics. Specialists now have a job on their hands to entice people to sell but Stewart expects a longer term resurgence in consignments. “The big drivers of that activity include financial distress, mortality rates, family and generational planning. I think all of those factors will be higher than they have been.” And in the US, museums have been given the green light by the Association of Art Museum Directors to sell works to cover operating losses for the next two years, he adds.
The rules of engagement between longtime competitors have also been turned upside down, with partnerships designed to preserve the fortunes of the whole sector. Sotheby’s, for instance, is hosting a “Gallery Network” on its website, where external dealers can ply their wares to its large global audience, with the auction house taking a cut on any sales.
Christie’s this month announced a partnership with the Paris Biennale to organise an online sale in September after the physical art fair was cancelled. Such co-operation would have been “inconceivable” just a few months ago, says Cerutti, but is now regarded as essential in the wider effort to rebuild the market. Will these pacts survive the Covid emergency? “I’m quite sure this will continue,” he says.
Auction house directors caution that the fundamentals of their business — the value of expertise, client trust and the ability to find buyers and sellers of unique objects — will not disappear. But the trade is likely to look rather different in future. As Stewart says: “We used to be in the live theatre business. Now we’re going into the streaming business.”