Tuesday, March 11, 2014

Art Market Winter 2014

1. NEW YORK - Sotheby’s 2013 Sales $6.3bn; $1.2bn in Private Sales
Consolidated Sales Grew by 17% in 2013 to Reach $6.3 Billion, the Highest Total in Company History
Private Sales Grew by 30% in 2013 and Achieved Nearly $1.2 Billion, the Highest Total in Company History
Fourth Quarter Net Income Increases 37% Over Previous Year
Profitability Increased 20% in 2013

Private Sales Reach New Heights
• Multiple private sales in excess of $50 million each, held in a range of collecting categories, enabled Sotheby’s to achieve a record total of $1.18 billion in 2013
• Sotheby’s opened three new spaces dedicated to private sales in 2013: A second S2 gallery in London, as well as additional galleries in New York and London

Client Engagement is Happening Across Sotheby’s:
• The number of clients who purchased works privately with Sotheby’s in 2013 increased 18%, reaching a record level of participation
• The number of successful purchases through Sotheby’s BidNow program increased 36% in 2013

Client Base Continued to Expand in Key Areas of the Market:
• Impressionist & Modern Art (22% Increase in Number of Buyers) and Contemporary Art (23% Increase in Number of Buyers)
• The Number of Clients from Asia Participating in Sotheby’s Worldwide Auctions Increased 24%

 2. CHINA - How Rich Chinese Use Art to Move Money Abroad - Following a recent report in The Art Newspaper on an academic study of the discrepancy between import and export values of works of art leaving and entering China, CNN takes a broad look at the ways in which the international art trade is being used by wealth Chinese to export capital. The art market is useful vehicle for these capital transfers because it regularly makes cross-border all-cash transactions in objects that have “fuzzy” value and opaque ownership.
What’s especially significant about the report is the way in which the global art trade infrastructure must be complicit in this activity.
The rush of money out of the country is taking place in spite of Beijing’s strict capital controls — which limit the amount of money an individual can move out of China to $50,000 per year. […]
Here’s how it works: Rich Chinese purchase a piece of art in mainland China, then sell it at a hefty price across the border. The profits — in foreign currency — are then pocketed.
Another method is to buy artwork from outside China — often at an inflated price from an associate. The associate, who’s in cahoots, takes a cut and then deposits the remaining payment in an offshore bank account of the buyer’s choosing. If the authorities come knocking, it’s easy for the buyer to produce a receipt and the art — even if it was fabricated for the laundering scheme. […]
That makes it difficult for anyone reviewing purchases, including the Chinese government, to accuse a buyer of over-paying, said Steve Dickinson, a China-based lawyer with Harris & Moure.
“It’s just beautiful, because no one can challenge you on the prices,” he said. “It could be five bucks; it could be 50 million bucks.”
3. NEW YORK The (Auction) House Doesn’t Always Win
Christie’s and Sotheby’s Woo Big Sellers With a Cut
When Christie’s sold Jeff Koons’s “Balloon Dog (Orange)” for $58.4 million in November, it seemed as if the auction house had just earned a pretty penny.
After all, Christie’s, like other auction houses, typically charge commissions to buyers and sellers, which for high-priced works might be an eighth to a quarter of the gavel price.
But the owner of the work, the newsprint magnate Peter M. Brant, said Christie’s certainly made no money from him. To secure his business, the house waived the seller’s commission, he said, and then, as a sweetener, gave him a large share of the buyer’s fees.
“I was not required to give them anything from the buyer’s commission until it reached a certain price — which it did not make,” Mr. Brant said in an interview, rather wistfully, since he was hoping for a higher price.

Factor in Christie’s other costs — buying insurance and newspaper ads, publishing glossy catalogs, moving the towering Balloon Dog to its Rockefeller Center headquarters, where it was parked outside for gawking — and the possibility of making lots of money seems to be limited.
   “Balloon Dog (Orange)” at Christie’s last fall. Its seller says
Christie’s made no money from him. Credit Don Emmert/Agence France-Presse — Getty Images 
Christie’s would not comment on this, or any individual, sale. But Mr. Brant is not alone in his bargaining, and far from alone in noting that even as bidding prices go ever higher, the auction houses’ cut is rapidly shrinking.
Caught in a scramble to outmaneuver their competitors for the top works and market share, the major auction houses have increasingly offered all kinds of financial incentives to lure the top consignments — essentially giving away a big share of their commissions for the privilege of selling someone’s art.
“The process of consigning artwork to the major auction houses today is like buying an airplane ticket, and just as opaque,” said Thomas C. Danziger, an art market lawyer. “You never really know how much the guy in the seat next to you at the auction — or on your flight — has paid for the same ride.”
In this game, the biggest collectors receive the best deals, which, several in the industry said, has led to an auction house paradox: The pricier the artwork, the lower the profit margin.
That has not stopped the main houses — including Sotheby’s, Christie’s and Phillips — from doggedly pursuing a small clutch of millionaires and their art collections. The sales fuel splashy headlines and perhaps rope in other sellers. But these companies may also be repeating tactics that got them into trouble five years ago, when an art market bubble collapsed with the financial crisis, analysts and industry experts said.
The auction houses deny that they are trimming profits with givebacks or putting themselves at financial risk. Christie’s may have reaped little from the 10-foot-high “Balloon Dog,” but it made money on the whole night, in part because the sculpture’s presence helped attract other sellers.
“The evening sales are immensely profitable,” said Christie’s chief executive, Steven P. Murphy. “Yes, the margins on the top lots are much thinner than the middle market. But sometimes, volume makes up for that. A thin margin on a $50 million lot is still a profit.”
   Andy Warhol’s “Silver Car Crash (Double Disaster)” at auction at Sotheby’s in November. It fetched $104.5 million. Credit Andrew Burton/Getty Images 
But the activist hedge-fund investor Daniel S. Loeb, who announced last year that he had bought a 9.2 percent stake in Sotheby’s, has called for the ouster of William F. Ruprecht, its longtime chief executive for, among other things, giving up profits.
In a public letter to Mr. Ruprecht, Mr. Loeb wrote, “It has been Sotheby’s who has most aggressively competed on margin, often by rebating all of the seller’s commission and, in certain instances, much of the buyer’s premium to consignors of contested works.”
In an interview, Mr. Ruprecht said it is impossible to compare Sotheby’s, a publicly traded company that releases audited results quarterly, with other houses, which are privately held. Christie’s is owned by François Pinault, the French luxury-goods magnate, while Phillips’s owner is the Russian company Mercury Group. And Mr. Ruprecht told analysts that an increase in the buyer’s fee last year had helped stabilize its business. Some analysts agree that conditions may get easier, if rising prices tempt reluctant sellers off the sidelines even without discounted fees.
The competition is fierce, in part because the number of elite collectors is small. According to Christie’s, about 150 collectors worldwide can buy a painting for more than $20 million.
“It is small but it is growing,” said Mr. Murphy, whose company has been seeking to expand the number of collectors in countries like China and India.
Typically, a seller might pay about 10 percent commission on a $100,000 artwork. A buyer would pay about 25 percent. But for some works of art — commonly those worth $1 million or above — sellers don’t usually pay anything. more....

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