The Commercialization of Auction Houses

The International Herald Tribune has an interesting article about the state of the major auction houses. It gives a little bit of recent history and reviews how and perhaps more importantly why, they have gotten to their current situation of financial decline and need for reorganization.

The article makes a case that instead of being fine and decorative art lovers and proponents of quality of merchandise, the major auction houses evolved into a big, returns motivated business with constant pressures to increase sales and annual profit levels. Sotheby's is now a public company, so an emphasis will always be on profits and increasing the price of the stock. The article details the commercialization of the major auction houses, and in doing so is very interesting and insightful.

The IHT article states The financial crisis that managements are endeavoring to forestall by reducing overheads is the inevitable consequence of the metamorphosis undergone by auction houses over the last four decades. The service industry that auctioneering had been for two centuries - and still was in the 1960s - has turned into a purely commercial venture trying to emulate big business.

This shift of emphasis reflected a new mind-set among managerial teams that was in part due to a natural desire to make more money for themselves and in part to a fundamental cultural change. Unlike the previous generation of auction house leaders to whom art was an object of admiration and personal desire, some of the new managers looked upon it as merchandise.

The IHT continues The auction houses are now stuck with inflated marketing teams put together to hype their goods and large financial departments set up to work out complex deals with wealthy clients. They have multiplied auction outposts across the world, in search of new bidders, the latest being Dubai, where Christie's October auction was a heavy disappointment, and Doha, where Sotheby's is to hold in March a sale of paintings and watches.

The entire configuration must be revised. A smaller format will be needed to adjust to the mass of goods available for sale, which will inexorably contract, crisis or no crisis, and to turnovers that will come down.

This involves reducing personnel, not among the experts and department hands who do the job, but among those who put in frills, from PR crews to administrators. News that John Tancock, Sotheby's remarkable expert in Impressionist and Modern art, with a lifelong network of connections in the field is retiring sounds like a tactical mistake made in panic.

Not all luxurious premises are justified, nor are all the bureaus abroad. Working methods and long-term policy need to be reconsidered.

With luck, auction houses may then slowly revert to the public service role that was theirs in the days when there was no temptation to manipulate the market. Their ability to operate satisfactorily is as necessary to the common good as is the proper operation of the banking system, even if auction houses showed an eerie propensity to make the same fundamental mistake - expecting an unwavering ability to pay ever more artificially inflated prices on the part of underinformed segments of the public.

To read the full IHT article, click HERE.