A Look at Sotheby's

The Wall Street Journal recently published an article on the current leadership situation at Sotheby's as the NYC auction houses are going into the important May sales.  The article notes that over the past six months,14  Sotheby's specialists have left the auction houses.  Potential consignments now most also be run through the legal department before becoming official. Overall an interesting read with some good insight into the upcoming sales and the current situation at Sotheby's.

The Wall Street Journal reports

New York’s auction houses head into a whirlwind week of spring sales starting Sunday, Sotheby’s finds itself in an awkward position: Its corporate moves are garnering the kind of gossipy attention its masterpieces typically do.

Over the past six months, at least 14 high-profile specialists—including the former heads of its key impressionist-, modern- and contemporary-art departments—have left the company, either on their own or as part of a buyout instigated last fall by new chief executive Tad Smith. The exodus has put pressure on its younger, less experienced experts to woo and reassure collectors at a time when global art sales are falling—and may not have yet hit bottom.

On top of that, Sotheby’s is literally pulling the beige carpet out from visitors to its York Avenue headquarters by renovating several floors in an effort to make its once-fusty showrooms look bigger and more downtown-gallery sleek. Already, a few glassy, corner offices where wooden crates and old catalogs were stored have been transformed into concrete-floor spaces where experts now display pieces for sale by Cy Twombly and Francis Bacon.

“Why do we need six boxes of catalogs for a sale we held in 2004?” said Amy Cappellazzo, chairwoman of Sotheby’s new fine-art division and a former Christie’s specialist. She and her art-adviser colleague Allan Schwartzman helped oversee the renovations shortly after they were hired two months ago. “The issue is we need to look like an art business, not an old-fashioned auction house.”

After trailing rival Christie’s for the past four years, Sotheby’s is going to extreme lengths to catch up and appease shareholders and boardmembers like Daniel Loeb, who led a campaign to oust the house’s former management two years ago. As part of the shake-up, Sotheby’s hired Mr. Smith, former chief of Madison Square Garden, to be its new CEO last year, with a mandate to bolster the auction house’s contemporary art sales and improve profit margins.

As a result, auction experts who once brokered deals over handshakes and long lunches must now run potential consignments past Adam Chinn, a lawyer and former hedge-fund manager who was recently hired to be Sotheby’s head of transaction support.

Simon Shaw, a longtime Impressionist-art specialist, said Mr. Chinn has discouraged staff from offering to share its sales commission with potential sellers, a profit-winnowing mechanism that has become a mainstay of all the major auction houses. Guarantees, or promised sale prices on artworks headed for auction, have also dwindled, for now. “Adam is showing us how to not undersell ourselves,” Mr. Shaw said. The company’s share price has fallen roughly 36% over the past year, closing at $27.09 per share on May 4.

The brunt of the shake-up is being felt at Sotheby’s contemporary-art department, which claimed a 37% market share in the category in 2014, compared with a 63% share at Christie’s, a few months before Mr. Smith took over as CEO. Major collectors and investors who offered advice to Mr. Smith as he settled into the job told him that his team struggled to put asking prices on pieces in a way that would win it consignments but also lock in profits for the house. At least nine members of Sotheby’s senior team in contemporary art have since resigned, including Anthony Grant, vice chairman of the Americas and international senior specialist in contemporary art, as well as Alex Rotter and Cheyenne Westphal, former co-heads of world-wide contemporary art in New York and London, respectively. Mr. Grant and Ms. Westphal said they parted on good terms, adding, “It was a surreal roller coaster for a few months, but now it’s fine.” Mr. Rotter didn’t return messages seeking comment.

Now, it largely falls to Mr. Smith and Ms. Cappellazzo, head of the house’s fine-arts division, to put together a new team—and secure material to sell at auction and privately. Grégoire Billault, a 16-year veteran of the house and Mr. Rotter’s successor in New York, said the younger generation of specialists is adjusting quickly. “Amy has no fear, and she pushes and pushes,” Mr. Billault said. “That’s not me, but we’re a great combination.”

Next week, Sotheby’s expects its sales of impressionist, modern and contemporary art to bring in at least $464 million, a 48% drop from the $893 million it sold in a similar round last May. Specialists and dealers said the smaller sales are partly a function of the wary market overall, as collectors who can afford to hold on to their art trophies sit on the sidelines until the broader financial outlook brightens.

On Monday, Sotheby’s impressionist and modern-art sale will include André Derain’s 1906 Fauve seascape, “Red Sails,” which is estimated to sell for at least $15 million and Auguste Rodin’s milky marble depiction of a kissing couple, “Eternal Spring,” which is expected to sell for at least $8 million.

At Christie’s, specialists say Sotheby’s shuffling has put them in the odd position of playing up their “old faithful” status, said Brooke Lampley, head of impressionist and modern art in New York. While there has been some turnover at the house, it’s mostly been back-office positions like the lighting designer, which doesn’t get the art blogs wagging. Christie’s overall sales next week are expected to reach at least $589 million, also a far smaller tally compared with a similar round last year. But Ms. Lampley said she’s tried to play up the house’s steady management in her talks with collectors as well as her sale’s safe-bet offerings. The house kicks off Sunday with a cross-category sale of mostly conceptual art organized by specialist Loic Gouzer that carries a tongue-in-cheek title, “Bound to Fail.” On Tuesday, its contemporary sale includes a 16-foot-wide, untitled Jean-Michel Basquiat self-portrait that’s estimated to sell for $40 million and a blue-and-green Mark Rothko abstract with a low estimate of $30 million. Claude Monet’s 1919 “Waterlily Pond” is expected to be the star of Thursday’s sale of impressionist and modern art. Its estimate: $25 million plus.

“This isn’t the season of the $100 million blockbuster,” Ms. Lampley added. “Everyone is in a more analytical mood.”

Source: The Wall Street Journal