The Scream

In the lead-up to key London art sales this week, Christie’s and Sotheby’s have deepened their rivalry and sharpened their tactics.

The two auction houses have long enjoyed a near-duopoly in fine art auctions. Each has shown extraordinary resilience in recent years, bouncing back from a serious price-fixing scandal at the turn of the millennium, and boosting sales amid the global financial crisis.

Despite the rise of Chinese competitors (see sidebar), at the top it remains a two-horse race, and the winner is often leading by a nose. In 2012, Christie’s took 54 per cent of the two groups’ combined sales, compared with 50 per cent the year before.

The art market slowed in the first quarter of this year – with global sales volumes falling 7 per cent, according to market intelligence firm and online auction platform Artnet – which has intensified competition.

Already the bets are on. Sotheby’s is estimating total sales of £95.5m-£135.3m in the Impressionist and Modern category, and £83.4m-£119.2m for Contemporary.

Christie’s is estimating a total of £73.6m-£106m for Impressionist and Modern, and £69m-£90m for Post-War and Contemporary. Kandinsky’s “Studie zu Improvisation 3”, estimated at £12m-£16m, looks set to be a highlight of the Christie’s Impressionist and Modern sale tomorrow evening, the first big sale of the week.

As both houses look to develop new strategies, there are signs that their tactics may be growing more distinct – setting the scene for more divergent fates.

In 2012 Christie’s sales totalled $6.27bn, up 10 per cent from 2011, while Sotheby’s totalled $5.4bn, down 7 per cent. Sotheby’s announced last month that net losses had more than doubled in the first quarter of this year to $22.3m. Christie’s, privately owned by French luxury entrepreneur François Pinault, is not required to declare profits.

Bill Ruprecht, Sotheby’s president, chairman and chief executive, has identified rising costs and a lack of single owner consignments (individual collections) as factors behind the losses, and has stated that they were not unexpected, with larger sales scheduled later in the year.

Competition for trophy consignments is fiercest, and the margins are smallest, in the Impressionist, Modern and Contemporary categories.

Earlier this year Sotheby’s followed Christie’s lead in increasing their buyers’ premium in an attempt to strengthen margins, leaving it just marginally cheaper to buy through them.

Both companies have also been pushing into private sales, where they remain neck and neck. In 2012, Christie’s private sales amounted to $1bn, a 26 per cent rise on 2011, while private sales at Sotheby’s totalled $906.5m, an 11 per cent rise.

The benefits are obvious: buyer and auction house enjoy confidentiality, since viewing is often done in private and details of individual transactions are not disclosed – and the costs of sale are greatly reduced.

However, private sales are not likely to dwarf auction sales any time soon. Live sales remain hugely popular in mainland China, and it is here where both houses are focusing an increasing amount of energy and resources.

They have adopted differing approaches, with one seemingly favouring speed and a base in Beijing, and the other, independence and a base in Shanghai.

In September last year Sotheby’s announced a joint venture agreement with the state-owned Beijing GeHua Art Company to become the first international fine art auction house to operate in the mainland.

“We’ve got really strong local staff who are all Mandarin-speaking, we’ve got the head of the Chinese Auctioneers Association as a leader for our business in Beijing, who’s been in that business for 25 years, and we’ve got two sets of sales there this fall,” says Mr Ruprecht.

Christie’s meanwhile is positioning itself as the first international fine art auction house to operate independently in mainland China.

“Beginning in September of this year, we will have our first auction and exhibitions in the city of Shanghai and, unlike any other entity, we’ll be operating as Christie’s there,” says Steven Murphy, chief executive of Christie’s.

The art market has seen high growth in China in recent years, and although there was a 50 per cent decline in value sold in the Chinese market during the first quarter of this year, according to Artnet figures, Jacob Pabst, Artnet chief executive, argues there is still much potential.

“People are more confident, they think they can trust the price levels,” he says. “There has been a bit of a clean-up so the prices reflect more what’s really happening.”

The internet is another area where tactics differ. Mr Murphy’s background in recording and publishing – as president of EMI/Angel Records and more recently as president and chief executive of health publisher Rodale – seems to have sharpened his technological focus.

“We have moved from seven online [only] auctions in 2012 to 50 online [only] auctions in 2013, and we average between 45 per cent and 75 per cent of the successful buyers are individuals new to Christie’s,” he says.

Perhaps stung by an ill-fated venture with eBay, which halted online-only auctions in 2003, one year into a proposed three-year partnership, Sotheby’s has been reluctant to commit to online-only sales. Although it has seen online bidding grow 50 per cent in the past 12 months, there are no plans for online-only sales this year.

“We think it’s smarter to be inclusive and let everybody bid on whatever they want to bid on,” says Mr Ruprecht.

Mr Ruprecht, who joined Sotheby’s in 1980, says: “We are betting our future on the fact that wealth will continue to be created and there will continue to be an economic elite, and that works of art will be relevant to them all over the world.”

But Mr Murphy is confident that his company can maintain its advantage. “Christie’s has for a while, through last year and into this year, been in the lead, and we’ve earned that position through building accessibility to the burgeoning interest in art,” he says.

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