In the Moet-and-beluga auction trade, the sweet deals for sellers are telegraphed in code. A 105, for instance, means the seller gets to pocket an extra 5 percent on top of the hammer price. A 109 means a 9 percent premium, and so on.
‘Negative Impact’
“The days of the auction houses keeping all the commission, that went away a long time ago," said Doug Woodham, the president of Christie’s Americas from 2012 to 2014. “Enhanced hammer deals have had a profoundly negative impact on the economics of the auction houses.”
Few would have sensed the financial pressure as collectors filed into Sotheby’s Upper East Side galleries to glimpse “Untitled” last November. Until then, the abstract painting had rarely been seen in public -- and Sotheby’s, Saveur magazine would later recount, was making the most of the moment.
High on the 10th floor, Massimo Bottura, the celebrated Italian chef, carved a giant wheel of Parmesan, a prelude to a multi-course feast set amid the high-priced works up for sale. “Honey, I want that Longo for the living room,” one woman told her husband. Nearby, the photographer Cindy Sherman, in a pink skirt and gold platform sneakers, admired two of her own works.
Behind all that splendor, the squeeze was on. Since 2009, art prices have soared and sales have more than doubled. But Sotheby’s commission margins, the revenue from commissions as a percentage of auction sales, have dwindled to about 14 percent from 21 percent. After a roller-coaster ride in recent years, Sotheby’s share price has fallen 36 percent over the past 12 months, closing at $27.57 on Monday.
Christie’s, which as a closely held company isn’t required to report financial results, has been wielding the enhanced hammer too, as has Phillips, which specializes in emerging artists. Last May, Christie’s handed much of its $15.3 million in fees to the real estate developer Sheldon Solow when it auctioned off one of his pieces, a sculpture by Alberto Giacometti, for a $126 million hammer price, according to a person familiar with the matter. Representatives for Christie’s and Phillips declined to comment, and Solow didn’t return telephone calls.
High Stakes
The enhanced hammer is only one tool auction houses are using to lure big collectors. Other deals, from various financial guarantees to art swaps, are also being cut.
The stakes were high for Sotheby’s going into the Nov. 11 sale. Only days earlier, the house had disclosed it wouldn’t earn any commissions at all from selling the collection of the late A. Alfred Taubman, its former chairman, until the house covered a $515 million guarantee that it gave the Taubman estate to win the consignment. (Taubman, who died last year, had been imprisoned for 10 months following the price-fixing scandal of the early 2000s.) The news was weighing on Sotheby’s share price.