Sotheby’s has taken the bold move to scrap buyer’s premium on all of its online-only auctions. The auction house has at the same time announced that it will raise their regular buyer’s premium (the amount a successful bidder at auction must pay), for the third year running. Buyers will now pay 25 per cent of the hammer price up to and including $300,000, 20 per cent from $300,000 to $3m and 12.9 per cent above $3m, effective November 1. The current lowest band is 25 per cent up to and including $250,000 — so the buyer of an item previously sold for $300,000 will now pay $75,000, instead of $72,500. The highest band is rising from 12.5 per cent, so a $5m item would have had a premium of $862,500 — now it is $873,000.
In their endlessly competitive rivalry with Christie’s, the auction house only introduced online-only sales last year
In their endlessly competitive rivalry with Christie’s, the auction house introduced online-only sales last year, although David Goodman, Sotheby’s executive vice president of digital development and marketing, says that they are its “best tool for attracting first time buyers”. In the first half of 2017, 45% of buyers in online-only sales were new to Sotheby’s and around 20% have gone on to participate in live auctions. The first sale to scrap the premium is Sotheby’s Contemporary Art online sale, on 16 September.
Sotheby’s second quarter earnings announced on 3 August, illustrated the importance of online sales and digital marketing for the company Last year, Sotheby’s held 16 online-only sales and, Smith says, “is on track to double that number this year”. The average price in Sotheby’s online-only sales is now just under $10,000, although it cites two pieces sold for more than $150,000; these were a sculpture by Frederick William MacMonnies, sold for $175,000 ($140,000 without buyer’s premium), and a Victor Vasarely painting at $162,500 ($130,000 without premium).
A shareholders letter dated 22 August, stated: “The online marketplace is a related, yet distinct business opportunity for Sotheby’s beyond our live auctions— one with a different competitive landscape and reduced traditional expenses—that demands a different approach to pricing.” The move will, Smith says, “simplify the auction process” but Sotheby’s “will continue to charge a vendor’s commission”.
For the three months ended June 30, 2017, Sotheby’s reported net income of $76.9 million, representing a $12.1 million (14%) decrease when compared to the same period in the prior year, as a higher level of Agency commissions and fees and a lower effective income tax rate are more than offset by a higher level of indirect expenses. Although second quarter net income decreased by 14%, diluted earnings per share decreased by only 6%, from $1.52 to $1.43, due to a lower number of common stock shares outstanding as a result of our share repurchase program. Total revenues for the second quarter of 2017 are up 5% from $298.7 million to $314.9 million, largely due to increased inventory sales from the prior period.
Contemporary art has again taken the lions’ share at Sotheby’s. It a 37 percent improvement in contemporary art sales, to $701.4 million, as might have been expected after the $98 million hammer price for Jean-Michel Basquiat‘s Untitledcanvas at its May auctions in New York. (Sotheby’s provides only hammer totals for net sales in the specific sectors of the business, but overall totals include the buyer’s premium.) Still, the contemporary total only represents a $30 million increase on 2015.
Last year Christie’s held 34 online-only sales with 79 more planned. Christie’s explained that they need “continue to attract the largest number of new buyers (29%)”, with total spend remaining “stable” at £19.8m ($25.2m) and average price per lot increasing to $7,222.
Is this just another case of robbing Peter to pay Paul? You decide!