Sotheby’s stands by James Murdoch
Record profits as investment in the US giving way to China
By Charlotte Burns. Market, Issue 227, September 2011
Published online: 02 September 2011
James Murdoch, the controversial chief executive of News Corp International, has been drawn into the ongoing contract negotiations between Sotheby’s auction house and its art handlers’ labour union, Teamsters Local 814.
Murdoch was appointed to Sotheby’s board of directors in May last year. Commenting at the time, Sotheby’s chairman Michael Sovern praised Murdoch for his “impressive experiences”, “media perspectives” and “sophisticated understanding of digital media and the internet”.
The emphasis on technology now seems unfortunate: Murdoch is the heir apparent to the multinational media conglomerate, News Corp, and is inveigled in the phone hacking scandal that enveloped the company over the summer.
The disgruntled art handling union has seized upon the connection. George Miranda, the president of Teamsters Joint Council 16, which represents more than 110,000 union members in New York, alleged that Murdoch’s position on Sotheby’s board showed: “Risk management is clearly not a priority for Sotheby’s executives or board of directors.” The statement also accused the house of “greed and dysfunction”.
Sotheby’s declined to comment, other than to say: “James Murdoch is a valued member of Sotheby’s board.”
The union timed its statement to coincide with Sotheby’s announcement of its second-quarter results on 3 August. Nonetheless, the auction house did not refer to the fallout in a conference call to shareholders.
Instead, the auction house discussed its $127.2m quarterly profit—the best in its history. The company’s president and chief executive, Bill Ruprecht, said that: “The market volatility we’ve seen around the world in other arenas has encouraged participation in our market place.”
Nonetheless, Sotheby’s share price tumbled last month as the international markets went into turmoil. The company’s stock has lost 37% of its value since 7 July, falling from $47.8 to under $30, as we went to press.
US on the wane
Ruprecht also said that China now represented “the largest art market in the world today”. He said that, at the same time as investing in Asia, Sotheby’s had “reduced the number of units and volume of activity that we pursue in the US in particular”.
A $7.9m (or 24%) increase in administrative costs in the second quarter was largely due to “consulting fees to develop some of our strategic initiatives, particularly in China”, added William Sheridan, Sotheby’s chief financial officer, while a $1.6m increase in marketing expenses for the first six months of 2011 was due in part to brand promotion in China. Meanwhile, Ruprecht added, a restructuring plan to streamline European operations, notably in Italy and the Netherlands, “will allow management to focus on growing markets, especially China”.
Private sales are growing rapidly, up 114% for the first half of this year. Sotheby’s predicts that these will offer greater profit margins than their regular auction transactions. “The non-auction marketplace is generally perceived to be as large as the auction market place…around $20bn-$30bn [each],” said Ruprecht. The latest figures show that the Sotheby’s auction commission margins fell from 18.3% in the first half of 2010 to 16.4% in 2011, continuing a declining trend, because of “the competitive climate for top-end consignments”, said Sheridan.
Submit a comment
All comments are moderated. If you would like your comment to be approved, please use your real name, not a pseudonym. We ask for your email address in case we wish to contact you - it will not be
made public and we do not use it for any other purpose.
Want to write a longer comment to this article? Email firstname.lastname@example.org