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What will 2014 bring?

Tension between dealers and auction houses will grow, sales will get even less transparent and don’t bet on a $100m Picasso selling online

Our mystic mog, Georgina Adam, peers into her crystal ball

It’s the time of year when I again gaze into my crystal ball and try to predict what will happen in the art market in the new year. Buoyed by the most incredible sale results at the top end, culminating in the blockbusting $691m auction of post-war and contemporary art at Christie’s in November, the market has rarely looked healthier. New fairs are still being created, seeking to plug the few remaining gaps in the art-world calendar. The hottest artists are basking in celebrity—and cash. Buyers, sometimes very young, from new economies are bolstering the top end of the auction world. The luxury goods, fashion and music worlds are increasingly interacting with contemporary art, adding to its allure. So what can we predict for 2014?

Ramped-up competition

The big story of the past few years has been the growth of private sales in the major auction houses, the implications of which are profound. By selling privately, with no record of success or otherwise—nor prices—the auction houses are ramping up competition with dealers. The $1bn of private sales racked up by Christie’s and $906.5m by Sotheby’s in 2012 (we do not yet have the figures for 2013) put the firms on the same level as some of the world’s biggest art dealers: for example, Gagosian Gallery, which had a reported turnover of $925m in 2012.

These private sales are sucking money out of the traditional dealer sphere, mainly from the secondary market, although the still-expanding market compensates for this. Competition from the auction houses is also increasing on the primary market, where they are selling artists’ work directly, particularly in the new economies: Christie’s, for instance, offered pieces straight from artists’ studios in its November sale of ink paintings in Hong Kong.

I expect the tensions in the dealer versus auction-house scenario to worsen, with only the biggest galleries having the resources to counter the salerooms’ competition. In a winner-takes-all situation, only the biggest dealers saw sales growth in 2012. As reported by the art economist Clare McAndrew, galleries with a turnover of more than $14m saw sales grow by a stunning 55%, whereas all the others saw sales fall.

Tension will also be ramped up among the auction houses, given the activist shareholder’s attack on Sotheby’s for its less-than-sparkling results. The firm had an 8% drop in revenues in 2012, although its third-quarter filing in 2013—the latest available figures as we went to press—showed narrowing losses and increased revenues. Competition between the two big houses will increase even more as Christie’s continues to apply an aggressive marketing policy similar to the luxury goods players, in which it makes money on lower-value products (such as online lots and the inventory from Andy Warhol’s estate) that enable it to be more competitive on the high-value lots.

The departure of Tobias Meyer from Sotheby’s leaves the question as to who, if anyone, will replace him, and whether the vocal shareholders succeed in unseating Bill Ruprecht, the auction house’s chief executive, as they have said they want to. While my guess is that a prominent outsider will be brought in to run the contemporary department, my crystal ball has gone all cloudy over Ruprecht’s future…

Consolidation online

Although the buzz about sales of art online continues, particularly since Amazon entered the fray last year, I expect that investors will begin to tire of the huge “burn” in some of the high-profile sites and will want to see some profits. How the sites will monetise themselves will be the problem: look for more consolidation, such as last year’s folding of Blacklots into Paddle8. The arrival of the auction giant eBay, returning to the fine art field for the third time, could also have an impact on the smaller players.

Amazon is aggressively targeting high-end dealers in an attempt to improve the quality of the art on its site, but I don’t think this will work. The Amazon brand, although trusted for DVDs and much else besides, is just not a prestigious name. Buying art is ultimately about buying a dream, a trophy, a “story”. “I got it on Amazon” or “on eBay” is not something that anyone could boast about. That being said, I expect online to continue to grow in the volume market, and for more transactions to be completed online at the mid-level. But a $100m Picasso? Forget it.

Even less transparency

This was a big issue in 2013, with renewed calls for regulation of the market after the Knoedler debacle and other scandals, when forged works were sold without any transparency as to the vendors’ identity. However, I see the situation getting worse rather than better. The increasing number of sales of art online muddies, rather than clarifies, the size and nature of the transactions. A new online site, ArtWide, promises complete anonymity for buyer and seller, so the whole transaction is completed with neither knowing who the other is.

The sparkling results obtained in November’s New York sales, which carried enormous guarantees, will only encourage the auction houses to ramp up the use of these financial instruments, and the small pool of guarantors to agree to them. Although the conditions of sale are spelled out in the catalogues, some aspects—such as the split between the guarantor and the auction house—remain confidential. Here, again, the auction process is not as transparent as it is often thought to be. And non-disclosure of the name of a vendor (designated instead as a number) will be able to continue. A legal challenge to this practice was mounted in New York, and the court has just found in favour of an auctioneer who did just that. The auction houses are breathing a sigh of relief; Sotheby’s had even filed an amicus curiae (friend of the court) brief in the case.

Art-fair churn

The market is increasingly event-driven, as reflected in the multiplication of fairs. Two new events are expected, for example, in the San Francisco Bay Area this year: Silicon Valley Contemporary (10-13 April) and Art Silicon Valley (9-12 October). Fairs add to a city’s cultural “offer” and bring in tourist dollars, so they are highly popular with authorities, who will encourage and facilitate them. However, all but the very top dealers, with huge staffs and resources, are suffering from “fairtigue” and becoming more selective about the events they attend. Where they would previously give an event three years to justify their presence, they are now more likely to bail out after the first year if it doesn’t work for them. So expect to see the roster of many fairs—even the biggest ones—change far more than in the past, as exhibitors seek greener pastures.

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