Tuesday, July 8, 2008

Bigger and Badder

In my last blog entry, I wrote about the “rich getting richer,” and the concomitant escalation of high-end material that has taken over every area of the high art world, including rare books. The best material becomes ever more desirable (and costly), while everything else stands still or falls back. It’s as true for old books as it is for old masters.

Part of this mirrors an economy in which the divide between the haves and have-nots grows greater every year. But a great deal of it is caused by a radical change in the circumstances under which high art objects are bought and sold. There have always been dealers and connoisseurs who evaluate material and move it into the hands of collectors. What’s really changed over the past 20 years is that auction houses have become increasingly dominant, in many instances displacing private dealers, galleries, and other specialists.

This has happened on macro and micro levels. Little dealers, like Bob Langmuir, used to get house calls. Now that material gets put on eBay or goes to local auctions. At the other end of the scale auction houses like Christies and Sotheby’s have become international giants.

These big auction houses have been brilliant at marketing themselves as honest brokers. When a dealer or middleman is involved, any amount of manipulation is possible. An auction situation, ideally, is transparent. Consumers compete in a public venue for the goods. The idea has enormous rational appeal – at least in theory - and the major auction houses, as well as eBay, have promoted it to the hilt

In practice, however, auctions are subject to all sorts of manipulation. For one thing, connoisseurship has been replaced by salesmanship. Those luscious auction catalog entries are designed to make you want to pay as much as possible, not to inform you honestly about the goods. At the end of the day, nothing is guaranteed. It is always “buyer beware.”

Secondly, the success of these giants has skewed what used to be called “Fair Market Value.” The example cited in my last blog entry is classic. Something a dealer might sell for $20,000 sells for $80,000 or more, simply because of WHERE it was sold. An item is likely to bring a higher price at Christies than at Swann’s, hence Christies will attract better goods. The few big auction companies that have established dominance now can be sure to attract only the best material, which will bring ever-greater prices. This has always gone on, but now more than ever before, venue influences value.

This dominance has had another side-effect. Over the past decade, auctioneers have begun raising their “buyer’s premium” - the amount they charge the buyer on top of the selling, or “hammer” price. From 10% it went to 15%, to 20%, and then, shockingly, to 25%. See “Sotheby's profit up 46 pct on auction commissions” at http://www.reuters.com/article/companyNews/idUSWNAS247120080226

The implicit message is that these companies and their stockholders are no longer interested in working with the common round of dealers, collectors and institutions. They are interested only in the very top of the market – those people to whom money is not an issue. It’s a tough, and if you’re not enormously wealthy, a rather nasty business.

And perhaps these were the market forces that persuaded Phillips to cancel the auction of the Diane Arbus photos that Bob Langmuir had discovered. I’m sure Phillips de Pury seemed big enough and bad enough when they pulled the rug out from under Bob last April 8th. But it could be that they were, in reality, caught between two bigger and badder entities – Christies and Sotheby’s.