A new Sotheby’s report peeks under the hood of high-end auction houses, and reveals just how critical the super-rich are to company bottom lines.
(Bloomberg) — The past five years have brought significant growth in transactions exceeding $1 million at Sotheby’s, Christie’s and Phillips, according to a new report co-authored by Sotheby’s and the London-based research firm ArtTactic.
The report analyzed sales of contemporary, Impressionist, modern, old master and traditional Chinese artworks exclusively from those three companies. The report is therefore more about the top-tier auction business than the art market in general. Still, its findings demonstrate the high-end secondary market’s strength, as well as its vital importance for the three auction houses’ bottom lines.
The insights are particularly novel because they draw in part from Sotheby’s private sales information, a closely guarded secret until now.
“An auction house’s private sales data gives us a little window into a part of the market we don’t have access to,” says Anders Petterson, the founder and chief executive officer of ArtTactic. (Private sales data from Christie’s and Phillips are not included.)
Inflation Hits the Rich
One of the clearest takeaways from the report: The price of expensive art is rising.
In 2018, sales exceeding $1 million at the three auction houses yielded $7.44 billion. By 2022, they’d grown 9.5%, to $8.15 billion. But even as the total grew, the number of painting sales above $1 million fell. In 2018, there were 1,410 of these sales, according to the report, while in 2022 there were 1,352. What’s more, last year works priced at $20 million or more accounted for 45.2% of all such sales.
Less art, in other words, is making more money. The average price for a work of art in the $1 million-plus price bracket was $5.3 million in 2018; by 2022, it was $6 million.
The report underscores how significant this high-end market is for the auction houses’ total revenue. In 2018, even though the $1 million-plus tier represented just 4.6% of all lots sold, it racked up 75.9% of the houses’ total sales value. While that proportion dipped in 2020 (67.8% of sales value, with 3.1% of lots sold), it resurged last year, with 4.3% of the auction house’s lots totaling 77.8% of total sales value. Overall, approximately $31.35 billion of the $42.13 billion spent on art at the auction houses from 2018 to 2022 was for works priced at $1 million or more.
“Again, we’re only looking at the three houses,” says Petterson, “but I felt I didn’t quite have a sense that it was weighted [so heavily], from a business perspective.”
Private Sales Made Public
In an unprecedented move, the auction house disclosed a glimpse into its propriety private sales data in the report.
Between 2018 and 2022, some 85.9% of all Sotheby’s private sales, by value, were for works fetching more than $1 million. The pandemic and its attendant market uncertainties pushed many people into private transactions: Private sales exceeding $1 million jumped by 76% from 2019 to 2020, rising from 191 pieces worth $803.5 million to 212 works worth $1.41 billion.
But once the auction market firmed and consignors began to feel more comfortable putting their work on the public block, private sales went downhill: Last year the category totaled just over $1 billion, for 168 objects. Individual values also peaked in 2020, when the average price for art in the bracket was $6.7 million; by last year it had sunk to $6.3 million.
“If we combine trends in the public markets and overlay the trends with Sotheby’s private information,” Petterson says, “there’s an inverse relationship between private sales and public sales.” Public sales dipped in 2020, he explains, but private sales jumped. “You could argue that the market was much more stable than it was portrayed publicly,” he says.
It helps bolster the overall takeaway, Petterson continues, that art can be a store of value. “There is an increasing level of financially driven motivation for buying art that wasn’t present in the past,” he says. “This put some figures on what we expected was happening but didn’t have access to.”
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