Evaluating Art Auction Results Pt. 1 – artmarketblog.com
In my last post I wrote about how the figures released by the auction houses after an auction can be rather deceiving. Almost every article I have read on the recent February Impressionist and Modern Art auctions says that these auctions were a major success. One journalist even went as far as to say that the auction results are an indication of a bullish market. Now I’m not trying to be picky, but a bull market refers to any market condition where prices are rising so referring to the art market as a bull market when the market is currently characterised by falling prices is incorrect. On a more positive note, the fact that people are still willing to spend large sums of money on art at the current time is a good sign that people have not completely lost confidence in the art market and that there is still plenty of wealth available to spent on art if the price is right. The fact that considerable sums of money are still being spent on art does not, however, mean that prices being paid are on the increase. At the current time it just means that the market has responded positively to lower estimates and the increased potential for bagging a bargain.
After writing my last post I began to think about exactly what it is that determines whether or not an art auction is successful or not. There are statistics that can be used to gauge the success of an auction and they are:
1. Percentage of lots sold by number
2. Percentage of lots sold by value
3. Sale total (value)
4. Average lot value
5. Number of works that exceeded previous sale price
Before these statistics can be used to determine whether or not an auction was a success one first needs to decide whether they are judging the success of the auction in relation to the art market or in relation to the company that conducted the auction. Although this may seem like an unnecessary step I believe that the failure by journalists and analysts to indicate the context in which they are conducting their analysis of an auction can lead to confusion or a seemingly incorrect analysis. The primary motivation of a company such as Christie’s or Sotheby’s, whether we like it or not, is making profits yet I often think that people forget this fact and treat these companies more like non-profit organisations. Not-profit organisations whose job it is to maintain a balanced and stable art market that acts in the best interest of artists, collectors and investors. But we all know this is not the case. As a publicly listed company, Sotheby’s has a responsibility to it’s shareholders to provide a return on their investment. Therfore, for Sotheby’s, a successful sale is one that gives people a positive impression of the company and is highly profitable so that the share price increases. To achieve the results that they need auction houses often operate on a very thin line between what it is considered to be ethical and acceptable and what is considered to be anti-competitive and unethical. Sometimes this line is even crossed as was the case with the Sotheby’s/Christie’s commission fixing scandal.
To be continued…..
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.
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