The hammer comes down. $150,000. $2.7 million. $450 million. Art auction houses create hysteria in the art world, commanding a large piece of the $67+ Billion market. And while art houses have created some of the biggest names in art history, they’re highly controversial for the artists and galleries supplying them.
Whether you’re looking to sell your works through an auction house or bid your way to the next masterpiece in your collection, here’s an overview of how these houses work and the triopoly in charge of it.
Art Auction Houses Create Transparency in the Art World
According to the Art Market 2023 report by Art Basel and UBS https://theartmarket.artbasel.com/, global auction sales accounted for nearly $27B of the total market or over 40%. It’s these auctions that set precedents in the price for a particular artist while showcasing the demand for an artist’s work based on bidders and quantity available for sale.
The art industry is notoriously opaque when it comes to money–who’s dishing out millions for art, and how much do artists get paid? The publicized nature of art auction houses makes it easier to track the first, while the latter is a major concern for their controversy.
Art auction houses represent the secondary market for art–most times financially detaching the work from the artist. While we’re accustomed to seeing blue-chip artist works selling for millions of dollars, it’s rare that any of this money goes to the actual artist, even if they’re still living.
Regardless, art auction houses play a key role in the industry, establishing themselves as a middle man to connect art buyers and sellers. Three must-know names instantly come to mind: Christie’s, Sotheby’s, and Philips. They account for most of the art auction sales, and their control over the market values them as a modern-day triopoly.
The Art Auction House Triopoly
It’s easy to enjoy the theatrics involved with art auctions. Seeing masterpiece artworks once hidden in private collections, hearing the auctioneer chanting astronomical prices, and the frenzy of bidders in the audience or phones vying for a place in art history. But what really goes on behind the scenes that make these art houses so critical to the art market?
Christie’s is a New York-based art auction house selling fine art and other luxury goods. It’s most notable for the 2017 auction of Salvador Mundi by Leonardo Da Vinci for the hammer price of $450 million—the most expensive listed painting to date.
Sotheby’s is the oldest major art auction house, established in 1744. It originated in Londonderry but now operates offices in 80 locations worldwide. The record-breaking households the record for most expensive contemporary artwork sold (Mark Rothko – White Center for $72.8M) and most expensive art sold for a living artist (Gerhard Richter – Abstraktes Bild for $34M).
Phillips is the third major art auction house, although significantly smaller than Christie’s and Sotheby’s. It’s one of the leaders in 20th-century and contemporary artworks, achieving sale records with Basquiat and Yayoi Kusama works.
These companies, as well as other reputable auction houses, work similarly. They approach clients with collections (or vice-versa) and determine an estimated value for an art piece. The art house then creates a catalog of the sourced works and May host a viewing exhibition to see the lot in person. Later, holding the actual auction with bidders in person, via phone, or online bids. Once the hammer closes the sale, art houses earn a commission on the sale, upwards of 10% in the more established auctions.
There are tons of variables that determine which auction house a collector selects. They must consider price estimates, the likeliness their art will sell, etc. As for buyers, one of the biggest factors before buying is whether the work is validated as authentic—imagine spending millions of dollars on a valueless fake!
The more established an art house, the more it’s able to satisfy the needs of both parties. The staff at Christie’s, Sotheby’s, and Philip’s do their due diligence by meeting with collectors in-person to review their collections, implementing verification on art, managing buyer relations, and more. One can see how they earn their commission on each sale.
What about the artist?
This brings us back to the original concern about auction houses. What’s in it for the artist? With contemporary art being a fast-growing segment for auction lots, we’ll see growth in the number of living artists’ works that go up for auction. Since an auction constitutes a secondary market sale, Sotheby’s is one of the first to launch an initiative called Artist’s Choice to sell works as a primary market auction.
https://www.sothebys.com/en/series/artists-choice
Whether setting precedents in the secondary market and seeking ways to establish a footprint in the primary market, art auction houses remain one of the key pillars driving the broader art market.
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