The auction duopoly under pressure

Source: Artprice

The art market recovered its momentum in the first half of 2010: + 71% in auction revenue from Fine Art alone! This fact has been quickly seized by the auction houses who are now predicting annual growth in 3 figures in order to reassure a still hesitant market.
In line with this market trend, the historical duopoly, Christie's and Sotheby's, have posted first-half revenue figures up 67% and 140% respectively versus their Fine Art revenue for 1H 2009. In a dynamic market context, these figures seem perfectly natural. Nevertheless, when compared to the duopoly’s growth figures in previous years, the picture does not look quite so rosy.

For example, the latest combined revenue figure for the two auction houses is 25% lower than in 1H 2007 and 20% below the combined 2008 figure. Compared to 1H 2006, i.e. before the market started its final ascension in 2008/2009, the auction revenue is only 9% up for Christie's and 0.5% up for Sotheby's. Moreover, although the two auction houses have posted market share gains, these gains are substantially dependent on “major” auction results: more than 340 hammer prices above the $1m line, representing 62% of their combined sales.

Between 2002 and 2008, the Christie's and Sotheby's duo never left more than 30% of the Fine Art auction market to their competitors. Since July 2008, this figure has been rising and in 2H 2009 the combined market share of the competitors amounted to 46% of global auction revenue.

While the Chinese auction houses account for most of this increase, the other Western auctioneers have not managed to take advantage of the gradual dilution of the duopoly’s market hegemony and the emergence of a highly globalised art market.

Phillips de Pury et Luxembourg, in constant decline since 2001, is today the number 5 auction company in the world behind the Chinese giants Poly and China Guardian. Phillips, acquired by Bernard Arnaud and his LVMH group between 1999 and 2003 to compete with Francois Pinault’s control of Christie's, has not generated more than 4% of the global market share since 2002. Today, the Russian Financial holding Mercury controls the auction house founded by Harry Phillips in 1796. The aggressively seductive strategy adopted by Phillips de Pury & Company (e.g. a sale entitled “SEX” was organised in March 2010) does not appear to have had the desired effect: In 1H 2010, the English auctioneer was responsible for only 2% of global art auction revenue.

In France, the situation is hardly any better: apart from the scandal that hits the historic Hôtel des ventes Drouot, the French auction companies have once again lost market share this year. The first French auction house in the global ranking is Artcurial, in ninth position behind the Austrian company Dorotheum and a long way behind the Chinese and English houses. In 2006, there were 6 French auction houses in the global top 30; today there are just 3.

China is the big winner from the global art market crisis with 5 auction companies in the world’s top 15 and a market share that is steadily growing.

In the second half of 2010 it is just possible that the two global giants, Christie’s and Sotheby’s, will manage to re-affirm their domination… after all, their fine art revenue in 1H 2010 was better than their combined total for 2009. But if they do, it will be against what now looks like a well-established global trend.

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