Hammer Time!

(Excerpt)

Already worth a staggering $30bn a year, growth in the global contemporary art market is accelerating rapidly. Johnny Davis shadows Sotheby's super-auctioneer Oliver Barker to find out how the industry is defying worldwide economic downturn, who's fuelling the boom & whether a bust is around the corner.

Sotheby's was wising up to contemporary art's potential. The previous decade (90s) had seen museums all over the world begin aggressive trawls to bolster their collections. In 1997, it tested the water with a contemporary-heavy New York sale for the Children's Heart Foundation. Pooling $15m, it toppled all expectations & confirmed contemporary's potential.
Sotheby's, along with the almost-as-venerable Christie's, hasn't looked back.

Next came a wave of young, moneyed collectors - often hedge-fund managers - hip to contemporary art's brash aesthetic, happy to push prices to staggering, scarcely believable levels.

At consecutive evening sales last year, Sotheby's, Christie's & Phillips de Pury sold a total of $837m worth of art in 24 hours, breaking more than 120 artists' records.

"Until about 1980," says David Nash, for many years Sotheby's director of impressionist & modern art worldwide, "if you bought a work of contemporary art by a major artist from a major gallery & tried to resell it immediately, you would get about half what you paid for it."

The market is now worth $30bn a year, the world's largest legal economy to go virtually unregulated. According to Ed Dolman, Christie's CEO, the Christie's-Sotheby's duopoly controls 70% of that market. (Others put the figure nearer to 90%.)

Talk of crash abounds. But even as some Western hedge-funders tighten their belts, a new wave of collectors has arrived from the Middle East, Russia & China.

"Nobody thinks these prices are sustainable," says Don Thompson, author of The $12 Million Stuffed Shark, a rollicking expose of the art world. "Can they keep going up 15% a year forever? Of course not. But the one thing I learned doing my book is just how much money there is out there. If you're a billionaire buying a picture, it really doesn't matter whether you spend $25m or $30m."

"We are the only publicly-listed auction house," Oliver Barker says. "Phillips de Pury & Christie's are both privately owned. Our principle objective is to get money for our shareholders."

Sotheby's was founded in 1744, Christie's in 1766. Rivalry between the two can be intense, a situation presumably not improved in 2000 when the houses were found guilty of running a price-fixing cartel & fined 260m pounds. While Sotheby's was ordered to pay an additional 70m pounds in criminal penalties & saw then chairman Alfred Taubman sent to prison for a year (a scandal that very nearly derailed the firm), Christie's escaped criminal charges by submitting evidence documenting its complicity.

Its a standing joke that an auction house's bread & butter is the three Ds: death, divorce & debt. "That paints us as real ambulance chasers," Barker smiles.

There are clients who couldn't care less about the art. They're buying it to "flip" - sell for a profit later. "There's a group of collectors who famously buy things so they can put them in a warehouse for six months. We have people come in all the time & say, "Look, I've got a million dollars to invest, what would you advise?"

People are still talking about the art market crash. But it hasn't happened. Barker, though, seems more cautious than before. "Since the financial crisis we've become a lot more obsevant as to what people's risk aversion is. It's too early to say. Unlike the stock market, where you can see what your shares are worth, the only way to see what a picture's really worth is at auction. That said, we've become a magnet for China & Russia & all these new world economies. There's no doubt that the recent success of our share price has been driven by that.
"The bottom line," he adds, "is there will always be a market for great art."

Hammer Time!
Johnny Davis
British GQ
Aug.08