Galleries vs. auction houses: war declared?

Over the weekend, published a piece of mine titled “Blurred lines, battle lines?” that tackled the controversies surrounding the Huber sale, Haunch of Venison being bought by Christie’s and the fact that TEFAF Maastricht – the premier fair for everything from Old Masters up to Moderns – for the first time included galleries owned by Sotheby’s and Christie’s. (BTW, MAN blogger Tyler Green had a very funny fly-on-the wall moment in the minimalist gray-plywood Christie’s booth – which a friend tells me was being called “le pissoir” by snooty British dealers more attuned to wood molding and plush carpeting.) After running through the various details and insider speculation regarding all three stories – some of which will be familiar to people who have been reading Artworld Salon closely – I tried to put this all in perspective:

What connects these three controversies? The fact that battle lines are being publicly drawn by dealers, traditionally the most discrete players of the artworld. Despite the strength of the market, they feel their position is under attack, be it at art fairs or in the secondary market. Likewise, auction houses – with their huge staffs and sprawling marketing apparatus – are simply better positioned for the new globalized market, able to target collectors no one (not even the houses) knew existed. Suddenly, galleries feel forced to play a much more finance-driven game… Given the current market conditions and the way the artworld has evolved, the traditional model of the gallery building its position through close control of its artists’ [secondary] markets seems shakier than ever inflatables for sale in canada. There are too many variables – collectors flipping works at auction, artists defecting to other galleries, sudden market shifts.

What comes next for galleries? Thinking from a purely commercial standpoint, one could theoretically imagine a hybrid model where galleries hold private auctions among those collectors on a hot artist’s waiting list to see who gets the next work. Or art fairs could function like silent auctions, with collectors placing incrementally higher bids on the works displayed in booths. But these are short-term games, unsuited for artists focused on their legacies or for galleries with any interest beside profits. What’s more likely is that the gallery world will strongly bifurcate, with some galleries playing the auction-house game of high finance and volatile marketplaces, while others work only with artists and collectors focused on the longer term.

You can read the piece on to get the details (and to see what Amy Cappellazzo of Christies and gallerist Roland Augustine have to say on these issues). But here’s what I’m curious about for discussion here:

1) Can you imagine any other practices that would hybridize the current auction-house and gallery models? 2) What do you make of the notion that galleries will have to choose which game – short-term or long-term – to play? 3) Is trying to play both games at the same time (as many do now) a losing proposition?

8 thoughts on “Galleries vs. auction houses: war declared?”

  1. I do think the galleries are in the weakest position in this three way tussle with the fairs and the auction houses. But it is not untenable. The auction houses have the reach and the media publicity, and the fairs have the volume of work available for viewing in one place and at one time, but the galleries still have the relationship with the artist. The strong galleries with good artists, and the ability to locate and promote good new artists, have little to fear. Even if their influence over the secondary market dwindles in the short term, as it must in these volatile times. They will continue to be feted by the fairs and recognised by the auction houses and maintain their position with buyers and artists. It is the second and lower tier galleries that have to worry.

    With competition for collector eyeballs high and media hype steering new collectors to the doors of the major auction houses and the better fairs, it is hard for a second tier gallery to attract any attention and thus footfall. It is they who have to think about alternatives to their current business model.

    As for hybrid auction gallery models, I do not think a gallery trying to run a formal private auction for works in their control is the right solution. (Informal pseudo auctions of course happen already.) It might generate better prices for a few works in the short term, but if there is such demand then surely the artist is better off going direct to a major auction house with more buyers in their sphere of influence? And perhaps a buyer might be happy to participate the first time, but if price is the only arbiter of his relationship with the gallery, then what loyalty is encouraged, in either direction? I think this is a route for a gallery to being disintermediated out of the system altogether, over time.

    I am also not a fan of auction houses buying galleries. I think there is a risk of conflict of interest and certainly, as we have seen, a risk of irritating one part of their own supply chain: other galleries.

    As with so many things I think the right way to build a position in this competitive landscape is to think of new ways of communicating with the market. Galleries need to be clever about ways of maintaining relationships with artists and with potential buyers. They also need to be on top of what is going on in the market around them, with fairs and auctions and new artists and new galleries, and be able to provide this knowledge to those in their community. This is not rocket science, but it does require some understanding of new technology and it requires some work. Few galleries do it well.

    There is the potential for other financial innovation, beyond, auctions, however. Options (puts and calls), forward pricing, conditional agreements are all financial tools that could be used. And some variants of these already are. I would be interested to hear from others what new financial innovation they have already seen from galleries over the last couple of years. And whether they think galleries are taking on too much new risk with the positions they already take.

  2. It is the second and lower tier galleries that have to worry.

    Hand me that razor blade, would ya?

    They also need to be on top of what is going on in the market around them, with fairs and auctions and new artists and new galleries, and be able to provide this knowledge to those in their community.

    I’m not disagreeing, but with staffs a mere fraction of the what larger galleries, let alone the auction houses, have, this isn’t a realistic expectation for smaller galleries. Also, this information will bring collectors in, but not necessarily to buy, merely to gossip.

    I think we’re already seeing what the smaller galleries have to do to compete. I won’t point to any particular examples, but smaller, more focused programming within a freshly defined niche seems to be a smaller gallery’s best route forward at the moment. You’re gonna see the rise of the “lean, mean, fighting machine” gallery in response to this. Stake out your little corner of the market, defend it by being THE expert, and stop trying to compete with the one-size-fits-all behemoths.

  3. “War declared” is very late breaking news indeed. This is just one more battle, perhaps an unusually visible one, in a conflict that erupted years ago. The fighting intensifies when the market soars and the stakes get higher. And in a sense, the cold war has simmered ever since the creation of an art market where a buyer had two places to buy a picture — a gallery or an auction house — and especially when regular buyers, not just the trade, realized they had this option. In that sense, this “war” started somewhere around the 1980s.

    There are many conceivable paths that can connect an art work and a collector, and we may be living in times when the principal paths traveled by objects on their journey to a collector, and by artists as they ascend their careers, are fundamentally changing. In a way, that’s the main reason why we started this conversation.

    The gallery system has had a phenomenal century-long monopoly on validating artists and marketing their works. Now, faced by the globalization of wealth, mounting values and production expenses, and an untenable proliferation in the number of galleries, something clearly has to change. I agree with Ian that replicating auction-like practices is not the way forward.

    Galleries’ core strength is their commitment and close-up attention to the process of identifying and nurturing talent and prices. Where they lose out is at the high end. That’s where the business demands vast capitalization and global operations muscle. Few galleries can privide this. The same Darwinian food chain has always operated within the gallery system itself, with successful artists trading up to more powerful galleries.

    So how forward? Based on the experience of other cultural fields, the way forward for some galleries will be consolidation.

    The bane of the gallery system is that galleries, in attempting to serve ever growing markets, tend to proliferate rather than consolidate. There are many reasons for this but the bottom line is that this leaves galleries splintered — a vast sea of understaffed and undercapitalized, weak organizations. The so called mega-galleries are simply galleries that have achieved a certain degree of consolidation through their own clever management. Art fairs offer a degree of consolidation as well, without actually merging organizations. Sooner or later, some of the smaller guys will have to team up to play in the big leagues.

    Another, longer term division of labor between small galleries and large arts businesses (be they galleries or auction houses) would be to adopt the model of other creative industries and leave the talent scouting to the small firms. In this model, galleries could focus on what they do best and operate as talent agencies. The production and the distribution would then be the job of larger corporate entities that have the reach and capacity to do the job. This may sound like complete nonsense to some, but it does happen to be the way a couple of other very large cultural industries operate.

    My point is that markets and cultural industries are not immutable. They must evolve, and so must galleries.

  4. Weird Web 2.0 moment: yeoman Artworld Salon commenter Edward Winkleman has a great post on his blog that´s spun off from this Artworld Salon post. I excerpt from his post below, but I strongly advise that you go check it out in full – and then read through the comments there as well.

    “Rather than play along by the auction house rules and accept second-fiddle status, I think the best thing galleries, and especially younger galleries, can do is constantly focus attention on the one aspect of the auction house business that doesn’t serve their customers well. Namely, auction houses intentionally make art more expensive than it has to be, and this only helps the auction houses in the end. After the glamour and excitement of overpaying for a work of art in the flurry of carefully crafted hysteria wears off, collectors are charged heartily for that momentary thrill. And even the afterglow of media excitement for broken records is short-lived, because the auction houses immediately go into overdrive to inflate the prices by the same artist at the next sale. More than that though, what happens at auctions affects prices everywhere else, meaning that even if you don’t currently buy at auctions, you’re still paying more than you should have to for the art you buy.

    With some folks so rich they don’t care if they overpay and the thrill of acquiring that prize piece being worth every cent to them, I think it will take a concerted effort to help everyone else snap out of it and see that supporting your local art gallery – developing a relationship that will ensure you have access and the best prices available – ultimately makes so much more sense than dreaming you can outbid the überwealthy at auctions. Because when the auctions are the only game in town, what do you think is gonna happen to those commission rates then?

    The other big advantage to supporting your local smaller art gallery is the luxury it gives you to slow down in making purchases. Collectors can still get first pick at the art by the artists they like, and I don’t mean in the frantic previews of art fairs, but rather in the calm and charm of the artist’s studio. Yes, that’s still possible if you establish that sort or relationship with a gallery that values that experience. Or, you can get your paddle and wave it enthusiastically, hoping the auctioneer will spot you among the throngs of other bidders, while you try to quickly recalculate whether you really need that much money to retire the way you want to. The choice is yours.”

  5. So long as your local art gallery is capable of finding, developing and encouraging artists of quality whose work you might be interested in buying. We are not talking about bakeries here. Art is not yet a commodity, though it sometimes seems so to be. It is still true that we live in a world where far more people, even proportionately, can devote their lives to painting or sculpting or experimenting than the time of the old masters and that, therefore, there is much more mediocrity around than good work.

    My interest, as a putative buyer, is not to support galleries because they are local or because they are based in New York. My interests lie in locating work I like. Work that moves me. Work that makes a difference to my life. I don’t care where that work is to be found.

    I do, however, like Edward Winkleman’s reminder that the Auction Houses business is to maximise how much money we pay for what we love. And clearly, therefore, if a gallery can give me quiet, comfortable, unrushed access to works I would like to buy, at prices that are reasonable, that is where I would prefer to go. So yes: a hearty encouragement to smaller galleries who do their job well and support artists of quality and find them collectors who will support them over time.

    But I fear that doing that job is becoming increasingly difficult. It is not just new buyers who follow the media hype to the auction houses and major fairs (where galleries compete to enter). Artists, too, are rethinking what routes to market are best for them. As I said in my first comment to this thread: it is the relationship with artists that is the key to the continued positioning of small galleries within the changing landscape of this Art world we inhabit.

  6. My interest, as a putative buyer, is not to support galleries because they are local or because they are based in New York. My interests lie in locating work I like.

    Absolutely understand and agree. But when that work you like is also liked by hundreds of other collectors, it’s your relationship with the gallery that will ensure you’re at the head of the queue, able to get it for a fair price, rather than having to overpay at auction.

  7. Things are looking kind of touch-and-go re the auction houses at TEFAF Maastricht next year. From The Baer Faxt, citing a Maastricht exhibitor: “I don’t really agree with the favorable comments on the mixing of Old Masters and Modern, as it hasn’t done that well. In Christie’s case, they have caused discontent as they have mixed abstract and Jenny Saville with old masters in an aircraft-lounge stand design, when they told organizers they’d be showing Old Masters and they are in that section.”

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