Christie’s and Sotheby’s: On the Champagne Trail

In their competition for clients, the top auction houses resort to wining, dining, hand-holding, house calls, appraisals, loans, guarantees, single-work catalogues, and providing employment for consignors’ children.

Specialists from Christie’s postwar and contemporary art department on the phone with clients and spotting bids in the audience. From left: Barrett White, Amy Gold, Amy Cappellazzo, Brett Gorvy, and Laura Paulson.

Specialists from Christie’s postwar and contemporary art department on the phone with clients and spotting bids in the audience. From left: Barrett White, Amy Gold, Amy Cappellazzo, Brett Gorvy, and Laura Paulson.


Two months from now, Christie’s and Sotheby’s will sell somewhere in the neighborhood of a half-billion dollars’ worth of art over a two-week period when they hold their November sales of Impressionist, modern, and contemporary art in New York. How the artworks perform on the block, particularly in the high-profile evening sales, is critical to the firms’ standing. The results determine each house’s market share and ability to attract five-star properties in the future—as well as the health of the art market as a whole. As London dealer Martin Summers puts it, “The market is judged as high or low or flat or excited by the results of the sales.”

For Sotheby’s and Christie’s, the race is similar to the television network ratings battles that influence their relationships with advertisers. Every season one house performs better than the other by winning property from an esteemed estate or by talking the right pictures off the right walls. At the end of each evening sale they hold press conferences to announce how well they did, how many works sold beyond their high estimates, and how many record prices were set. Every season, and again at year’s end, one firm emerges as the market leader.

Last year Sotheby’s—benefiting from a consignment from the Greentree Foundation comprising works previously owned by John Hay Whitney and Betsey Cushing Whitney that included a record-breaking $104.2 million Picasso—took the lead with $2.69 billion in annual auction sales over Christie’s $2.31 billion. (The houses receive a fraction of their sales as income. Sotheby’s, a publicly traded company, reported $443 million in auction revenue and $62 million in profits in 2004.)

Christie’s had dominated the marketplace for much of the last eight years, although often by a slim margin. (In 1999 and 2002 the companies’ sales were neck and neck.) And despite Sotheby’s success a year ago with the Whitney consignment, Christie’s outperformed Sotheby’s evening sales of Impressionist, modern, and contemporary art in New York last May by $117 million.

Each season’s tally is a testament to the strength of the auction house’s team—the array of specialists, financial and legal advisers, and chief executives who pull in property year-round. Rare is the artwork over which Christie’s and Sotheby’s don’t do battle. Says Michael Findlay, a director of Acquavella Galleries in New York and formerly Christie’s international director of fine arts, “Christie’s and Sotheby’s are constantly assessing how far out on a limb they are willing to go to prevent property from going down the street to the competition.”

To win a coveted collection, Sotheby’s and Christie’s will offer everything from elaborate dinner parties and Champagne and caviar served in the skyboxes to single-owner catalogues and all-expense-paid trips around the world. But what matters most right now, says Findlay, is the money that the firms are guaranteeing and advancing to consignors, “more so than the track record of the auction house or the personal relationships that have been created. In the majority of cases, when push comes to shove, the money will win.”

When it looked as if it was going to lose Warhol’s Liz (1963) to Christie’s last spring, Sotheby’s flew an executive to Los Angeles to deliver a reported $10 million guarantee to consignor and dealer Irving Blum to ensure that the painting, which sold for $12.6 million (including buyer’s commission) in May, ended up on Sotheby’s ledger.

Five years ago Christie’s and Sotheby’s pleaded guilty to fixing sellers’ commissions between 1992 and 2000. The firm Phillips, de Pury & Luxembourg, then owned by French luxury goods magnate Bernard Arnault, tried to benefit by offering heady guarantees (promises to pay a minimum sum to a consignor regardless of whether a work sells) to win property for competing sales of Impressionist, modern, and contemporary art in New York. But after sustained losses, Arnault sold his majority share in 2002 to his partners Simon de Pury and Daniella Luxembourg, who has since left the company to become an art dealer and adviser.

Now the firm, known as Phillips, de Pury & Company, primarily hosts sales of younger contemporary art (largely material from the 1980s forward) during each New York auction season, which remain principally Christie’s and Sotheby’s events. Phillips’s day and evening sales of contemporary art last May totaled $35.2 million, compared to Christie’s $170.95 million and Sotheby’s $94 million. While Phillips’s sales set 30 auction records, partly because works by many of the young artists had never before been sold at auction, when it comes to higher-value postwar artworks, Phillips is often not in the running, says head of contemporary art Michael McGinnis.

“Most of the time we are not competing with Christie’s and Sotheby’s,” explains McGinnis, who says that 70 to 80 percent of Phillips consignments are not competitive. “We’re working with a network of clients that we’ve fostered over the last six years. We get a lot of repeat business and word-of-mouth consignments from clients.” The firm also holds sales of jewelry, design, and photography throughout the year, and deals privately in a range of property.

Today, with artworks routinely fetching record prices and buyers continuing to outnumber sellers, consignors are able to play Christie’s and Sotheby’s against each other in order to secure the best deals, which increasingly involve monetary incentives like guarantees, loans, and advances. “The business is changing pretty dramatically,” says Marc Porter, president of Christie’s Americas. “Sellers of major property want a financial component in almost every case. They are forcing us out of our traditional role of being only an agent and often demanding that we become a capital partner as well.”

Sotheby’s Financial Services will lend collectors up to 50 percent of the low estimate of an artwork even if it’s not immediately put up for sale. The terms of the loan restrict the collector from selling the property elsewhere for a period of time even after the loan is repaid. Competition between the houses, says Porter, is “brutal” and “relentless”—so much so that Sotheby’s declined to make any of its specialists or executives available for this article, stating in an e-mail message, “How we compete and how we win business is highly proprietary.”

There used to be a saying, says Martin Summers, former managing director of London’s Lefevre Gallery, which closed in 2001, that “One sold at Sotheby’s and bought at Christie’s.” While some clients remain loyal to one house over the other—Summers says he prefers to sell through Sotheby’s because of his long-standing relationships with its executives—today most consignors are likely to solicit proposals from both of them.

The auction houses have about three months between the end of one season and the catalogue deadline for the next to line up property. They are geared to act quickly because the most aggressive deal can shut out the competition, and because once great material is won, it can be advertised and beget more great material. “Christie’s and Sotheby’s comb the pages of the obituaries, and if they hear of anything,” says Summers, “they are around there as quick as a whip before the poor fellow is even cold. Of course, there are usually a couple of dealers there as well.”

When Hester Diamond decided to sell modern artworks from her collection last August, she invited Sotheby’s and Christie’s to come to her Manhattan home and look at her collection. “I was having work done on my house at the time,” says Diamond. “I told them the work should be done in about two or three weeks and they could come by then.”

But neither firm wanted to wait. Sotheby’s insisted on coming by that afternoon, and in a matter of days had turned out a mock-up of the catalogue, including entries for her works and optional covers. When Christie’s won the Victor and Sally Ganz collection in 1996, it went so far as to present the consignors with an architectural model displaying how their pictures would be installed museum-style in the firm’s galleries.

In the early 1990s, when he was working at Christie’s, Findlay remembers, he was responsible for the timely delivery of a proposal that had been tied with a grosgrain ribbon to a Japanese client. So concerned was the then head of Christie’s in Japan with presentation, says Findlay, that she held up the delivery, “insisting that the ribbon be ironed.”

Presentations for important consignments can involve a half-dozen people, including the chief executive, the director of marketing, the chief financial officer, and the auction house’s legal counsel. Among the senior executives Diamond says she met with were Tobias Meyer, Sotheby’s auctioneer and worldwide head of contemporary art; Charles Moffett, Sotheby’s co-chairman of Impressionist and modern art; Warren Weitman, chairman of Sotheby’s North and South America; and Sotheby’s chief executive officer William Ruprecht.

Christie’s delayed its first meeting with her for a few days, says Diamond, so that its chief executive, Edward Dolman, who was not immediately available, could meet with her from the start. But by then, Diamond, impressed by Sotheby’s creativity and efficiency, says she had nearly made up her mind to give Sotheby’s the consignment.

There was some back-and-forth over what each auction house was willing to offer, says Diamond, but the amount of the guarantee was a “crucial factor” in her decision to consign the works to Sotheby’s, as were subsequent negotiations over what the split beyond the guarantee would be.

Sotheby’s reportedly guaranteed Diamond $65 million for six modernist works by Vasily Kandinsky, Constantin Brancusi, Piet Mondrian, Fernand Léger, and Picasso—an offer that “was dramatically different from Christie’s,” says an auction house source. Diamond’s property brought in $39 million, about two thirds of its reported guarantee. Mondrian’s New York/Boogie Woogie (1941) fetched $21 million, a record for the artist at auction, and Brancusi’s The Kiss (ca. 1908) sold for $8.9 million, but Kandinsky’s Sketch for Deluge II (1912), estimated at $20 million/30 million, failed to sell, as did Picasso’s Baigneur et Baigneuses (1921), estimated at $8 million/12 million.

Christie’s and Sotheby’s deal as much in glamour as in art, and one of the fundamental ways they compete is by wooing consignors. “They’ll throw a party for a consignor’s family, fly them to New York, put them up in a hotel, bring in a girlfriend or boyfriend,” says a source. “Little things that don’t add up to a lot financially but seem to make clients happy.”

Specialists from both firms wine and dine collectors lavishly, compliment them profusely, offer free appraisals of their collections for insurance and tax purposes, help with loans and restoration, and even employ their children. “Within the auction houses, there is a debate over whether it’s better for the children of collectors to work at your auction house or at your competitor’s,” says a former auction house executive. “It can backfire. The potential client can get an inside view that an auction house doesn’t want them to have. They can learn about a dropped work or someone putting a hole through a very expensive painting.”

One former auction-house executive recalls being accompanied on an exhibition tour to Tokyo, Geneva, and London by the stepdaughter of the consignor, her adolescent daughter (who refused to eat anything but hamburgers and french fries), and the consignor’s attorney and his wife, who were in the midst of “very serious marital discord,” says the source. “It was like a circus. One’s purpose is to show paintings to clients, but one ends up having to look after a group of dysfunctional people going around the world on your dime, demanding ketchup.”

Other ways to win over clients include inviting them to boardroom lunches, making donations to their favorite causes (Christie’s made a $50,000 contribution to the Brooklyn Museum when it showed “Sensation,” an exhibition of works by Young British Artists owned by frequent auction consignor Charles Saatchi), and offering the use of their premises for panel discussions and charitable events. Potential consignors “are like sitting ducks,” says a former auction house specialist. The auction business is about “nurturing the ducks, waiting for them to fly, and then taking your best shot.”

Christie’s, for one, produced a catalogue of John and Frances Loeb’s art collection for family purposes 20 years before winning a consignment of works from the Loeb estate in 1997, according to sources. The firm’s prior research on the collection formed the basis of a single-owner catalogue for the sale, which grossed $93 million.

The auction houses also develop close ties with intermediaries who can steer business their way, such as dealers and art advisers, who often counsel clients to consign works to a particular auction house in exchange for an introductory commission. The fee is typically paid out of the seller’s commission, but when there is none, the dealer’s fee is taken out of the buyer’s premium. Sellers sometimes seek out intermediaries with auction-house experience, like private dealer Franck Giraud, former director of Christie’s 19th- and 20th-century art department, who explains, “We know exactly what the auction houses can give you.”

One Japanese collector who transacted a legendary amount of business with Sotheby’s and Christie’s in the late 1980s never created “a pattern of consigning only to one house because he didn’t want to lose leverage,” says a source familiar with the collector’s negotiations. The collector “didn’t mind waiting for payment,” says the source. “He was more interested in getting a high price. He would convince the auction house to inform potential buyers that they could pay in installments if the hammer price went over the high estimate.”

The collector frequently ended up getting in fights with both Sotheby’s and Christie’s. “He played everybody,” says one auction insider. “He liked to smoke and he liked to drink. There are a number of people at both auction houses who drank more and smoked more with him…. He never let your drink fall below half an inch.”

Consignors can have a tough time choosing between the two firms. Asked how he decides between Christie’s and Sotheby’s, contemporary collector Kent Logan replies, “Frankly, with great difficulty.” When Takashi Hashiyama, president of the Maspro Denkoh Corporation in Japan, struggled with the choice earlier this year, he proposed that representatives from both houses
play the childhood game “rock, paper, scissors” to determine the winner. Christie’s chose “scissors” after researching the psychology of the game and consulting specialists’ children, defeating Sotheby’s “paper” and adding $17.8 million to its May sales results.

Both firms offer clients the option of buying and selling privately. Sotheby’s does not reveal its private sales figures, but it did report $22 million in private-sale commissions in its 2004 annual report. For the past six years, Christie’s has reported between $100 million and $150 million in private sales annually. According to Dominique Levy, former international director of Christie’s private sales department and now a partner in the New York gallery L&M Arts (previously C&M Arts), “If someone is looking for something specific, a private sale allows an auction house to solicit collectors and propose transactions on a buyer’s behalf.”

Often specialists will call up collectors and dealers to inform them of upcoming consignments while also keeping an eye out for other works that might interest a client. Brett Gorvy, international co-head of Christie’s postwar and contemporary art department, has served as an adviser to Metallica drummer Lars Ulrich since they met in 1995. “He would tell me what he was looking for and I would find it
or him,” says Gorvy, who bought postwar and contemporary art on Ulrich’s behalf at competing auction houses and through private dealers. “When we buy for people, our role is as an adviser. I do not look at who’s selling it. You cannot be competitive if it’s not in the best interest of the client.”

But when Ulrich decided to sell five works from his collection in 2002, including Jean-Michel Basquiat’s Profit I (1982), which made a record $5.5 million, he made Gorvy fight for it. “Friendship is one thing but business is another,” says Gorvy. Sotheby’s, Phillips, and Christie’s all went after the collection, but Gorvy ended up winning it, he says, because “I knew the works better than anybody. I thought their value was greater than the competition did.”

Logan says that representatives from Sotheby’s, Christie’s, and Phillips have been visiting him twice annually for years now. “They have become very sophisticated advisers,” says Logan. “They stay in touch and take the time to understand what I’m trying to do with my collection and, consequently, what might be available.”

Logan says he decided to sell David Hockney’s Seated Woman Being Served Tea by Standing Companion (1963) through Sotheby’s London last June—it sold for $3.2 million to the Museum of Modern Art—in part because the painting had come to him through a private sale arranged more than five years ago by a Sotheby’s specialist. “Because they were responsible for my getting the work, I felt an obligation to consign it to them,” says Logan. “It was their transaction to lose.”

In the struggle to wrest coveted property from the competition there can be what French dealer Marc Blondeau describes as “the pre-auction before the auction,” when competitors engage in “private bidding to get a consignment.” Each house counters the other’s offer until one of them drops out or the deal is won on other conditions.

When television producer and art collector Douglas Cramer began speaking in late 2000 to New York dealer Jeffrey Deitch, who was working as an adviser to Sotheby’s at the time, about selling some works, “Christie’s soon heard that I was talking to Jeffrey and Sotheby’s and got in on the act, and moments later Phillips jumped in,” says Cramer. “All three auction houses aggressively came after me with very attractive proposals that kept getting more attractive.”

In 1996, then Christie’s chief executive Christopher Davidge halted the pre-auction bidding for the Ganz estate when he offered the heirs something in the neighborhood of $150 million for the collection, say sources. The gamble paid off. Christie’s won the collection, which fetched $206.5 million in 1997, setting a record for a single-owner collection at auction.

In the same way that guarantees can escalate in the pre-auction bidding, estimates also can become inflated. “No matter how sensible a client is, it is very difficult to resist the auction house that offers the highest estimate,” says an auction insider. Specialists often feel pressure to increase the value of what they think something is worth in their efforts to match or exceed a competitor’s offer.

“If a consignor wants you to estimate a Kandinsky at $15 million, what are you going to say, ‘No’? You can’t afford to lose it,” says a source. “An estimate is not a promise. It’s not money on a table. It doesn’t cost an auction house anything until it fails to give a higher number. Playing the estimate game is very dangerous, but in the heat of battle, it gets done.”

The danger is that in every season a number of works don’t sell because the market deems the estimate, and therefore the secret reserve price below which the auctioneer cannot sell a work on behalf of a consignor, as too high. Says one dealer, “Even for material that is very good, if the price is not right, no one is going to move.”

With guaranteed property, the auction house ends up owning the work of art if it fails to sell. Alternatively, if the selling price at auction exceeds the guarantee, the consignor and auction house split the excess. Typically, sources say, the higher the guarantee, the greater the house’s share. One longtime private dealer says he’s come to a realization: “I tell you, a lot of private consignors are gamblers,” he confides.

It’s not always in a consignor’s interest to take a guarantee. If a work sells well at auction, a guarantee costs the consignor part of the upside. The Museum of Modern Art negotiated the option to forgo a guarantee in the days leading up to its sale of a group of works last year at Christie’s, which included Pollock’s Number 12, 1949. The extra time gave the museum the opportunity to ascertain the level of interest in the works: the Pollock made a record $11.65 million. Cramer says he was also given an extended period of time to accept or decline a guarantee when he sold at Christie’s in 1997. “I decided not to take the guarantee based on the strength of the market at the time,” says Cramer, “and the reaction to the works.”

The publicly traded Sotheby’s revealed in its first quarter report earlier this year that it had already awarded $112.3 million in guarantees for property. As a privately held company, Christie’s does not disclose detailed financial information about guarantees and other incentives, but last season it had a financial interest in 18 lots with a combined low estimate of about $30 million—nearly a third of the low-estimate value of its contemporary evening sale.

In recent years Christie’s and Sotheby’s have recruited outside parties, reportedly including Mitchell-Innes & Nash, Acquavella Galleries, and L&M Arts, to take on the risk of providing guarantees. In these arrangements, known as third-party guarantees, a dealer or collector agrees to pay the auction house the minimum amount, and if the work sells above the promised sum, shares in the upside. In its 2004 annual report, Sotheby’s explained that third parties sometimes also help in the valuation and marketing of properties sold at auction. The firm reported a 13 percent decrease in the amount of commission revenue it received as a percentage of total auction sales because of a $30.8 million increase in the commissions it owed or paid to third parties.

Third-party guarantees are controversial because the guarantor, whose identity is not disclosed, is permitted to bid on the work during the auction. Both houses say they disclose all guarantees—by the firm or third party—with a designated symbol in its catalogues and announce during the sale if an interested party intends to bid on a lot. If a third-party guarantor ends up winning the property for a price that exceeds the minimum guarantee, their share in the upside amounts to a decrease in the buyer’s premium. “Worst-case scenario, you end up owning the work if it doesn’t sell,” says Paul Gray, a director of the Richard Gray Gallery in New York and Chicago. “Best-case scenario, you end up buying it at a slight discount.”

With guaranteed property, the firms may also waive the seller’s commission as well as insurance, marketing, and catalogue illustration costs. Sotheby’s reported in its 2004 annual report that catalogue production, advertising, and promotional costs related to last year’s single-owner sales of property from the Greentree Foundation amounted to $1.2 million.

Auction houses use a sliding scale to determine how much a seller will pay in commission, ranging from 20 percent to zero percent, depending on how frequently and at what value the seller does business with them. Dealers typically receive discounted rates, and will likely not be charged a buy-in fee (around 2.5 percent of the reserve) if the property fails to sell.

To compensate for a loss of income on the seller’s side, Christie’s and Sotheby’s have substantially raised their buyer’s premiums—to 20 percent on the first $200,000 and 12 percent thereafter—during the past five years. Notes Gorvy, “Very desirable works are extremely expensive to sell. A fair proportion of the buyer’s premium goes toward the cost of marketing, insuring, and exhibiting the work of art.”

Pre-selling a work before an auction can include such marketing campaigns as promoting a work on a party invitation, featuring it on the cover of the catalogue, publishing single-owner or single-work catalogues, and even renting a billboard in gallery-populated Chelsea, as Sotheby’s did when it sold Jeff Koons’s Michael Jackson and Bubbles (1988) in 2001. When Sotheby’s was selling Warhol’s Orange Marilyn (1964), which fetched a record $17 million in 1998, it sent out “Guess who’s coming to dinner?” invitations to clients who, when they arrived, found Orange Marilyn seated at the head of the table.

Philippe Ségalot, former head of Christie’s contemporary-art department, recalls having promised the consignor of Jeff Koons’s Woman in Tub (1988), which made $1.7 million in 2000, that he would place a full-page ad featuring the work in the New York Times. But the advertisement for the work, which depicts a bare-breasted woman taking a bubble bath with a provocatively protruding snorkel, was rejected by the newspaper as “too shocking,” says Ségalot. “What could I do? I had given my word. Finally I came up with the idea of showing the back of the work. The ad read, ‘If you want to see the front, come to Christie’s.’”

One of the keys to winning property, says Giraud, is foreseeing “the desire of collectors. You have to anticipate what they want but would never have thought of.” To win the Ganz sale, Christie’s Davidge presented the four heirs with a “Chinese menu-style proposal that accommodated the needs of each individual heir,” says a source. Another insider adds, “Davidge came up with quite a brilliant financial formula that was not as simple as putting a large amount of money on the table.”

Cramer says he decided to sell 22 sculptures at Christie’s in 1997 because its executives offered to sell his 400-acre California ranch through their real-estate division. Four years later, Cramer decided to consign 30 postwar and contemporary works to Sotheby’s, in part because within 72 hours of his setting a meeting with Cramer, Tobias Meyer produced a sample catalogue cover that featured portraits of the artists in the sale. “It was important to me that the artists and their dealers were involved and well represented,” says Cramer, who turned down a competing offer with a higher guarantee. “That was something Tobias understood and that gave him an inside track.” The single-owner sale was 100 percent sold and grossed $20.7 million, nearly double its estimate.

There are two types of consignors, says an ex–auction house staffer: “those who trust the process, and those who micromanage everything.” Diamond says she engaged Charles Moffett of Sotheby’s in an art-historical debate over the catalogue entry for her Kandinsky. Art adviser Estelle Schwartz, meanwhile, insists that she be involved in the installation of all of her consignments. “I want to know which room my work is hung in, what it is hung with, and where it is placed,” she says.

Most consignors, if given the choice, will go with someone they know and trust. “It’s like choosing a bank,” says former Phillips partner Daniella Luxembourg. “You want to know the people who are handling your money.” Some sellers have stipulated in their contracts that if Christie’s honorary chairman and auctioneer Christopher Burge is unable to conduct an auction because of illness, they can withdraw their property from the sale. Explains Giraud, “An auctioneer can make the difference between a work selling and not selling. When you realize you’re the only bidder on a lot, believe me, you stop.”

Levy says that when she advises clients on auction consignments, she looks for the team that will likely do the best job of “selling the work privately to clients before the auction.” She inquires about the number of clients the auction house plans to contact about the work and how it plans to contact them. Often the auction houses will send a personal letter, a transparency, and a full write-up to clients they believe might be interested in a piece. With the consignor’s consent, say sources, the auction house may even bring a major piece to an interested client’s home for an overnight visit.

When both houses are willing to offer similar terms, consignors say they often choose based on the expertise and enthusiasm of the specialist. “It comes down to who thinks who is better at selling,” says New York dealer and adviser Neal Meltzer, former head of Christie’s contemporary art department. “Who is going to get you more money? It’s the information game. Who knows who? Who knows who is looking for what picture? Who has whose ear?”

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