Kenny Schachter is a London-based art dealer, curator, and writer. The opinions expressed here are his own.
Could we be in for a rough ride this fall in the high-flying, gravity-defying top end of the contemporary art market?
That was the billion-dollar question on the lips of the summer art crowd from St. Tropez to the Hamptons. August brought Sotheby’s second-quarter results, declared by new CEO Tad Smith as “rather bumpy,” which in translation means weaker than expected by Wall Street analysts, with profits off 7% and revenues down 1.1%.
At the time of this writing, Sotheby’s shares have been under another kind of hammer—down more than 25% since the third week of June from just shy of $47 to $34 on the close of business before Labor Day; and with slimmer and slimmer margins I can’t see how that will change anytime soon.
But the sky isn’t about to fall…not yet anyway…
Before I break out my crystal ball, let me tell you—as the kids do on the first day of class—what I did this summer: I personally experienced the seismic shift afoot in the art business.
Usually July and August are sleepy months, but this year they were transformed into an out-and-out cage match of hard-fought art transactions. Ground zero for this type of thing, improbably enough, was St. Tropez, notorious for burglaries where gangs spray gas through air-conditioning vents to dope and rob inhabitants—denied by authorities, it’s no secret to vacationers. Perhaps similar methods are employed to extract cash at the Riviera’s rash of charity galas, most prominent among them the bash hosted by Leonardo DiCaprio, he who inevitably rolls into town on a larger-than-yours, supermodel-infested mega yacht (so much for saving the environment). But it’s not all as altruistic as it appears at first blush. I heard—my old friend and secret source Deep Pockets loves to summer in the Riviera—that in at least one instance a major artwork in the annual charity auction had zero artist or dealer involvement, and in fact a guarantee had been negotiated with the owner. Call it a new trading platform for the boldfaced VVIP spec-u-lector set.
I experienced an epic instance of deceit when I sold a Rudolf Stingel to an end user in Los Angeles via two gallery intermediaries, one representing the famous TV personality who ultimately purchased the work and the other, my contact, a New York–based dealer who frequently sells to the chat show host. After terms were agreed and the invoice issued, I was informed that the sale was rescinded. A quick call to Deep Pockets revealed the astonishing fact—unbeknownst to the New York dealer—that the L.A. rep of the buyer (a reputable gallerist) had been adding chunky premiums on top of all the business he’d consummated with the client for years. In dealing, information is as valuable as the underlying asset.
But we dealers aren’t known to let a little moral turpitude get in the way of making money, so we picked up the pieces, lowered our respective asking prices, and closed. In art, like in real estate, it’s the old line from Glengarry Glen Ross: A-B-C (always be closing).
Then there’s the new art fraud with the same old set-up; I call it the Rembrandt-to-Renoir ruse. A portfolio is offered, typically at around €140 million to €150 million, with a range of works from Old Masters to Impressionists and a smattering of Picassos and a Rothko or two thrown in for good measure. The portfolio must be sold, quickly and quietly, as a whole—as if they’d ignore the Qataris or any of the other obvious players most likely to step up and pay the big bucks for individual works. Translation: the art market must really have hit the big time to be the subject of such obvious organized criminality.
In yet more instances of the scam over the last weeks, I was pitched a heretofore unknown blue period Picasso masterwork (and we know how many of those there are) along with the invariable Rembrandt, Renoir, etc. by a former judge on an entrepreneurial TV show. Judging by the flimsy nature of the ludicrously fake material, I should have replied, “You’re fired, stick to your day job”—granted he is a successful serial business buyer. A friend and former Goldman Sachs partner was audibly angered on the phone when I shot down the portfolio he was offered after asking for assistance in disposing of it, hungry for some summer deal flow and quick-fix profits from any sector. No one is exempt and you’ve all been warned.
Who will be the next to dip their toes into the ever-more seductive art trade? Already we have Kanye on record stating that he’d trade two of his Grammys to “be able to be in an art context.” What would I trade to be in a Kanye context? The last time I heard something like that was about 20 years ago, when artist Mark Kostabi asked me what it would take to insert him into the avant-garde. I replied, “About 20 grand.”
I sold some emerging art this summer at the day sale of a major auction house, commending myself for getting out of that market just in time. One piece of particularly shaky quality (who hasn’t made a mistake?) was knocked down at a surprisingly high price, which seemed too good to be true. And it was. When payment was due 35 days later, a week went by, then another, then another, until it was revealed that the buyer did a runner and reneged. (When I change my mind I call it a Kenege—when you’ve been in the business for a quarter century, it happens.)
The shock in this case, for me anyway, was that there is little or no recourse for the auction house or the seller against a balking buyer. It is not a pretty picture. I don’t intend to undermine confidence in the system in which we all work, but it is worth asking: if you let anyone with buyer’s remorse walk from a consummated sale, what is the glue that holds it all together? When pressed, the house revealed that, rather than pursuing a legal remedy, they simply issue the deadbeat a ban for life—which is amazing because, meanwhile, everyone else in the art world is suing each other!
Here was the not-very-confidence-inspiring response to my pleas to be made whole:
“I understand your frustration; for both yourself and for [REDACTED] this is far from the desired outcome. Yesterday we issued a legal letter to the buyer, which gives us the authority to terminate the sale on the 9th of September. At this point we will have the Artnet and Artprice records of the sale removed. Should we reach the 9th without having heard back from the buyer we can offer the work to one of the under bidders from June, or reoffer the work into the February day sale. We of course understand your concern regarding the price which will be achieved through reoffering, and we will absolutely work to try to achieve the same level of offer, as we do not wish you to suffer as a result of this. I am truly sorry for the inconvenience this has caused you, and hope that we can find a resolution which will be satisfactory.”
There you have it. It’s not just the Chinese that notoriously don’t pay for works they’ve won at auction. And as for that so-called lifetime ban, I was told by an auction insider that it would be readily lifted if the transgressor rang up to express that they really, really wanted to buy something again but were serious this time around.
Maybe I will show up at the major fall auctions wearing that T-shirt I got from the new online secondary-market selling platform ArtList.co, the one that says “Fuck Sotheby’s and Christie’s.” It’s sweet of ArtList not to want to fuck Phillips, too, but I suppose Phillips does a pretty thorough job of doing it to themselves.
The New Season
Which brings us to early fall. The sales that launch the season (or end it, depending on your horizon or accounting methods) never elicit much excitement or business for that matter, but there will be no shortage of auctions and fairs in New York, London, and Paris in September and October. Phillips’s “New Now” sale, which replaces its “Under the Influence” series of emerging-art sales (maybe it wasn’t, after all, such a good idea to reference illicit drugs and addiction, from a marketing standpoint?), will be followed by Christie’s First Open. Collectively, it will be a bloodbath. Forget Zombie Formalism, a term coined by artist/writer Walter Robinson to connote soulless, formulaic abstraction; we will be left simply with the walking dead of careers past. Next year they might try “Not Now.”
Over the past few months, the flip art market—turning around emerging art quickly at auction—has been slipping and sliding away as people begin to discern between the wheat and chaff, the good art and the instant money. We will soon hear its death knell. And it won’t be just the emerging market taking the hit; the middling-quality segment of established contemporary, from Richter to Ruscha, is also going to face a tighter and tighter squeeze. The biggest change wrought by the constriction of flip art is the swiftly closing arbitrage window between the primary and secondary markets. Watch out that you don’t get your fingers caught.
Post post-Internet art, lawsuits are the latest movement in contemporary, with knuckle-dusting battles erupting in the courthouses rather than the salesrooms. Artists, dealers, and collectors alike have been impacted. Here is a smattering from the docket:
You have Danh Vō vs. Bert Kreuk, a perennial pseudo-collecting flipper who has alleged that Vō refused to deliver on what Kreuk says was a commission agreement. After victory by the investor in a court in the Netherlands, the artist tried to make good (or bad) by offering a wall painting comprised of the text “SHOVE IT UP YOUR ASS, YOU FAGGOT,” rather than the room-size installation initially contemplated in their alleged deal. I can’t imagine why an appeal is pending, or why the artist lost a dealer and lawyer in the process. It was certainly a creative approach—you must hand it to Danh. Maybe I should step in to take Kreuk out of his predicament; the piece has a nice ring to it, and I can always shove it into the next “New Now” sale.
No new digital ink need be spilled on the Simcho vs. Ibrahim Mohammed Mahama suit, a surprising first foray into the courts for the face of flip, though Saatchi was the progenitor of this short-term sell strategy way back in the 1970’s. Simcho’s business model is combusting before his good eye. Reading though the action should confirm the suspicions of all: that this market is not so much the emperor’s new clothes as the emperor’s new had-it-made coal sack. Artist and dealer come off as equally complicit in a bald-faced scheme of laziness and greed, hoisted on their own petard.
Then there were the zillionaire collectors who sued their long-term advisor. They were under the impression he had been working for free for ten years, in it merely for the glow of the association and spillover of contacts and introductions. Again, I know and respect both parties (hence the anonymity here, which shouldn’t be too hard to decipher) and believe they were both right and wrong; the dealer should not have been surreptitiously getting backhanders by the galleries he patronized, nor should the collectors begrudge him for pocketing $1 million over the course of ten years for his efforts. In any event, a court was not the forum for such a dispute, in my humble estimation.
In addition, the courts have been playing an ever-increasing role as art-dealing middlemen, stepping into multiple belly-up bankruptcies, from Helge Achenbach to Perry Rubenstein, and becoming responsible for flogging more art than many mid-level galleries. Look for this phenomenon to grow in our ever-more-litigious times.
The Financial Markets
Following stock-market gyrations is like tracking your biorhythm—an indicator of volatility, psychological and economic, it becomes a rationale for the way people subsequently behave, and no one is exempt. Is it a tempest in a teapot or a full-blown, smashed-to-pieces Ai Weiwei vase? Who could have foreseen the crazy low price of oil and the extent of the clobbering commodities suffered? And then there was the breadth and depth of the stock market’s near collapse. Trillions were lopped off portfolios, private and public—poof!—in a matter of days. And so is the whipsawing world of financial markets today.
On the other hand, such relentless volatility, at least in short term, renders art and classic Ferraris and Porsches even more attractive and stable by comparison. Hopefully the summer of uncertainty won’t turn into full-blown unrest. And besides, art lags financials by a year or two, so let’s see.
November in New York
Auction superstars Brett Gorvy at Christie’s and Cheyenne Westphal at Sotheby’s are bound to astound as they’ve done in the recent past. Brett’s success has been greater, and will continue to be, for the time being. We’ll see some staggering sums and some spectacular fails. Maybe Phillips will even pull a rabbit out of its hat.
So far we know there will be a $100 million Modigliani at Christie’s and the $500 million sale of Alfred Taubman’s estate at Sotheby’s—the only astonishment there is the song and dance (and whopping guarantee) Sotheby’s had to engage in to win the collection of its former owner and long-term chairman. It’s indicative of a cutthroat environment that the once fabled house almost lost out to arch rival Christie’s. Look for people to hunker down with the things and people they know, buying obvious art by obvious artists from obvious art dealers and auction houses.
A recent survey of contemporary art galleries found that fully 30% of 8,000 polled operate at a loss, further affirming my belief that all of us in the art world are at least a little bit crazy to continue doing what we do. But we are lifers—we can’t help it. If I made $10 per year I’d spend $12 of it on art. Thankfully I am far from alone. The art world thrives on people selling what they don’t want to sell to buy what they don’t want to buy, much of which they simply can’t afford. Having no money never got in a dedicated collector’s way.
But don’t get me wrong. I’m no starry-eyed optimist. There is more turmoil, flux, change, upheaval—whatever you want to call it—than ever in today’s art market. From inside the storm, it’s tough to say exactly what is going on. Sure, you can chart and graph the flip art, thanks to all the activity, but it will be a while before there will be anything resembling a stock-take on the trading floor that is Brett Gorvy’s Christie’s contemporary art sales. Here’s what we can say: the prematurely high-priced emerging-art shakeout has been a good thing, and the market, for now at least, is still in rude health.
Despite, or maybe because of, all the drama, I had a pretty good summer. Let’s see what November brings. Watch this space.
Update, September 10, 2015: An earlier version of this article stated that Bert Kreuk’s alleged commission with Danh Vo had been paid in full, which was not correct. The legal proceedings between them are ongoing.