Global Auction houses innovate digitally to stay relevant in the ‘New Normal’

The Art Market 2021 Report is out. This Art Basel and UBS survey has been prepared by Dr. Clare McAndrew, Founder of Arts Economics. The Pothi team brings you excerpts and overviews of this incisive report. This is part 4 of a six-part series. You can read part 1 here and part 2 here and part 3 here

The COVID-19 pandemic forced many auction businesses to suspend live auctions for much of the year, and online-only auctions and other new formats took a more central role for many businesses. The move to digital channels was already well underway before 2020, with the auction sector generally seen as having made significantly more progress on this front in recent years versus dealers. With restricted capacity, some of the major auction houses experimented with new formats, with live-streamed auctions a key to recreating some of the excitement of live evening marquee sales. Although there was still a significant concentration of sales in the last quarter of the year, the typical auction calendar, where sales by the major houses are focused on one city, in one segment of the market, over a key auction week, was also interrupted by COVID-19 restrictions.

The ceiling for online auctions was raised over the year, including several works selling for over $1 million, however, the highest prices were still achieved in more traditional or hybrid formats that combined online sales with live-streamed events.

Despite the crisis, many works still sold for multimillion dollar prices in different sectors, including the $84.6 million paid for Francis Bacon’s Triptych Inspired by the Oresteia of Aeschylus (1981) at Sotheby’s in New York, and . While the decline in the auction market was due in part to a lower volume of these high-priced lots coming up for sale, the contraction in sales was felt throughout the auction sector, with a reduction in volumes and values across all of the different value segments and in most regions. Many in the sector noted that although masterpieces sold well, bidding was often very thin, with far fewer buyers competing for works.

The three largest auction market hubs of Greater China, the US, and the UK maintained their dominant position in 2020, with a combined share of 81% of global sales by value, down 3% year-on-year.  However, there was a significant change in distribution of public auction sales between these markets, with Greater China overtaking the US to become the largest global market with a share of 36% of sales by value, up 7% year-on-year. Sales in Greater China fell by 11% to $6.3 billion, however, this decline was significantly less than the other leading markets.

Total sales through all public and private channels at Sotheby’s in 2020 reached just over $5 billion, down from a reported $5.8 billion in 2019. Public auction sales totaled $3.5 billion, down 25% on 2019, and its second year of declining sales. Over 70% of all sales were held online (up from 30% in 2019), with a total value of $584 million in online-only sales, their highest ever total online and an increase of over 650% from 2019. Private sales also rose to their highest total in recent years, $1.5 billion, up over 50% on 2019 and representing around 30% of the company’s total revenue. Again, this was almost double the share of private sales in 2019 (17%) and surpassed the peak in private sales in 2013 (at $1.2 billion and 19% of sales).

Sotheby’s reported particularly strong sales in Asia, with auction sales there representing $932 million and Asian buyers accounting for 30% of their global sales. Their buyer base expanded and there was a shift to young collectors, with 40% of their bidders and buyers in Asia during the year new to Sotheby’s and 30% aged under 40. Buyers from Asia were purchasing at relatively high prices, with nine of the top 20 lots by price sold at the auction house during the year going to Asian buyers, and the company’s average auction lot value in Asia at the highest level for five years. Online sales in Asia also advanced by 440%, with 63 online auctions held in the region.

Sotheby’s also experimented with new formats in Asia including their ‘In Confidence: Selected Masterpieces’ sales in Hong Kong, a hybrid auction format with a silent auction based on absentee bids, but with no published prices or bids.

Sotheby’s sold a number of record works, including the year’s highest priced Francis Bacon and Ren Renfa’s late 13th century/early 14th century scroll \’Five Drunken Princes Returning on Horseback\’, for $39.6 million in Hong Kong.

Christie’s reported total global sales through all channels of $4.4 billion for 2020, down 25% year-on-year from $5.8 billion in 2019, also the second year of decline. Aggregate public auction sales fell 38% from $4.9 billion to $3.1 billion in 2020, however, within those, online-only sales rose by over 260% to $311 million, with over 200 sales and the highest ever total for the company. Online sales drove an influx of new buyers, with 36% of buyers through all channels being new to the company in 2020, with many coming through online channels. Christie’s sales were globally diversified, with 34% of global sales by value to buyers in Asia, 33% to those in the US, and the remaining 33% to Europe, the Middle East, and Africa.

Despite the drop in public auction sales, private sales increased for a third consecutive year to $1.3 billion, up 57% compared to 2019, and accounting for 30% of the company’s gross revenues, double the share of 2019.

Christie’s also experimented with new formats, including an international relay sale, ONE, which offered a mix of works between sectors, including Impressionist and Modern, Post-War and Contemporary art and design. The sale was held in a relayed sequence from Hong Kong, Paris, London, and New York, and achieved some of their highest prices for the year, including Roy Lichtenstein’s ‘Nude with Joyous Painting’ (1994) for $46.2 million.

Barnett Newman’s ‘Onement V’ (1952) and Brice Marden’s ‘Complements’ (2004-2007), both selling for $31 million. Christie’s also sold a T-rex skeleton (nicknamed Stan) for $32 million, as an addition to its 20th Century live-streamed evening sales in October and achieving the highest ever price for a fossil at auction.

Post-War and Contemporary art was the largest sector of the fine art auction market in 2020, as it has been for the last six years, with a share of 55% of the value of global fine art auction sales (up 2% in share year-on-year) and 55% by volume (up 4%).

Sales in the sector totaled $4.7 billion, a decline of 23% year-on-year, marking two years of decreasing values from 2018. The number of lots sold fell by 13% year-on-year. Sales of Post-War and Contemporary art have been among the most dynamic in the auction market, showing the strongest growth in many years, but also subject to much volatility due to the outsized influence of very highly priced works in the sector. Sales grew rapidly until 2007, but dropped 58% between 2007 and 2009, in the fallout from the global financial crisis as the supply of high quality works declined. This was one of the largest declines of any of the fine art sectors, but was followed by a rapid recovery up to a peak of $7.9 billion in 2014. From this peak, the performance of the sector has been mixed, and a reduced volume of very highly priced works in 2019 saw a drop in values of 10%. This second, consecutive annual decline in 2020 has brought the market back to levels just above 2010, meaning an overall fall in values over a decade of 23%. However, sales in the sector were still more than double the level of the previous recession in 2009 when the market fell to just $2.0 billion.

The top three markets (the US, Greater China, and the UK) accounted for 87% of the value of sales in 2020 and just less than half of the lots sold (at 47%). The US has been the leading market for sales of Post-War and Contemporary art in most recent years, and was again in 2020, although its margin was reduced as China gained ground. The US accounted for 36% of the value of sales, down 6% on 2019 (with a stable 24% of volumes).

In 2020, living artists’ works accounted for 49% of the value of sales in the Post-War and Contemporary sector, up 5% in share year-on-year.

Like the wider Post-War and Contemporary market, sales in this sub-sector declined by 23% to $2.3 billion, with an equal fall in sales of works by deceased artists. Sales fell in nearly all markets, with the US having one of the largest declines (down 45%), and leaving it in second place behind Greater China, which had a more moderate drop of 13%. Greater China accounted for 39% of the value of all sales, next to the US (28%).

Sales of Modern art were the second largest by value in the fine art auction market in 2020, with a share of 26% by value and volume. Although these were relatively stable year-on-year, the sector’s share has diminished significantly over the last 20 years, as sales of Post-War and Contemporary art have expanded.

While Modern art sales were almost twice the size of Post-War and Contemporary in 2000, they have been lower in value since 2011, with the margin between them increasing again in 2020 to 29%.  From being the largest sector in the market over 30 years ago, Impressionist and Post-Impressionist art has been overshadowed in recent years by Modern and Post-War and Contemporary sales in terms of aggregate values, and accounted for 10% of fine art auction sales values in 2020 (down 5% in share year-on-year), with 12% of the volume of global fine art lots.

Old Masters accounted for 9% of the fine art auction market by value in 2020, up 2% year-on-year but remaining the smallest of the fine art sectors. It also had the lowest volume of sales, with a stable year-on-year share of 7% of global volumes.

Looking ahead, most auction houses were optimistic about sales in 2021, both for their company and for their national markets. 77% thought that their sales would improve, and only 6% predicted a decline.

Anecdotally, many experts in the sector noted that much of the transformation to digital sales in this part of the market was well underway, and although this ramped up significantly in 2020, most were convinced that this was not a temporary change, and that new formats for selling that combined live and online sales along with more online-only sales were very likely to continue in future.

Some felt that the necessity to buy online in 2020 had encouraged some new buyers to engage with the channel for the first time or more than they had before, and that this might encourage more sales in 2021, particularly as economies adapted and the market generally improved, which they hoped would encourage some more reluctant vendors.

Overview

1. Public auction sales of fine and decorative art and antiques (excluding auction house private sales) were $17.6 billion in 2020, a decline of 30% from 2019.
2. Private sales were conservatively estimated to have reached over $3.2 billion in 2020 (up 36% on 2019). Total sales conducted by auction companies, including both public and private, were estimated to have reached $20.8 billion.
3. The three largest auction market hubs of Greater China, the US, and the UK retained a combined share of 81% of public auction sales by value. Greater China overtook the US to become the largest market, with a share of 36%. The US accounted for 29% and the UK 16%.
4. In 2020, the largest sector in the fine art public auction market was Post-War and Contemporary art (55%), which along with Modern art accounted for just over 81% of the value of sales. Sales in the Impressionist and Post-Impressionist sector, the dominant category 30 years ago, showed the largest decline in value year-on year, with sales down over 50%.
5. Sales of Post-War and Contemporary art totaled $4.7 billion, a decline of 23% year-on-year. 27% of the works by value sold in the Post-War and Contemporary sector were created in the last 20 years.
6. After losing almost a third of their value in 2019, sales of Modern art fell another 23% in 2020 to reach $2.2 billion.
7. The Impressionist and Post-Impressionist sector, the dominant category 30 years ago, showed the largest decline in value year-on-year, with sales down over 50%. Old Masters saw a more moderate decline of 10% year-on-year.

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