FOR THE 0.1%, building a legacy long involved amassing million-dollar artworks and bankrolling those who create them. Today billionaires also buy auction houses where such pieces are sold—especially if said billionaires are French. François Pinault of Kering, a luxury-goods group, bought Christie��s in 1998. Bernard Arnault of LVMH, a rival, owned Phillips for a bit in the 2000s. On June 17th Sotheby’s announced its sale to Patrick Drahi, a telecoms tycoon, for $3.7bn, ending three decades of public ownership for the 275-year-old company.
Mr Drahi is not the buyer many expected—and not just because his fortune, which Bloomberg puts at $8.6bn, has humbler origins than fine wine and fashion. Unlike Mr Pinault, whose 3,500-piece collection is worth over $1.4bn, he is an art-market neophyte. Leveraged deals and cost-cutting at his mobile provider, SFR, cast him as a financial engineer rather than a savvy manager. For Mr Drahi, a self-made man, Sotheby’s is a trophy asset, says François Godard of Enders, a research firm. He is paying a 61% premium on its pre-deal share price.
There is logic behind the delisting. In recent years Christie’s and Sotheby’s, which together sell more than 80% of works priced over $1m, have been battling to attract the top lots—with Sotheby’s mostly losing. Christie’s, which is privately held, can afford generous guarantees to sellers. Sotheby’s, under investor scrutiny, cannot. Its share price sank by more than 5% in a day last August after two guaranteed paintings sold for less than expected, hurting margins.
It will now be freer to court high-profile sellers more aggressively—and also to invest in selling more lower-priced pieces, which in the topsy-turvy art world offer higher margins than the big-ticket lots auction houses fight over. Boosting online auctions would help here. So would more private sales—where Sotheby’s acts as a broker and which have grown fast, reaching $1bn last year. Alex Maroccia of Berenberg, a bank, says it may spend more on R&D. Last year it bought Thread Genius, an artificial-intelligence startup that identifies artworks and can recommend similar items to losing bidders.
Buyers and sellers of all but the priciest pieces may rue the increased opacity of the houses’ already baffling commissions. But one group (besides Sotheby’s investors) will rejoice. Some of Mr Drahi’s fellow plutocrats make a killing from financing the guarantees that auction houses offer. For them, the more art that goes under the hammer, the better.
This post was originally posted at https://www.economist.com/business/2019/06/22/the-western-worlds-auction-house-duopoly-is-now-in-private-hands.