Kobel's Art Weekly

Kobel's Art Weekly 30 2022

Given the current world situation, the art trade is doing surprisingly well in some areas. At the same time, it is currently undergoing a fundamental change, as becomes clear in the second of the three parts of our seasonal review.

Digitization first and the auction houses as winners of this trend are the subject of an essay by Christie's President Dirk Boll in the NZZ of January 16: "In 2021, for the first time, more than half of all accepted lots at art auctions were sold 'online only,' a consequence of the digitization of the pandemic previous year. This has also massively improved the mediation of art, from the virtual display of works to in-depth content offers on websites. The evolution of distribution shows two winners: Instagram, which outperformed competing social media channels by doubling the transactional share of all visits, and the auction industry, whose structures were predestined for digitization."

Rise and Fall of the Art Pension Trust - APT for short - is described by Catherine Wagley at Artnet.

The art trade industry can breathe a sigh of relief, at least in the US. According to a report by the U.S. Treasury Department, stricter measures to control money laundering are currently not urgently needed, Graham Bowley and Zachary Small summarize the results of the study in the New York Times in early February: "But the study concluded that the industry has a low risk of terror financing, or being used for the sale of looted art from countries like Syria to support terrorist activities. It said that expensive artworks are rarely paid for in cash, likely making them an unattractive vehicle for laundering illicit money. In addition, the authors found that, as part of their efforts to protect their reputations and businesses, auction houses and major galleries already perform due diligence on customers, providing voluntary safeguards against abuse."

In mid-February, Catrin Povey, a lawyer, wrote in The Art Newspaper that climate change will also change the way art is insured: "An alternative insurance option could be parametric insurance. While still based on similar catastrophe models, parametric insurance offers a pre-specified pay-out on the occurrence of a specific trigger event, for example if the trigger was an earthquake measuring over four on the Richter scale, the parametric insurance would automatically pay out if an earthquake of this magnitude occurred. These policies may streamline the process and make the losses more predictable. However, when it comes to parametric insurance for fine art, it must be remembered that insuring art is not the same as insuring something that is replaceable-a piece of art, once lost, is lost forever."

On the other hand, crypto and NFT millionaires are beginning to take an interest in physical artworks, which in turn are being hotly courted by galleries and auction houses, explains Zachary Small in the New York Times: "Critics have scoffed that a marriage between NFTs and the art world is impossible. But catering to the tastes of the crypto nouveau riche has become the frantic obsession of the commercial art world, which is reshaping itself around these new collectors nearly a year after artists like Beeple and Pak sold NFTs, or nonfungible tokens, for tens of millions of dollars, inspiring the typically technophobic art industry to head into the metaverse."

The Russian invasion of Ukraine in late February makes most other issues seem unimportant. The information situation is confusing for outsiders, and social media is full of fake and manipulated images. The Art Newspaper has compiled a list of accounts of verified photojournalists.

Katya Kazakina and Eileen Kinsella try to figure out how sanctions against Russia might affect the art market for Artnet in early March.

Sotheby's and Christie's have canceled their Russian Sales in London, Ursula Scheer reports in the FAZ: "In view of the ever-growing sanctions lists with names of Russian individuals and companies, the houses apparently considered it advisable to forego events that attract clients from Russia on both the seller and buyer side. A Christie's spokesman said they had a 'responsibility' to respond to 'geopolitical events beyond our control.'" These auctions sell merchandise, not contemporary art, so the cancellation won't hurt the art scene critical of Kremlin.

Nobel is the request of a group of 50 collectors to establish a code of conduct for ethical and responsible collecting, admits Melanie Gerlis in her commentary in The Art Newspaper. At the same time, she has reservations: "And yet, the more I read the recommendations, the more they irritate me. It seems beyond the code's scope of suggestion to remind that buyers shouldn't do anything illegal: 'Sexual harassment [towards an artist] is strictly prohibited,' for example. There are also some responsibilities that I don't think necessarily fall to collectors, notably "Holding dealers accountable to pay artists promptly." [...] A call for structural change towards a more ethical environment needs to begin elsewhere in the market system." Why is that? "He who pays, creates," or "He who pays, determines the music," as the saying goes. There is no reason why this should not also apply in the art market.

Ursula Scheer is only interested in a brief report in the FAZ about the Art Market Report by Clare McAndrew for Art Basel and UBS online. Her analysis in the print edition of April 2 goes into more detail: "The wealthy do not lack capital and the desire to buy: the average expenditure of the collectors surveyed for the report almost doubled between 2020 and 2021, reaching 274,000 dollars. Baby boomers spend the most on average: 346000 dollars. But where do the majority of the super-rich potentially active in the art market live? Again, the United States tops the list (28 percent of billionaires), ahead of China (23 percent, and rising fast), followed with five percent each by India, Germany - and Russia. This puts the scope of sanctions against Russian individuals and institutions in perspective." Eileen Kinsella offers a detailed summary at Artnet. I summarize the findings for Handelsblatt.

In the April 10 FAZ, Julia Voss talks with Berlin lawyer Pascal Decker about the significance of the Russia sanctions for the art market and money laundering in general. Private sales, for example, are not affected by the due diligence requirements of money laundering regulations, she says: "Not if it's purely private. But be careful: if it's not a purely private sale, for example because an art broker is involved, the requirements of the Money Laundering Act must be fully observed. By the way, it is of course also your personal responsibility to decide which transactions you want to conclude in principle and to what extent you accept supporting potentially criminal money launderers."

Sebastian Preuss points out the responsibility of the art trade with regard to the Russia sanctions in mid-April in the WELTKUNST: "Nevertheless, the sanctions, in which the art market plays only a marginal role anyway, are right and unavoidable. What all players must do above all: make sure that the restrictions are not circumvented. The Panama Papers revealed in 2017 that Putin confidants Arkady and Boris Rotenberg, actually sanctioned after the Crimean annexation, sold a Magritte painting for several million dollars via detours. And there are still plenty of opportunities to do business through gray corporate networks. Every auction house, every gallery has it in its own hands to check who is behind a never heard of company in the Virgin Islands, behind a Zurich lawyer who wants to buy or offer an expensive painting. Not involving the authorities in suspicious cases means being complicit."

France's auction houses realized 4 billion euros last year, about 40 percent more than the year before, Olga Grimm-Weissert reports in Handelsblatt: "However, this [balance] includes not only art and collectibles, but also auctions of breeding horses as well as used cars and machinery for industry and crafts. Art and collectibles account for €1.9 billion (€1.858 billion). That France is benefiting from Brexit is signaled by the 1.3 billion euros with which international bidders participated in French auction results. Including, of course, online-only auctions."

The establishment of a monthly sea freight service for art between London and New York by Christie's and logistics company Crozier is reported by Eileen Kinsella in late April at Artnet.

Anny Shaw and Gareth Harris fear at the beginning of May in The Art Newspaper that London is in danger of a downward spiral: "Valentin describes it as 'a snowball effect'. He says: 'As the main auction houses reduce the number of sales in London, they lay off staff. The large galleries follow. The art specialists relocate to cities where they can find employment like New York, Hong Kong, Paris and Zurich.' Some warn that what happened to Paris in the 1960s, when the introduction of a complicated system of taxes and royalties on art sales contributed to the market's shift to the US and UK, could happen to Britain."

New York will soon be in the Wild West, at least the auction industry, which is being massively deregulated by the city government, as Graham Bowley and Robin Pogrebin report in the New York Times: "The regulations had been enacted over decades to increase oversight of an art industry long viewed as opaque - with buyers and sellers often shielded from public view - and chiefly required that certain information was disclosed, such as whether an auction house had a financial stake in a work up for sale. [...] As set by the new law, auctioneers will no longer need to be licensed as of June 15. The industry-specific regulations, installed in response to several scandals and the explosive growth of the art industry, have already been sunsetted. City officials defended the elimination of the rules as useful streamlining that will work to improve New York's business climate. But some art market experts said they were concerned that the city had gone too far."

In her auction review for the Financial Times in mid-May, Melanie Gerlis mentions, rather in passing, the new consignment tool that allows collectors to offer works from the David Zwirner Gallery for sale.

The Macklowe collection, which was auctioned off in two tranches, marks a new record, Ursula Scheer notes in the FAZ: "With a total gross sum of $922.2 million, the Macklowe collection, which brings together big names such as Giacometti, Twombly, Wahrol, Polke, de Kooning and Richter, is now the most expensive art collection ever sold at auction. It thus replaces the Peggy and David Rockefeller collection sold at Christie's in the top position, which grossed a total of $835.1 million in multiple auctions in 2018." Barbara Kutscher sums up the auction week, which raised more than $2 billion from the evening auctions alone, in Handelsblatt.

How rich you actually have to be to play at the big auctions is painfully calculated by James Tarny at Bloomberg: "Let me be clear: art is for everyone, and anyone can buy an artwork. But, as you read on, it's healthy to remember that the art market is for a comparatively miniscule, objectively rich select few."

With a preliminary turnover of 27 million euros, Ketterer in Munich has taken the lead among German art auctioneers, Sabine Spindler announced in early June in the Handelsblatt: "Collectors and art investors were in an excellent buying mood on Friday evening at Ketterer's auction of works of classical modern, post-war and contemporary art. Loss of confidence in the art market looks different. It was not only the five million dollar proceeds that led to the evening's dazzling results. The willingness to invest in the art of the second half of the 20th century, which is just becoming classical, in the six-figure price range is astonishing. Works by painters and sculptors firmly inscribed in the general canon saw notable increases."

The way in which prices for and the valuation of art are currently created is alarming, warns art consultant Lisa Schiff at Artnet: "In this fan-based economy, art no longer has to be experienced physically or be historically contextualized. In fact, the object itself no longer matters, leaving only an image that signifies potential profit, nothing more. This should be an urgent call for debate. The potential death blow to a traditional mode of value-making should be of serious concern to anyone who wants to defend the true essence, power, and ability of art to inspire, educate, incite agency, and remind us we are human. There are four factors that embolden this crisis: the primacy of auctions, the breakdown of the evening sale, the expansion of art lending, and the emergence of a new form of appraisal."

British Customs began imposing fines on art dealers for failing to comply with money laundering rules, Riah Pryor reported in late June in The Art Newspaper.

Bonhams CEO Bruno Vinciguerra continues to build his auction empire and is absorbing Cornette de Saint Cyr, Olga Grimm-Weissert reports from Paris for the Handelsblatt in early July: "Recent acquisitions have increased the market segments offered by Bonhams to 53 different areas. Cornette de Saint Cyr, for example, brings Bonhams comics auctions. Vinciguerra, of course, discusses each new auction house acquisition with the 'board' of the investment fund Epiris, which gives him financial freedom. He says the decision to buy Bonhams in 2018 was made because of the development potential of this 'sleeping beauty'. It has been known as a solid brand since 1793, he says." As yet, the conglomerate of its own and four acquired auction houses is more like a patchwork of miscellany for the mid-market. But it doesn't have to stay that way, with a smart Internet strategy and the necessary capital, which seems to be available.