For Return-­Focused Collectors, November Auctions Make a Strong Case for Blue Chip Living Artists

November 14, 2011

Following October’s strong auction results, sales in November brought still more record prices, reflecting the robust conditions on the global art market. Successful sales of Impressionist and Modern art, which turned out more favorably for Sotheby’s than for Christie’s this time, were followed by a vast offering of Contemporary art from both leading auction houses. Apart from the numerous new records that were set for individual artists’ markets and mediums during these sales, the auctions’ repeat sales results and the impressive investment return figures deserve special focus, as they reflect even better the health of the market.

During the first two days of November, Skate’s Top 5000 saw 43 new entries from Sotheby’s and Christie’s Impressionist and Modern art sales; the total trading volume of these works stood at $277.7 mln. Eleven of these entries were repeat sales, which saw an incredibly high average effective rate of return (ERR) of 10.16%. The weighted average ERR for Skate’s Top 5000 artworks now stands at 4.88% on an annualized basis, which is an all-time high….

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Is There a Better Business Model for the Art Trade than the Auction House? Yes, There Is!

November 10, 2011

The traditional mismatch between Sotheby’s robust auction volumes and the firm’s third-quarter loss-making financials, which were released at the same time (this week, actually), causes us to pose a legitimate question: while the auction has clearly been the best art industry business model to date (eight of the 13 constituent companies in Skate’s Art Stock Index have art auctions contributing to at least part of their economics), one may wonder if there is a better way to make money in the art industry. Can a company do better than living from one peak season to another, losing money between auctions and staking a significant part of its fortune on a single week of trade several times a year?

Skate’s believes that yes, there is a better model out there. It is currently practiced in the low-key world of collectibles and has not yet migrated to fine art market. The fine art market would be better off if it did.

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artnet Results Disappoint, Minority Shareholder Increases Ownership Interest

November 3, 2011

artnet has released its financial results for nine months ending September 30, 2011. They are disappointing. The firm continues to be loss making, revenues remain flat and artnet’s major hope, online art auctions, produced just 12.8% growth on a y-t-y basis and remains its second largest loss making business unit (after its magazine publication business). Perhaps the only interesting new development at artnet came from its mandatory disclosure on changes in significant shareholdings; the company’s long-term minority investor—San Francisco-based Artis Capital Management LLC—doubled its ownership interest in artnet over the course of 2011 and now owns 15.13% of the firm.

Skate’s believes that artnet under Hans Neuendorf’s leadership is reaching a point where significant change might be needed, which could be stimulated by the rise of a potential activist shareholder. We met Mr. Neuendorf this week and learned that apart from a new analytics product launch the firm is planning for this December, everything else remains business as usual at 61 Broadway.

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