20% premium on every lot under £250,000 at Sotheby’s

SOTHEBY’S have announced that they will charge a 20 per cent buyer’s premium on all lots up to £250,000 with immediate effect.

The threshold was previously £100,000, with premiums above that charged at 12 per cent. In the US, the equivalent threshold is now $500,000 instead of the $200,000 it was before.

Christie’s have not followed suit and say any decision to change rates would be based on their own needs.

Sotheby’s premium rise comes exactly two years after the last hike, when the US threshold was doubled from $100,000 to $200,000.

Cutting costs and increasing charges have made up the two-pronged policy that has restored Sotheby’s fortunes in the past three years. This latest move is an extension of that policy, shifting the burden of charges more to the buyer from the seller, with chief executive Bill Ruprecht declaring it an opportunity to improve the firm’s competitiveness.

The announcement comes at a time when clear blue water has emerged between the performances of the two market leaders. Both reported a 36 per cent rise in worldwide sales for 2006, but Christie’s total was £2.5bn ($4.7bn) compared to Sotheby’s £1.96bn ($3.7bn).

Low interest rates and soaring prices for Contemporary and Modern art have combined to lure a rich vein of wealthy investors to the art market, and both auction houses have been doing their utmost to cash in on this rush by securing as many top-end consignments as possible. This means guaranteeing sales for vendors, with Christie’s reportedly making $165m of such guarantees for their November round of Contemporary, Impressionist and Modern art sales in New York.

Mr Ruprecht, who has masterminded Sotheby’s recovery after the multi-million pound collusion settlement, says that, unlike Christie’s, he is concerned simply with profits, not market share. The problem, however, is that the richest seam of profits is to be found where the market is at its most competitive.

The raising of the premium thresholds suggests that when Mr Ruprecht dismisses market share he is referring to the volume of lots rather than sales totals. If so, the company’s strategy will be to offload the lower end of the market as much as possible in order to raise their game at the top end – Sotheby’s Olympia raised their minimum lot value to £500 some time ago.

Christie’s, as a privately owned company, do not publish details of turnover and profits, but what appears to be their more aggressive marketing strategy is certainly paying off in helping to win business at the top end of the Contemporary market, where the biggest profits are to be found.

This can be seen most starkly in the take for last November’s billion-dollar Contem-porary, Impressionist and Modern art sales bonanza in New York. Sotheby’s enjoyed their best day since 1990 with a take of $238m (£131.5m) for their November 7 Impressionist and Modern art sale, but Christie’s equivalent offering the next day totalled $491.5m (£271m).

Further, compare the $239.7m (£131m) that Christie’s took for their November evening auction of Contemporary art with Sotheby’s $125.1m (£68.4m) total for their equivalent sale.

In short, this means that Christie’s, with their $731.2m total for the series, exactly doubled Sotheby’s take.

By Ivan Macquisten