Issue #197  6/5/2013
What Exactly Changed in The Photo Market For The Highly Successful Week in NYC to Happen in April? or What Does It Mean When Your Market Segments?

By Alex Novak

I'll admit it: like a lot of AIPAD (Association of International Photography Art Dealers) exhibitors I was pretty concerned when the three big New York City auction houses announced that they were going to run their previews and auctions right over the days and hours of the AIPAD New York Photography Show this year, a year when the economy seemed to still be limping along. Add in the fact that all three auctions had fattened up their normal multi-owner sales catalogues and also tacked on a major single-owner sale--the first time ever that all three houses had done so at once--and there was plenty of room for concern. That sticky situation didn't even take into consideration all the numerous gallery shows in this city that would also suck dollars from the photography market during that first week in April.

So the photo market had a rather tall order: literally thousands of photographs were going to have to be sold for many tens of millions of dollars in one place in one week. That could have been a prescription for a very public failure in a marketplace that could be fairly fickle.

Several things happened on the way that changed those potentially disastrous results into such a strong positive outcome that it had most exhibitors, photo dealers, gallery owners and auction house personnel beaming, if not high-fiving, over the week's results in New York, which amounted to an estimated $50-60 million.

The first--and not insignificant--influence on the week was the roaring return of the American stock market. At the end of March the S&P 500 index price was 57% above its long-term trend, up from 56% above trend the previous month. Records in the S&P were hit just the week before the AIPAD, and optimism was the word on Wall Street. The photography market couldn't have had better timing for once. It looked like the U.S., at least, had shaken off its recessional chains and was ready to roar back. AIPAD not only got record attendance at its show, but those attending were buying and not just looking. And this mood extended to the entire art market, as Christie's tacked up just a shade under a half billion (that's with a B) for its evening sale of postwar and contemporary sale last month, which set a new record--and that was just for the evening! A strong stock market has always been good for the art and photography markets, although those markets tend to lag the stock market a bit.

Second, at least Christie's had the good fortune to have a sizeable portion (minus nudes) of its single-owner photo sale purchased by one deep-pocketed buyer from Qatar (shades of Sheik Al Thani!). Having a major player or two underpinning the rather small photography market has always meant premium prices. Remember that most even big photo auctions can be bought out completely for low millions of dollars or euros. There are plenty of players at that level in today's world. When one painting can go for well over $100 million, photography still may have a considerable upside to a moneyed art buyer, who could, if they wanted, buy out every major photo auction over a course of the year for less. When Sheik Al Thani played such a major role in the first Jammes sale, he single-handedly changed the market for 19th-century photographs. And, while we can quibble about micro-impacts, the overall price of such photographs will probably never be the same because of his influence.

Third, a fair number of collectors who did attend and try to bid at the auctions, especially on the single-owner sales material, which admittedly had some tasty morsels--albeit very expensive ones, found themselves priced out of the auctions and returned to the AIPAD Show and spent those "newly found" dollars. Likewise dealers who were either priced out of the auctions or found themselves with no time to preview or buy there shopped instead at the AIPAD stands of their brethren. Both groups helped boost show sales considerably.

And finally, the big-three auction houses--with the exception of most of the single-owner sales (and maybe not even there)--were continuing their decoupling from much of the traditional photography collecting market, and their past role in it.

Over the course of the last two decades the auctions have moved from a "wholesale"; market, where only dealers and very experienced collectors would buy and sell, to a "retail" market with all the glitz and glamor that the houses could bring to the table. That has brought in inexperienced bidders who often made serious mistakes and left dealers scrambling for less public sources of material, but it has largely built up the bottom lines of these auction houses. The move also has placed those houses is more direct competition with dealers and galleries. The auction houses now even maintain gallery space to sell so-called "private treaty" consignments and the work of contemporary artists that they are now representing, often in direct competition with the galleries that used to represent those artists.

But there is a bit of a counter-trend brewing. More recently, from the auction house point of view, it had become clear that quality vintage photography that could command big prices was becoming increasingly rare, despite the three major single-owner sales this time out. Plus big traditional buyers were getting nervous (or getting smart) about buying so publicly with the prices on such pieces remaining in many auction price databases putting a brake on future upward momentum. Too many bidders who were traditional photo collectors were looking up what the pieces sold for last time out and those past prices were starting to restrain current bids.

Equally problematic was the modest need for connoisseurship, which also meant the need for a more educated buyer--one that could at least tell the difference between apples and oranges. This cut the prospect list down and often hampered sales. With items that had little variation (supposedly) and little need for time spent researching the work, the auctions could appeal to a new buyer who was shopping more superficially and who was turned off by the often depersonalizing NYC gallery system. When you often have to ask to even get a price and then are made to feel that you are interrupting the gallerists to do so, you might find the auctions with their publicly posted price estimates and usually friendly, helpful staffs a more hospitable place.

While the NYC gallerists that I do business with would never be so unfriendly and would go out of their way to help, many other galleries in NYC (and in LA, Paris and London) have poorly trained staff that somehow think bad manners is the proper way to treat potential clients. The reputations of a few cold, too hip, upscale galleries are hard to shake for the rest of the gallery scene. Especially without a consistent marketing message from their own association to counter the auction houses' approach.

But without a ready source of fresh high quality vintage material that could be sold with consistency and at higher and higher prices (now limited by auction price databases as noted above), these large auction houses realized they had a problem. Their apparent solution was to develop and concentrate on a dozen or so photographers and their work that were highly decorative in nature and had huge numbers of such prints that could be recycled over and over again in a marketplace that looks more like a pyramiding scheme than anything else. Clients for such work rarely seemed to care about prices in their hunt for a conversational piece for the wall, thinking (falsely) that auctions would provide a safe buying strategy where they couldn't possibly overpay, but certainly did in many, many instances. And I also feel that such "exuberant" bidding was "encouraged" by at least some of the galleries which represented the artists or their estates--although certainly not all.

Previously it was Ansel Adams and Edward Curtis that supplied the steady drumbeat of sales that opened many of their auctions. Now you can add later-prints by Irving Penn, Horst, Henri Cartier-Bresson and Diane Arbus/Neil Selkirk, along with prints by Richard Avedon, Helmut Newton, Robert Mapplethorpe, Peter Beard and even relative newcomers like Nick Brandt and David LaChappelle. All were or are very productive photographers--to say the least. Most, with perhaps the exception of Mapplethorpe, made relatively large editions (or their estates have), if they bothered to edition at all. Most had good technical skills (or had printers that did) and made images that were large, perfect decorative elements. And most were, at the same time, well-known and even highly respected names.

In a phone conversation, collector Michael Mattis termed such a list "Photography as a Luxury Good," and added: "It is unfortunate that the auction-house reliance on this recently-anointed roster seems to come at the expense of the Old Masters of the field, from the 19th century through Pictorialism, i.e. the entire first half of photography's history, which now accounts for a vanishingly small percentage of auction totals at the big houses on both sides of the Atlantic."

More and more, photographs are being sold as the "luxury good" that Mattis refers to above. Phillip's is actually owned by a Russian luxury company and often sells photographs in concert promotionally with other luxury goods. Christie's also doesn't shy away from this tie-in approach, and it too has an owner whose other companies are dealing in luxury goods. Under this scenario photographs become more like commodities--albeit very expensive commodities for a luxury-oriented market.

This "perfect scenario" helped resolve the auctions' supply problem and at the same time shifted its market to naïve, moneyed "collectors" who readily depended on the auction house "expertise". Such images, the auction houses would imply, don't really require any special knowledge or connoisseurship: just a love of luxury, fashion, sex or cute lion cubs. Anyone, even the occasional impulse buyer, could now feel that they could buy photography with the "expertise" of the auction house somehow "guaranteeing" that the work was "good", priced correctly and maybe even important--no matter if that feeling was warranted or not.

I believe that this new approach--whether conscious or not--began at Christie's, where the wily and highly intelligent Philippe Garner used his sharp knowledge of the market, contacts and marketing prowess to kick-start the process, but it was quickly emulated and adopted in varying degrees by all three major auction houses in NYC, London, and even Paris (at least for Christie's in the latter city). It has snowballed into a successful (at least to date) strategy that has placed what those major auction houses now do largely outside the realm of much of the traditional photo market. This certainly has long-term significance for both the auction market and the gallery/dealer system.

The three major auction houses have done a very good job of repositioning and marketing this new position. Dealers and galleries not only let them get away with this (not that they could do much about it), but often contributed to the auction houses' success. It is not surprising to hear some clients complain about "high" gallery prices and then pay the auctions 20%, 30%, 50% or more--in some instances much more--higher prices the following week for the same item. While galleries get beat up for terms and payment methods that hurt their bottom lines, auctions have very strict policies on payment that they now enforce with a vengeance, including threatening to charge interest and storage charges on unpaid items after only 15 days. Their shipping/packing costs, since they force clients to use expensive third-party shippers, are also substantially higher than private dealers and most galleries, particularly in Europe.

But at the same time, the auctions have--as noted above--begun to develop a whole new subset of buyers who are less interested in getting the best deals or in understanding photography, and have no knowledge of the flexibility that galleries may offer them over the auctions. I think we are starting to see the effects of this development, as auction buying is appealing to a different set of retail photography buyers than the traditional market of passionate long-term collectors. Such buyers are more short-term in their approach, since a lot of what they buy winds up on the walls of their homes. Dealers have always maintained—only partly tongue-in-cheek--that the definition of a collector is someone who, after they fill up their walls with art or photography, still keeps buying. I would suspect that a lot of the new auction buyers don't or won't fill that definition.

The buyers are also much more international than in the past when much of the market originated from the U.S. or Western Europe. Now buyers come from China, Russia, Brazil, India and the Middle East, and other more exotic areas.

So what do all these changes mean to the photography collecting market and its players?

Here are just a few of the issues and questions that these developments raise, in my opinion:

--There appears to be a new audience of auction buyers who are short-term and with decorative focus. Can galleries and dealers tap into that audience in any way that is reasonable? Can that audience be developed by any of the parties in the photo market to be longer term in their buying patterns?

--Only certain types of work and certain artists are now getting shown at the major auctions on a regular basis. Will this mean overexposure for those artists or will they reap the rewards of a greater spotlight?

--Condition and accuracy of information issues are less important to these new buyers, or at least they aren't concerned about those issues when bidding.

--The fact is that the major auction houses (and even minor ones) have moved largely to a retail market that is highly transparent, and now highly competitive with their past buyers and supporters (dealers and galleries). That provides positives and negatives, so how will the galleries and dealers compete? How will this competition affect the auction houses, as more and more dealers recognize that they aren't competing with other galleries any more but with a much larger competitor? Are there ways for these two large competitive forces to work in concert? Or are markets starting to fly apart.

--There are opposing trends relating to transparency in the market: larger, more traditional collectors have a growing concern about the lack of privacy on prices of very major pieces at auction—given that the reporting of those prices never disappear, while a fresh, young group of newer buyers at auction are attracted and comforted by the public posting of estimate ranges.

--Galleries may find themselves losing artists to auction house representation after they have spent considerable time and money developing a market for those artists. How does that affect their strategy on taking on new artists in the future?

--What do some of these shifts mean to second-level auction houses, and can they take advantage of the changes in the marketplace to differentiate themselves, or will they simply try to emulate the larger houses?

--Does the lack of privacy in the auction market provide any competitive buying and selling advantage for dealers and galleries over the auction houses on major six- and seven-figure pieces?

--What does this segmentation and concentration by the major houses mean to the value of artists' work that don't fit easily into their strategy? Or will it simply shift the non-decorative market away from big auction houses to smaller ones and to dealers and galleries, as it seems to have done already to some degree?

I am curious myself to how others may see these changes (or not, for that matter). Feel free to email me your comments at anovak@vintageworks.net .