A while back, there was this video online that I must have watched some thirty times. It was from an auction at Christie’s in New York in 2007, the year before the market for contemporary art totally collapsed in the middle of the infamous days-long auction of Damien Hirst works. The artwork being auctioned off was one of Andy Warhol’s car crash paintings from 1964, with a starting price of USD 17 million. The bidding is frenzied for the first couple of minutes; three bidders keep outbidding one another a million at a time. Shortly after the price reaches 35 million, one of the bidders starts to trail off, and it finally comes down to two bidders on the phone with Christie’s representatives. The excitement grows with each new million flying through the air. But the scene also becomes increasingly embarrassing. It’s difficult to say why, but perhaps it is because it becomes obvious that is no longer about the art as such.
At USD 61 million, the bidding finally comes to a halt, and the auctioneer raises the gavel. Suddenly, there’s a USD 61.5 from the audience! The auctioneer is practically skipping with excitement and joy. It’s Larry Gagosian, a person with his own stakes in the Warhol market, bidding on behalf of the oil billionaire Steve Cohen, who is on the other end of his cell phone. In the end, the Warhol piece is sold via Christie’s Asia representative for USD 64 million.
Last week, in the middle of a pandemic, something happened at Bukowski’s auction house in Stockholm that I perceived as a small echo from that time. An artist who was watching their own work made me log on to follow the auctioning off of Natalie Djurberg & Hans Berg’s Crocodile, Egg, Man (2012), a relatively small silicone sculpture (36x53x25 cm) plus podium (53x24x20 cm). The asking price was SEK 300,000–400,000 (EUR 29,000–39,000), but after a quick round of bidding via two telephones, the final price landed at SEK 16.3 million (EUR 1,59 million). Including all the fees, the final amount for the American big spender will be close to SEK 20 million (EUR 1.95 million), forty times the asking price.
This kind of record is normally the only aspect of the artworks that creates headlines in the mainstream media. Accordingly, Dagens Nyheter published an article the following day about “the highest auction price ever for contemporary art in Sweden.” And it is certainly a newsworthy event! But is this really a result of Djurberg & Berg becoming so big and sought-after on the international art market, as the newspaper concludes in its analysis? And what does the record price mean for the artists in the long run? Is this purely a good thing for them?
Strangely enough, the article doesn’t mention that two other works by the artist duo were sold at the same auction. Sure, they were two animated films in editions of four: The Experiment (Forest) (2009), which had an SEK 100,000–120,000 (EUR 9,700–11,700) asking price and sold for SEK 160,000 (EUR 15,600), and Feed All the Hungry Little Children(2007) which started at SEK 100,000–120,000 and sold for SEK 280,000 (EUR 27,300). Shouldn’t the works have been sold for a lot more, if it was all about an increase in international demand?
Surprisingly, many people on social media are congratulating Djurberg & Berg, and some of them seem to think that this will make them rich. They are certainly entitled to their droit de suite. This fee used to be 5 per cent of the sales price, but is now based on a sliding scale; it goes down to 0.25 per cent as the price goes up, and is subject to a cap of about SEK 128,000 (EUR 12,500). Divided in two, the artists won’t exactly make millions from this. The big winner here, in addition to Bukowski’s of course, is the seller. They had probably been hoping for something in the vicinity of SEK 500,000 (EUR 49,000) and must now be quite pleasantly surprised.
How does this affect the pricing of works being sold on the primary art market (i.e. the galleries representing Djurberg & Berg)? This is a serious and extremely productive artist duo. Many of their sculptures are from the animated films that have been the foundation for an uncompromising and exceptional practice. In other words, there is a good supply of sculptures on the primary market, where you do not have to pay millions for a sculpture of the same size. Indeed, the asking prices at auction give a good indication of what can be seen as a sensible (and low) estimate of the works’ market value.
As in other industries, the market for an artist’s work normally depends on supply and demand. This can, and should, be managed in different ways via an engaged and skilled gallerist. The best thing for the artist and gallery owner is when the price increases slowly and steadily; when an event like last week’s occurs, it is difficult to handle. If you draw the same conclusion as Dagens Nyheter, every collector who over the years has bought a sculpture for SEK 100,000–500,000 will now see a chance to sell the work and make forty times their investment. Suddenly, Bukowski’s may have twenty to thirty sculptures to sell at the next auction, and then we are in a situation where supply far exceeds demand. Then we can talk about a “saturated market,” which in turn means that the secondary market pricing may fall below the gallery prices.
If this happens, we can only hope that Djurberg & Berg’s gallerists monitor the auction, and put in bids to secure the value. This is, of course, not a dream scenario for a gallerist. It also means that you may end up with a sizeable stock of sculptures that you have to wait a few years to sell again, in order for the market to stabilise according to the slowly rising curve that you want.
A gallerist’s nightmare is so called ‘flippers’, who suck up as many works as they can by a certain artist in order to influence others to buy that artist. Together, they drive up prices by bidding on the same works so that collectors become aware of the good investment. When the pricing is sufficiently high, the ‘flipper’ sends their work back on to the market, which leads to a decrease in the artist’s value. While the original flipper has made a profit, the other collectors panic and try to sell their works before the value decreases even more. Thus, more works emerge on the secondary market, and the artist becomes increasingly difficult to sell on the primary market. This phenomenon may be more prevalent on the international market, but we have seen examples and tendencies within the Swedish context as well.
That the art market, and the auction market in particular, is so attractive for agents seeking easy money has to do with it being so secretive and unregulated. In most countries, sellers and buyers can remain anonymous, which makes the market ideal for money laundering or tax evasion. Various national and international measures are regularly taken to address the problem, yet there are numerous complicated ways to evade transparency. Auction houses have also been involved in deals that are murky, to say the least, and there is an array of things to facilitate this – the seller’s “reserve price,” buyers’ “safe purchases,” small cartels of interests and investments, and “fixed prices.”
A relatively new phenomenon that makes it easier for shady art collectors are the so-called Freeports, large warehouses where the art market’s darkest deals are conducted. Freeports are formally outside national jurisdictions, and this is where art, wine, expensive rugs, luxury cars, and other valuable items are stored either while waiting to change owners, or as a way to avoid paying taxes. These facilities work even better than the auction market in terms of anonymity. Sometimes, however, it is also an advantage to be able to declare where you have spent your money – and for that the auction market is perfect.
An auction result like the one at Bukowski’s can, in short, be about two actors who want to boost the pricing of a particular artist – perhaps even after a secret agreement to buy each other’s works and thus find ingenious ways to avoid tax or transparency? But it can, of course, also be the consequence of two collectors or frenemies sparring, or simply a love for the work of Djurberg & Berg so great that owning a piece has become an obsession. What really happened at Bukowski’s on 10 November 2020 is privy only to those closest involved.