Shane Ferro
Art market news and commentary by the staff of Art+Auction

MARKET WATCH: Art market news and commentary by the staff of Art+Auction

Sotheby’s Announces 2012 Earnings and an Increase in Buyer’s Premium

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Sotheby’s released its earnings report for the fourth quarter (and full year) of 2012 today, which are down slightly from the record 2011 numbers. Meanwhile, the auction house also announced it will increase its buyer’s premium, as rival Christie’s did last week. Here are the highlights from the press release:

The company’s consolidated sales were $5.4 billion — lower than last year and almost $1 billion below Christie’s 2012 sales.

Total Revenues:

For the full year 2012, Sotheby’s reported total revenues of $768.5 million, a $63.3 million (8%) decline from the prior year. This decrease is largely attributable to a $79.4 million (11%) drop in auction commission revenues resulting from a 10% reduction in net auction sales, as 2011 included a record level of sales from single owner collections. The decline in auction commission revenues is partially offset by a $6.8 million (10%) improvement in private sale commission revenues and a $5.7 million (47%) increase in finance revenues.

Private sales are still on the increase:

Private sales, an increasingly important part of Sotheby’s business, totaled a record $906.5 million, an 11% increase. And as of the end of 2012, the Company’s finance segment loan portfolio balance was $425.1 million, almost double the prior year balance of $223.0 million, and near peak levels.

Sotheby’s is making a lot of art loans:

Sotheby’s Financial Services, the world’s only full-service art financing company, saw revenues increase 47%; loan portfolio balance was $425.1 million at the end of 2012, almost double the prior year balance.

Buyer’s premium is increasing for the first time in five years — with thresholds for the percentage taken as commission even higher than Christie’s new structure. While the house said during the earnings call Thursday that thresholds are equal to its competitor in some markets (depending on currency), premiums are definitely higher in the U.S., the U.K., and Hong Kong — the three markets that account for the vast majority of sales turnover. Thresholds are the same in Paris. Regarding the higher premium, Sotheby’s CEO William Sheridan said that the company has “moved farther ahead to what we think of as rounder numbers.”

Effective as of March 15, buyers at auction will pay 25% on the first $100,000 of hammer price; 20% on the portion of hammer price above $100,000 up to and including $2 million; and 12% on any remaining amount above $2 million. For over 98% of lots sold, this change will represent an increase of 2% or less in the final purchase price and for all lots, a maximum 3.6% increase in the final purchase price.

Oh, and then of course, there was “The Scream.”

Shane Ferro

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