Sotheby's released info about its first quarter sales, revealing the auction house's net losses more than doubled during the first three months of 2013 even though they experienced a 23 percent growth in net auction sales. The problem has been blamed on smaller auction commission margins (fees collected from buyers and sellers) and competition in the fine arts world. Auction houses like Christie's are fierce adversaries.
You may be thinking, "if they had a sales growth how are they not making as much money?" Well, that has to do with the fact that the auction house earns less from big sales. As Artinfo states: "Typically the auction house receives less back per pound of sale as the price of the lot increases." So even though it sold expensive works, it gained less money.
To decrease losses, the auction house decided to increase its buyers’ premiums. From March 15, anyone buying a piece from the auction house that is $100,000 or lower pays 25 percent, $100,000 to $2 million pays 20 percent, and over $2 million pays 12 percent.
It should also be known that Sotheby's is spending more money than ever on expansion. The auction house is trying to reach international collectors which now make up 40 percent of its auction sales. In 2012 Sotheby's became China's first western fine-art auctioneer, however soon they won't be alone. Christie's has plans to follow suit.
Although the news of Sotheby’s losses is a bit shocking, its biggest auctions are typically held later in the year, and because art is seasonal the first and third quarters are usually the least successful. The auction house may be able to recover from its losses and end 2013 on a high note. Unfortunately the news of the quarterly results resulted in Sotheby’s share price to fall by 3 percent.