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Auction Houses: Challenges for Now and the Future

J. Howe & Co. auction, 1830.svg Source: Wikimedia Commons

The status of the auction house within the art world and in particular the art market is irrevocably important. The first known auction house in the world, Stockholms Auktionsverk (Stockholm Auction House) was founded in Sweden in 1674. Sotheby’s and Christies, two of the biggest auction houses today, were founded in 1744 and 1766 respectively. Auction houses have been central players in the art world ever since. Over time these institutions have adapted themselves to new challenges of varied natures and have persevered to still be integral players within the art world today.

The challenges of today have formed as the result of the technological developments of the late 90s and the rapid innovation and disruption of industries from the early decades of the 2000s. Two such challenges at the forefront are digitisation and the presence of new technologies. It remains important for auction houses, art professionals, and all stakeholders to assess these challenges in light of the Covid-19 pandemic as well, and the possible responses to these challenges to best prepare for and adapt to the situation and ensure auction houses continue to stay relevant within the art market.

The art world responded to the restrictions placed during the Covid-19 pandemic with increased use of digital technologies; museums made available their collections online for virtual visitors; art galleries took to hosting art shows and openings in virtual viewing rooms with varied approaches such as lifelike imitations of brick-and-mortar walls or experimenting with the seemingly boundless potential of coding and online programming. Not to be left behind, auction houses took to hosting viewing rooms and live streaming of bidding rooms. Across the art world there was a systemic shift towards online sales (ArtZine, 2021). While infrastructure for online sales may have been available long before the pandemic, its adoption saw accelerated uptake as a result of the lockdown. As Thierry Ehrmann, founder and chief executive of popular platform Artprice said, ‘the art market had been resisting to get on the digital field and now has been forced to give it a try.’ (Sagardoy, 2020).

Prominent auction houses Sotheby’s and Christies have also pointed out that digitisation was an important focus area for them (Wall Street Journal, 2021). In a statement to the Antiques Trade Gazette (2020) Sotheby’s said the “restrictions on in-person events” led to the auction house “transforming the traditional auction calendar and accelerated the business’s focus on digital innovation”. Since the start of the pandemic Sotheby’s has enlarged its catalogue and made it available on the internet as a result of these unprecedented sales. They have not only made an online-accessible digital PDF booklet, but they have also broadened their horizons by incorporating Youtube videos, descriptions, webpages, quotes, and biographies of the artists on each lot description. Perhaps the most immersive feature that Sotheby’s has introduced is an augmented reality function in its app that allows customers to digitally hang art in their homes (Sagardoy, 2020; Art Market Monitor, 2021).

NFTsBerlin.jpg Source: Wikimedia Commons

Another important and present-day challenge is that of the emergence of new technologies that impact the auction market within the art world. The past few years has seen the development of new technological standards, goods and services that have the potential to have a huge impact on the market. Some key examples of this include the development of Virtual Reality as a plausible technology that can be adopted by auction houses. Another such technological development is Blockchain and Non Fungible Tokens, which aid in the creation of digital art with embedded digital signatures. The entry of the latter technologies has taken the art world by storm (Nadini and Alessandretti, 2021).

NFTs (Non Fungible Tokens) are digital assets that represent goods such as art, collectibles, and in-game items. They are typically encoded within smart contracts on a blockchain and traded online, typically with cryptocurrency (Nadini and Alessandretti, 2021). An NFT can be used to determine the “provenance” of a digital object, providing incontrovertible answers to questions such as who owns, formerly owned, and developed the NFT, as well as which of the numerous copies is the original. An NFT can be associated with a variety of digital items, including photographs, movies, and audio. In a variety of applications, such as art, gaming, and sports memorabilia, NFTs are now being used to commodify digital objects. (Luke and Stoilas, 2021). While NFTs are growingly popular throughout the art world and in the public, there has been much hesitation and asymmetrical adoption of regulations by governments around the world. This has resulted in a lack of clear and uniform policies that affect the exchange of NFTs between two or more countries.

Auction house Sotheby’s sold its first NFT in April 2021 (Howcroft, 2021) and has subsequently launched a dedicated NFT marketplace titled ‘Metaverse’ (Art News, 2021) that will be the first of its kind from a leading auction house. The institution was also an early investor in NFT start-up Mojito. Such steps point out that Sotheby’s considers NFTs an important element of its future. However the challenge for the industry at large remains in its slow adoption and plethora of misconceptions that exist about NFTs.

COVID-19 has undeniably changed the way auction houses operate and will continue to do so. “In all my years in the art market, there has never been an external event that forced such immediate change,” said David Norman, Phillips chairman of the Americas (Kinsella, 2020). Having been integral parts of the art world since the 17th century, auction houses have faced a myriad of challenges in the past, and while they may not seem as daunting as the present ones, the functioning and status of the auction house is evolving and continues to be integral to the art market.

About the author: Indraneel Banerjee is an MBA in Art and Culture Management from IESA Arts & Culture, Paris. Having a foundation in Psychology, Communications and Culture, he is Trustee of Udayan and Founder of Cultur·Able, a platform on Accessibility and Inclusion in Culture

References

Anny Shaw Ben Luke and Helen Stoilas. WTF are NFTs? Why crypto is dominating the Art market. https://www.theartnewspaper.com/podcast/wtf-nfts Accessed May 4, 2021, 2021. The Art Newspaper.

Antiques Trade Gazette, L. C. (2020, December 20). Auctions take a hit from Covid but private and online sales rise at Sotheby’s and Christie’s. Antiques Trade Gazette. Retrieved 2021, from https://www.antiquestradegazette.com/news/2020/auctions-take-a-hit-from-covid-but-private-and-online-sales-rise-at-sotheby-s-and-christie-s/.

Art Market Monitor, A. M. M. (2021, January 22). After pandemic’s rapid change, Sotheby’s has 8 predictions for 2021. Art Market Monitor. Retrieved 2021, from https://www.artmarketmonitor.com/2021/01/22/after-pandemics-rapid-change-sothebys-has-8-predictions-for-2021/.

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Christie’s. (n.d.). About Christie’s. About Us: The History of Christie’s | Christie’s. Retrieved 2021, from https://www.christies.com/about-us/welcome-to-christies.

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Eileen Kinsella, ‘How COVID-19 Pushed Auction Houses into the Future’ Artnet Intelligence Report 93 2020, p. 59

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Culture Cog by ReReeti Foundation is a space for conversations on art, heritage and culture and their interdisciplinary nature. By bringing in a variety of voices from the humanities and social sciences, we’d like to explore connections that aren’t found in the mainstream.

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Indraneel Banerjee

Indraneel Banerjee

Cultural Communicator from India, Kenya and France