Market Monday: The Upper Hand
This week, a fistful of stories about leverage, its illusion, and its consequences...
Another of 2016's most notable art-industry legal sagas ended on Monday, as Larry Gagosian and representatives of Qatar's royal family settled their respective claims over Picasso's 1931 sculpture "Bust of a Woman (Marie-Thérèse)." To refresh, Gagosian agreed to buy the piece from Maya Widmaier Picasso for a cool $106M last year, specifically so that he could then resell it to mega-collector Leon Black for an undisclosed amount. But the Qataris sued to block the sale, on the grounds that Widmaier Picasso had allegedly already promised to sell the bust to their agent for $47.4M back in 2014. You'll be stunned to hear this, but the terms of the settlement were not disclosed. That makes it impossible to glean anything specific about the sculpture's ultimate fate. However, one definite consequence is that Black now knows exactly how much Gagosian was upcharging him in their original deal for the piece. If he's unhappy with the price delta, it's certainly possible that he could haggle much harder on future transactions. Which once again reinforces why high-end gallerists and dealers are incentivized to fight transparency until their hearts explode: In any resale, your bargaining position is always stronger when your margins are a secret. [Bloomberg]
Preet Bharara, the US Attorney for the Southern District of New York, continued his "Dark Knight with a Docket" campaign to clean up the east-coast art industry, this time by indicting investor Morris Zukerman for $45M worth of tax evasion––some of it stemming from bad behavior in his life as a collector. Among a slew of other white-collar allegations, Zukerman is accused of dodging state sales and use tax by instructing New York dealers from whom he'd just purchased works to ship his new acquisitions to out-of-state properties, only for the same works to be shipped back to Zukerman's home on Park Avenue "hours or minutes" after reaching their first destination. If this trick and its variations aren't the oldest in the industry, they're plenty wrinkled. And as in Zukerman's case, it's not uncommon for major collectors to be the ones making them a necessary condition of sale during negotiations with gallerists and dealers. That thrusts sellers into a "damned if you do, damned if you don't" situation: Risk becoming an accessory to fraud by facilitating the bogus out-of-state invoicing and shipping, or risk losing thousands (if not millions) of dollars in sales by refusing to play ball. I'm not saying that scruples never win out. I'm just saying that the whole scenario puts gallerists and dealers at a disadvantage––and that, in any negotiation, the party with the upper hand usually gets what it wants. [Bloomberg]
Christie's announced that it will expand its decades-long presence in China by opening a new exhibition space in Beijing this fall. Details about the project remain largely under wraps for now, apart from the fact that it will debut with a show centered on works consigned to the house's November auctions in New York (which in turn means that the space can't open later than October). While some in the industry have questioned the move based on an alleged 23 percent decline in China's art market last year per TEFAF, I think those criticisms miss the point to some extent. Setting aside that TEFAF's data is largely guesswork, it's plausible, if not likely, that collectors spent less in China itself because much of what they wanted to buy was only available internationally. By opening a dedicated exhibition space in Beijing ahead of Sotheby's, Christie's gains the first-mover advantage on the Chinese mainland, which has again and again proven itself to be enamored with western brands of all types––fine art being no exception. Unless Xi Jinping's ongoing anti-corruption drive turns most of the country's plutocrats into expatriates in the coming years, that makes Christie's latest expansion look like a smart bet in an industry where sellers know that catering to the high-value collector is still the best strategy, particularly by putting the artwork directly in front of them. [The Art Newspaper]
Finally this week: In a bizarre conclusion to his game of masthead musical chairs with fellow art-media tsar Sergey Skaterschikov, publishing magnate and mega-collector Peter Brant announced that he had "taken control of all assets" involved in last year's merger of industry verticals Art in America, ARTnews, Modern, and Antiques––a weirdly militant choice of words that keeps making me think of Borat on the campaign trail. While the knee-jerk reaction might be that the artists in Brant's collection stand to benefit unduly from his consolidation of publishing power, it's highly unlikely to me that this move affects the art market in any meaningful way. As I've written before, if you want to know how consequential press coverage has been in cementing artist's careers over time, take a look at the parade of present-day mystery men featured in any issue of any major art magazine from earlier decades. Today, they're like luxuriously printed John Doe catalogs. And the countless ruptures they show between publicity and a sustained artistic career say everything necessary about the impact that Brant's ink-stained coup will have beyond the borders of his own ego. [artnet News]
That's all for this edition. Til next time, remember: We don't get what we deserve. We get what we negotiate.