Sotheby’s has performed a U-turn on its recently overhauled premium structure, the latest decision in what has proved a dramatic year for the auction house.
An email sent from the auction house to clients today reads: “You may recall that, 10 months ago, we announced a bold initiative to reduce our Buyer’s Premium to a flat 20% on almost everything we sell”—while works over $6m had a 10% fee—“and to create fixed financial terms for sellers”.
This, naturally, went down well with buyers, says chief executive Charles Stewart, but the streamlined selling fees, at a flat 10% for works estimated up to $5m, capped at $50,000 and designed to minimise individually tailored negotiations, “proved less attractive to potential sellers”.
So, from 17 February 2025, Sotheby’s fees will revert to broadly the same as those that were in place beforehand, namely a 27% buyer’s premium for works up to $1m; 22% for between $1m-$8m and 15% above $8m. The seller’s fee will revert to “bespoke terms”, the email says. Some tweaks are still in the latest structure. Sotheby’s confirms that the previous 1% “overhead premium” on all bought lots is still scrapped (though remains for wines and spirits), while the introduced success fee to sellers of 2% of the hammer price above a work’s high estimate remains.
Stewart sticks to the thinking behind the changes. “We are totally unafraid to try things that challenge conventions in ways that benefit the market and expand access by growing audiences,” he tells The Art Newspaper, adding that the system as it stands “leads to a whisper market” around consignments. The aim, the email says, was to bring “transparency, simplicity and fairness on fees that have always been intimidatingly complex”. But in the end, Stewart says, “the market doubled down on the status quo.” The change in selling fees proved particularly unappealing to “people used to consigning and those with art advisers,” he says.
Also working against them, Stewart says, was the timing of the changes, which came “as the market had much more of a supply issue”. Uncertainty around the US elections, coupled with ongoing concerns about the wider geopolitical environment, resulted in a much more reluctant selling environment in 2024. “We need to be responsive. We’ve tried, we’ve learnt and we’ve listened,” Stewart summarises.
Stewart did not comment on whether rival Christie’s picked up more juicy consignments on the back of the amended Sotheby’s structure this year. He concedes, though, that one sticking point was that the amount between the hammer price and the total paid by the buyer at each house—the basis for calculating incentives to sellers such as offering a portion of the buyer’s premium—was different (presumably lower), which consignors found “confusing”.
On Tuesday, Christie’s projected its total auction sales for 2024 would be $4.2bn (down 16%) while Sotheby’s is expected to make a total $3.5bn (down 35% and excluding car sales), according to the analysts ArtTactic. When private sales are added in, Christie’s 2024 total stands at $5.7bn, down 6%, while Stewart expects Sotheby’s total to have fallen around 25% to approximately $6bn, also including car sales through RM Auctions. He says that the premium changes “had no significant impact on our margins.”
The U-turn caps an eventful year for the auction house, which began by successfully defending itself in court against accusations from the Russian billionaire collector Dmitry Rybolovlev. Midway through the year, Sotheby’s informed bondholders confidentially that its first half core earnings had fallen by 88%, though this did not include businesses such as private sales and financial services and, a spokesperson says, included some significant one-off costs. In October the company closed a $1bn cash injection that made the Abu Dhabi-based investment company ADQ a minority shareholder and went some way to assuaging concerns over its $1.65bn of debt, accrued under owner Patrick Drahi who bought the business in 2019.
But last week, news broke that the auction house had laid off at least 100 members of staff (out of a reported 1,800), following a job cull earlier in the year of about 50. “Given the challenges the market has faced this year, we’ve taken a careful look at our business and staffing levels to perform well and grow going forward,” a spokesperson says.
