A Bid Too Far

The season may have been something of a fizzle at the beach, but in the art market, it was the longest, hottest summer in years. On a Friday afternoon in August, Michael McGinnis, director of contemporary art for Phillips Auctioneers, sat at his desk in the cramped East 79th Street offices of the upstart, London-based firm surrounded by a mountain of catalogues and artworks in – and out of – packing crates. As five o’clock approached, the newly rich collectors he cultivates were fleeing the city for their art-filled, humidity-controlled beach houses. But McGinnis was doggedly plowing through transparencies of recent works by Matthew Barney, Jeff Koons, and Cindy Sherman – fashionable artists whose works he hopes to sell for record sums at auction this fall. Above all, McGinnis was keenly aware that by the end of summer, he must nail down an impressive array of works for the all-important fall sales, which begin on November 13.

With Phillips as the new wildcard in the 250-year slugfest between Sotheby’s and Christie’s, the competition has never been more intense. “It’s insanity – we’re incredibly busy,” says McGinnis, a relentlessly cheerful, plump-cheeked 30-year-old who quit Christie’s last year to launch Phillips’s contemporary department.

And the battle has not been without what the Pentagon calls collateral damage. Dealers once watched from the sidelines as Christie’s and Sotheby’s duked it out over old masters, Impressionists, and Abstract Expressionists. But to the dealers’ horror, the auction houses have moved aggressively in the past two years to seize control of the contemporary-art market. Gallery owners complain that the extravagant prices achieved recently at auction have prompted speculators to buy artists’ latest works in galleries, then flip them at Sotheby’s, Christie’s, or Phillips for a quick profit, inflating the fragile careers of artists the galleries have painstakingly nurtured.

“I think it’s reprehensible,” says Barbara Gladstone, a prominent Chelsea dealer. “When I see works from 1999 at auction in 2000, my blood boils. These artists are people with careers. It’s a reflection of unmitigated greed, and I think it should be regulated.”

Gladstone argues that art created in the past decade should be excluded from public auctions – a high-minded proposal that is unlikely to come to pass. “If an artwork is over ten years old, I think, okay – the statute of limitations is up,” she says.

“The galleries are the big losers in this game,” fumes a prominent SoHo dealer. “When collectors sell work from our gallery at auction, we don’t make a dime, and neither does the artist. If the piece does badly at auction, everyone suffers. If the piece does well and we raise our prices to match the auction price, the collectors get angry. And if we don’t raise them, the artist feels betrayed – artists are very sensitive – and they threaten to defect to another gallery. It’s a no-win situation.”

Some established collectors also find it in bad taste. “If you put something up at auction, you can hurt the artist’s market,” says Herbert Schorr, a veteran bi-coastal collector of emerging artists. “To me, if I want to make money, I’ll make it in the stock market. But I must admit that I am in a very small minority.”

The auction houses plead innocence. “I don’t try to encourage people to sell work they just bought last week,” says Philippe Ségalot, head of Christie’s contemporary-art department, who is more than familiar with such expressions of dealer rage. “But I cannot ignore it, because if I don’t take it, they will go to the competition.”

The spring 2000 auctions in New York produced record sums for the work of 35 artists including Phillips’s, whose first glitzy contemporary evening sale fetched an impressive $11 million. Out of Sight, Out of Mind – a 1991 sculpture by Damien Hirst consisting of two severed cattle heads preserved in formaldehyde – sold for a staggering $552,500 at Phillips, a record for the 35-year-old British artist. Bidding was fierce, even though the sculpture itself was stuck in London. A polite salesroom announcement elicited a few chuckles: U.S. Customs was demanding that the purchaser sign an affidavit guaranteeing that Hirst’s grisly handiwork would be used solely as an artwork, in order to prevent the potential spread of mad-cow disease. No less remarkably, Woman in Tub – an über-kitsch 1988 porcelain sculpture by Jeff Koons of a headless woman grabbing her breasts as an intrepid visitor with a snorkel attacks her from the bottom of her bubble bath – sold to an unidentified telephone bidder at Christie’s for $1.71 million.

With the fall auction season rapidly approaching, there’s no shortage of deep-pocketed collectors with the superior vision required to admire the aesthetics of pickled cows’ heads and headless porcelain pornography. And with the spring’s high prices egging the auction houses on to score an even bigger autumn, McGinnis and his formidable rivals, Christie’s Philippe Ségalot and Sotheby’s Tobias Meyer, spent their summers jetting from villa to chalet to dacha to ranch in order to cajole coveted artworks from collectors. To close their deals, the three experts and their various deputies often fly thousands of miles to view a single picture. “It’s important to see it firsthand before we make a serious commitment,” says McGinnis, who recently flew to Switzerland for the day to visit a collector. “The stakes are high in these auctions, and you have to be 1,000 percent confident that you’re going to be able to sell it.”

Among the tantalizing contemporary works the three are confident about selling in the fall sales are another Damien Hirst, In Love/Out of Love, from 1998, that McGinnis estimates will sell for $400,000 to $600,000. And at Christie’s, Philippe Ségalot has lined up Charles Ray’s Male Mannequin, a sculpture that Christie’s describes as “a self-portrait in some sense as the genitalia is anatomically correct and cast from life,” which he has estimated at $700,000 to $900,000.

In grabbing the contemporary dealer’s secondary sales, the auction houses are adjusting to a seismic shift in the marketplace and evolving tastes. Impressionist paintings and early-to-mid-twentieth-century artworks have long produced top dollar, but superb examples are increasingly scarce. Most are locked away in museums and private collections, or have become exorbitantly expensive. But newly wrought, contemporary pieces – some on which the paint is barely dry – are in prodigious supply. “Thirty years ago, we were collecting Abstract Expressionists when that was still affordable,” Schorr says of his switch to emerging art. “We buy young art,” his wife, Lenore, adds. “It’s more challenging. It’s the thrill of discovery.”

In their enthusiasm for these new artists, many ignore the fact that the stratospheric prices being achieved at auction for recently created works are eerily reminiscent of the inflated market of the eighties that immediately preceded the art-world Armageddon of 1990, when prices and confidence plunged. A dismal contemporary auction at Sotheby’s in November 1990, where 58 percent of the artworks offered went unsold, remains a painful memory to some.

“Very few people seem to have learned the lessons from the end of the eighties,” observes Matthew Marks, a leading Chelsea dealer who isn’t tickled to see the market froth over. “I’m not that old, so I don’t see why I can remember it, but so many people old enough to be my parents’ age don’t.”

A cautious skepticism, however, may be hard to maintain in the face of positive market pressure. At Sotheby’s evening sale on May 17, a multi-edition photograph created in 1998 by Andreas Gursky sold for $181,750 – a record price for the popular German artist, and an astonishing sum given that it was selling in galleries only two years ago for just $30,000.

And it’s no secret that Phillips has been offering hefty guarantees and up-front sums to help along a few deaccessions from private collections. Phillips reportedly put up $1.3 million to secure Gerhard Richter’s Apfelbaum for its May auction – in the form of an outright purchase or a guarantee. It was cheerfully listed in the catalogue with an $800,000-$1.2 million estimate. If the painting had sold in that range, Phillips would have taken a loss. But the market rewarded McGinnis’s aggressive tactics when a buyer snapped it up for a $1.5 million hammer price. Not to be outdone, Sotheby’s and Christie’s have been busy making counteroffers. “To compete for property at this level in such an accelerated market, guarantees are a necessary part of the business,” McGinnis notes.

With such inducements, who could resist cashing in? “The auctions make my life more difficult,” says Marks, who is Gursky’s New York dealer. “If I’m selling works for a fraction of what they could conceivably bring at auction, it’s obviously of no interest to me if I sell to someone who’s then going to turn around and put it up for auction.” So Marks takes the only measures he can. Collectors who dare to indulge in such speculative high jinks are immediately blacklisted from the gallery. To discourage short-term speculators, some influential dealers, including Andrea Rosen, now issue invoices specifying that if the purchaser decides to resell the work, he or she is expected to offer it first through the gallery.

Defending his role in the dust-up, Ségalot notes that he is careful to limit the number of pieces by an individual artist in a sale in order to avoid flooding the market with his or her work, and that he deliberately creates conservative, realistic estimates that will encourage bidding. “We try to care – I mean, we do care – about the artists, their market, and about the galleries, et cetera,” he says.

The dealers are not the only ones with rising temperatures in this hot market. Collectors, too, are getting frustrated – but with the dealers. Like his competitors, McGinnis notes that the auctions are often the only way that collectors who are passionate about an artist’s work can gain access to it. What irks the collectors most is gallery “waiting lists” for work by sought-after artists – often a euphemism for a dealer’s refusal to sell the work of an artist to anyone but a museum or a famous collector who can be relied upon to improve the work’s provenance.

“I sympathize with the dealers,” McGinnis says. “But the reality is that we provide a service to consumers who are looking for work perhaps created last year. If they can’t get it anywhere else, and if we can source it for them and sell it successfully, I think it’s our obligation.”

At Sotheby’s, a couple of works created in 1999 showed up in the auction house’s day sale on May 18, both selling for sums comfortably above their high estimates – a simple oil portrait of a yellow-and-green-eyed woman by Vanessa Beecroft for $9,600 and a small etching of a hand by Robert Gober for $2,280. But Tobias Meyer downplays the importance of such works at Sotheby’s. “It’s definitely not a market that I consciously run after,” he says.

Meyer’s reluctance to pursue works of such recent vintage is partly due to the fact that Sotheby’s – unlike Christie’s – continues to define “contemporary” as work from 1945 to the present. During the past two years, Sotheby’s has achieved several records for work created in the past decade. But given that the prices over $1 million in Sotheby’s recent sale were generated by classic works, Meyer is more motivated to sell blue-chip contemporary items such as a late-forties abstract canvas by Clyfford Still or a sixties Warhol.

Two years ago, Christie’s caused a major ripple in the art world by launching a new department for work created since 1970, challenging the definition of what constitutes contemporary art. It was a cunning scheme to attract new, younger buyers – and an instant success. The first sale, in June 1998, was 100 percent sold and produced twelve record prices for Gerhard Richter, Sigmar Polke, and Dan Flavin totaling $16.2 million – way above Christie’s $12.6 million high estimate.

For all the hue and cry over Christie’s bold move, it was actually Sotheby’s that got the ball rolling a year earlier with a landmark sale in May 1997, when Meyer took up the gavel for the first time in New York after his appointment as head of contemporary art worldwide.

That sale included eleven artworks consigned by the Boston Children’s Heart Foundation – an intriguing and unlikely source. The collection had been assembled by Dr. Bernardo Nadal-Ginard, a Boston cardiologist with a superb eye for contemporary art who had recently gone to jail for dipping into the nonprofit medical foundation’s funds to treat himself to works by trendy artists such as Kiki Smith, Jeff Koons, Matthew Barney, and Robert Gober.

“The quality was unbelievably high,” Meyer recalls. “So I decided to put the contemporary works at the beginning of the evening, which was a first. People didn’t anticipate them to do so well, but they did.”

One of the most fought-for items was Kiki Smith’s sculpture of a hunched, seated woman urinating. It sold to the London dealer Anthony D’Offay for $233,500 – nearly three times its high estimate and a record for the artist. Sotheby’s 1997 triumph may have hastened Christie’s decision to create its post-1970 department, but the latter firm has wasted no time since in aggressively marketing itself as the ultimate venue for buying and selling recent art. Indeed, Christie’s found a new lease on life when contemporary-art collector and hard-charging French luxury-goods tycoon François Pinault bought the firm in 1998. Much of the effort has been led by Philippe Ségalot, the 37-year-old Frenchman who became head of contemporary art for Christie’s worldwide in the fall of 1998, when works by Gober, Jean-Michel Basquiat, and Cindy Sherman were on the block.

Ségalot’s successes have administered a spectacular jolt to the careers of certain artists, most notably Jeff Koons – the eighties art star who dropped out of the public spotlight in the early nineties amid a harrowing custody battle over Ludwig, the son he had with his ex, Italian porn star-politician Ilona “Cicciolina” Staller, whose nickname translates as “little pot of flesh.” Denied custody, Koons spent much of his time during the nineties traveling back and forth to Rome in order to visit his son, perhaps regretting the numerous explicit and multi-edition porcelain sculptures he had created in 1991 depicting himself naked with Cicciolina flagrante delicto in a memorable variety of positions.

Last November, collectors and dealers arriving for the first contemporary preview at Christie’s glamorous new headquarters at Rockefeller Center were startled to encounter actors prancing about in Pink Panther costumes as rock music blared. More than a cheap party gimmick, the kitsch costumes were intended to promote the imminent sale of Koons’s Pink Panther, a porcelain sculpture of a seminude blonde hugging the cartoon character, which was also pictured on the cover of the catalogue.

While some found the costumed high jinks entertaining, others were not so amused. “It was so tacky,” recalls a well-known SoHo dealer. “It was the most hyped-up thing.”

Some may grumble, but Christie’s effective boldfaced promotion was entirely in the spirit of the rampant commercialism so expertly exploited in the work of Koons – a former Wall Street commodities trader whose art provocatively advertises itself as a commodity by invoking the everyday kitsch of soft porn, kids’ toys, rock music, film stills, and TV. Created in 1988, Pink Panther is part of Koons’s celebrated “Banality” series, which inspired admiring and furious reviews when it was first exhibited at Sonnabend in December that year. Hilton Kramer, the arch-conservative critic, called the show “nothing but a recycling of kitsch taste for jaded sophisticates.” As such, it may have been just the ticket for its well-heeled audience.

“Philippe is smart, and he’s made it fun,” says a SoHo dealer, speaking of the new direction of contemporary auctions at Christie’s. “The art is cutting-edge, and the parties are fun. It’s a social appointment twice a year, and people come for the auctions even if they’re not going to buy. But I think it’s also kind of a joke. It’s bored rich people looking for excitement. It’s decadent.”

To widespread astonishment, Pink Panther sold for $1.8 million to an anonymous telephone bidder at Christie’s evening sale on November 16 after intense bidding among five collectors. That staggering sum was more than twice the auction house’s high estimate of $800,000 and more than quadruple Koons’s previous auction record of $409,500.

“Privately, it could never have brought that price,” notes a young dealer who was involved in consigning Pink Panther to Christie’s.

“When I priced Pink Panther for $600,000 to $800,000, they told me I was crazy,” Ségalot says, chuckling. “Then it sold for $1.8 million, and that allowed us to get more for the next sale.”

No kidding. On the strength of his success with Pink Panther, Ségalot managed to line up a total of five Koons pieces for Christie’s next evening sale on May 16, led by the spectacularly garish Woman in Tub.

Christie’s went to extraordinary lengths to galvanize interest in Woman in Tub, throwing a “Bubble Bash” theme party for 900 guests with dimmed lighting and a disco beat on May 15, the night before the sale. Again, the Christie’s hype appears to have paid off. After intense bidding among four contenders, including dealer Larry Gagosian, Woman in Tub sold to an unidentified telephone bidder for $1.71 million.

“The big question is, who’s paying $1.8 million and $1.7 million for Jeff Koons at Christie’s?” says a leading SoHo dealer. “Nobody knows. The big suspicion is that it’s Pinault himself.”

Such widespread speculation is fed by a couple of factors: As the owner of Christie’s, Pinault stands to gain mightily from the buzz generated by Christie’s high sales results, and the diminutive Frenchman – a prodigious collector of contemporary art – is known to be a fan of Koons’s work. And earlier this year, he paid $3 million for Koons’s Speed Rocker, a 40-foot-tall sculpture – half-pony, half-dinosaur – abloom with 75,000 plants, which was on view this summer in the Papal Palace in Avignon, France.

Ségalot is keen to put such speculation to rest. “Everyone thinks to the contrary, but Mr. Pinault didn’t buy any of the Koonses offered at Christie’s,” he says, clearly exasperated. “It’s funny that now every strong price is associated with him, you know? But I can tell you very firmly, and very honestly, that is not the case.”

So who is the mystery purchaser? The dealer involved with consigning Pink Panther points to Peter Brandt, the controversial tycoon and former publisher of Art in America. Ségalot refuses to confirm or deny that Brandt is the purchaser, and he is similarly tight-lipped about Woman in Tub.

Despite the hype and glory Christie’s has achieved with its recent-contemporary sales, Tobias Meyer currently has no intention of creating a post-1970 sale at Sotheby’s.

“When you see it as a business, the money is in the classic contemporary works,” Meyer says, referring to multi-million-dollar works by artists such as Jackson Pollock, Jasper Johns, and Andy Warhol. “With the young art – I call it the spice of the sale – you can get very high prices for certain things if the quality’s great. You can create a certain buzz, but it’s not the meat and bones of the market.”

Meyer points out that the record $14.3 million achieved for Rothko’s Yellow Over Purple at Sotheby’s most recent contemporary evening sale is roughly the same as the $14.4 million total for all 50 works sold at Christie’s the previous evening.

Given the enormous expenses involved – staffing a separate department, extensive international travel to secure artworks, and color catalogues that are costly to produce and send – it is hard to imagine that either Christie’s or Phillips is making much of a profit on its contemporary sales.

Despite her animus toward the auction houses, Barbara Gladstone acknowledges that there is a silver lining. The widely publicized triumphs of the auctions can translate into increased public interest and more business in the galleries. “They bring a wider audience,” she says, referring to the auction houses, “because it’s exciting and kind of sexy, all that money.” Even so, she says, “there’s a lot more interest in the money being spent than there is in the art.”

Infatuation with art at auction doesn’t necessarily translate into business elsewhere, however. Many dealers are frustrated that new collectors often seem oblivious of the galleries, preferring instead to buy in the charged atmosphere of the auction room.

“I met some people this spring who, much to my complete amazement, went to the auctions and paid five times what they should have for a piece, then chose to come visit the galleries the day after,” Matthew Marks recalls.

“They very nicely purchased a similar piece from me at a fraction of what they’d paid at auction, so I just mumbled something about how I hoped they weren’t going to make a habit of it, and that next time they might want to come visit the gallery the day before the auctions. But they didn’t seem bothered by any of it.

“I think they just have a lot of money and they’re enjoying themselves,” he adds with a sigh. “But as a dealer, you want to throw yourself off a bridge when you see these people going at it in the salesroom.”

Few things are more vexing to a dealer than the spectacle of collectors bidding extravagantly for a multi-edition work when an identical piece is sitting in their gallery, available for a fraction of the auction price. Winterthur 1992, a small landscape photograph from an edition of ten by Thomas Struth, sold for $45,825 in the Christie’s day sale on May 17. Eight blocks north at the Marian Goodman gallery, however, it was available for $20,000 – less than half of the Christie’s price.

“I think the people who go to auction ought to come to the gallery first and take a look!” says Goodman, the legendary 57th Street dealer, who has represented Struth since the late eighties.

Strange as it seems, such discrepancies are commonplace. “If someone wants to pay three times the price, that’s up to them – they’re welcome,” says Antonio Homem, the director of Sonnabend gallery, now located on West 22nd Street. “Maybe it’s just the price one pays for ignorance,” he adds.

Like other dealers, Homem is indignant about collectors who think nothing of paying exorbitant sums in an auction salesroom but who then have the gall to try to nickel-and-dime dealers when visiting the galleries. Recently, he recalls, a collector who paid a wildly inflated price at auction came to the gallery and inquired about a comparable piece. “This person who had paid ten times the price said, ‘How much does your artist cost?’ ” Homem recalls. “I mentioned the price, and he said, ‘Will you give me a discount?’ “

And when works soar in price at auction, it inevitably presents dealers with a delicate problem: whether to raise the price of an artist’s work in the gallery. To Barbara Gladstone’s dismay, Where Does It All End?, a small wax sculpture by Sarah Lucas that is a cast of the artist’s mouth with a cigarette, somehow inspired a winning bid of L37,600 – $55,500 – at Christie’s contemporary sale in London on June 27.

“I sold it for a thousand dollars in 1995 when it was new, but that’s only five years ago,” Gladstone says. “I don’t know how you could arrive at that number,” she adds. “It has its own life, this auction market. And I don’t think the auctioneers know much more about it than the rest of us.”

Even though Lucas’s sculpture sold for 55 times its original gallery price, Gladstone claims she has no intention of hiking prices for new work. “I don’t think the primary market should be affected by the secondary market,” she says. “The primary market has to exercise sanity and restraint. The artist and I are responsible for what we feel is a sane number. And it has to be based on something real. Because we’re not irrational. The marketplace may be irrational, but we’re not.”

“People come up to you and say, ‘I hear you sold a medicine cabinet for L500,000,’ ” Damien Hirst says. “And I say, ‘I sold it for L500 in the gallery and only got half that.’ ”

“The gallery has an ongoing relationship and responsibility to the artist, and the auction house is there to sell what’s in demand, which is changing all the time,” observes Marian Goodman. “But the problem is that artists get judged because they can’t sustain an inflated price. The artist hopes to have a long career, and you’re not looking to make a killing. It gets really bad when you feel like an artist is losing his chance to survive by having the auctions overload his market. There’s no artist that can stand up to that.”

Sometimes, of course, a dealer is happy to see an auction sale boost the reputation of an artist. Sandra Gering was delighted that Gnaw, a piece comprising two 600-pound lumps of chocolate and lard literally gnawed by Janine Antoni, put the conceptual artist on the map when Christie’s sold it for $204,000 to dealer Lucy Mitchell-Innes, bidding on behalf of the Museum of Modern Art.

The conventional wisdom, Hirst concedes, is that “the auction market trickles down into the primary market. It’s a bit like Prada being upset by things selling in thrift stores.” Or perhaps that’s the other way around.

And yet even a star like Hirst is pessimistic about his fate in the auctions. “I haven’t had much bad experience in the auction world,” he says. “But I’m sure it’s inevitable.”

A Bid Too Far