Role of Auction Houses - Case Study Example

Role of Auction Houses Total Number of Words: 2,998 Introduction In each country, museums and art galleries is being preserved either by the government institutions or private entity as a way of preserving the natural and cultural heritage of each society that has been present for thousands of years (Liston, p.1). In line with the preservation of historical events and cultural information of each country, museums collect hard-to-find antique collections and other prestigious work-of-arts like paintings, sculpture, books, jewellery, and collectible memorabilia. (Christies a; Phillips de Pury & Company a; Sothebys a) The main purpose of each museum is to collect as much historical objects related to both human and non-human achievements including the preservation of the collected items for many years. (van der Wateren) In line with the preservation of prestigious paintings and other works-of-art, the painting of Mao Tse-Tung (Mao Zedong) who once led the Communist Party of China (CPC) between 1943 – 1976 was placed in auction back in November 15, 2005 at Christie’s for as much as US$12 million whereas the painting of Orange Marilyn back in 1964 was sold at Sotheby’s for US$17.3 million. (Vogel) In return, museums allow the general public to have the privilege to view collected items through exhibits. The focus of the study is to discuss the major role of auction houses such as in the case of Sothebys, Christies, and Philips de Pury & Company in relation to the selling of prestigious work-of-arts which can be found in the local and international museums. In the process of going through the main discussion, strategic ways that enables auction houses to achieve its organizational goals including the major role of auction houses such as: (1) the ways in which auction houses connect the buyers and the sellers; (2) ways in which auction houses are able to search for potential sellers of hard-to-find antiques and other culturally preserved artistic items; (3) official arrangements of public viewing and auction event; and (4) the proper collection of payments from the buyers and the allocation of payment to the seller will be thoroughly explained. Prior to conclusion, the role of auction houses with regards to the collections found in the national museums will be tackled. Major Role of Auction Houses Connects the Antique and Art Sellers with the Selected Target Buyers In general, auction houses serves as a link between the buyers and the sellers of a particular items. In the case of old and prestigious items, auction houses such as in the case of Sothebys Holdings Inc., Christies International PLC, and Philips De Pury among others serve as a useful link that connects the antique and historical art sellers to interested museums and art galleries. In most cases, the highest bidder of each item will have the exclusive right over bided items. Auction houses are business organizations that connect the sellers with the target buyers. For this reason, auction houses do not only serve the needs and wants of each local and international museum. As part of globalization, the main goal of the auction houses is to locate interested sellers of antiques before inviting well-known and wealthy people including the selected museums and art galleries all over the world to participate in the auction. Since auction houses invite only those selected individuals with passion and interests in collecting hard-to-find antiques and culturally preserved items, there is a higher possibility on the part of the auction houses to be able to sell auctioned items at a relatively much higher market price. Entering into a business contract with auction houses can be beneficial on the part of the seller. Since auction houses has a better marketing network and the capability to invite few individuals who might show a serious interest with hard-to-find art collections and antiques, there is a better chance that the seller will receive a highly competitive price over the auctioned item as compared with personally selling the item without the professional assistance of an auction house (Explore Auctions). Aside from being able to effectively sell the item at a much higher market price, there is a lesser chance that the seller would encounter individuals who might victimize the seller through a fictitious business transaction. The best strategic way to strengthen the auction houses’ connections within the global markets is to develop a long-term alliance with other auction houses like the Toshi International – a Tokyo-based gallery as well as the ‘Bonhams’ – a British auction house. By joining and becoming a member of the ‘International Association of Auctioneers’, the British Antique Dealers Association, and the National Auctioneers Foundation (NAF) among other related organizations (National Auctioneers Foundation; International Herald Tribune; Vogel), it is easier for an auction house to collaborate with other auction houses in case there is a huge project that needs ot be taken cared of in the future. By joining and actively participating in the special gatherings and occasions of each exclusive organization, each auction houses can increase their local and international connections to increase the success of each business organization. Auction houses are not limited on working independently all the time. Back in 1993, the oldest auction house in Austria known as the Dorotheum Auktions which was established back in 1707 collaborated with Sotheby’s Holdings Inc. in order to conduct an international cooperation deals with interested parties for the purpose of being able to gain more revenue out of selling items that are related to the post-war Austrian art collections (International Herald Tribune). With the assistance of Sotheby’s, it was easier on the part of Doretherum to gain an access with the V.I.P.’s who are interested in participating in the auctions of the rare Austrian art collections. Search for Potential Sellers of Hard-to-find Antiques and Culturally Preserved Artistic Items Auction houses such as in the case of Sothebys, Christies, and Philips de Pury & Company uses its respective websites to invite potential sellers who wishes to sell their belongings related to valuable items like paintings and jewelleries among others. (Christies c; Phillips de Pury & Company c; Sothebys c) There are also cases wherein it is possible for the close friend or relatives of the seller to recommend a highly reputable auction house. Sometimes, it is the artists themselves who submit their personal work-of-art for public bidding in exchange for financial gain. By sending a photograph copy of the item(s) the seller wanted to sell either by post or e-mail, auction houses would normally provide its customers with free estimate with regards to the action value of each item(s) (Phillips de Pury & Company). Aside from giving the seller a rough estimate with regards to the potential auction value of the item(s) for sale, auction houses are able to evaluate the seasonality in which the seller’s item is best to be placed on an auction. Regardless of whether or not the listed items for auction are sold, interested sellers of various types of historical and art-related items are usually charged with ‘a listing fee’ and the cost of insuring the property1 by the auction houses (Explore Auctions; Phillips de Pury & Company c). Aside from collecting a listing and insurance fee from the seller(s), it is the obligation of the auction houses to negotiate with the amount of money that will be paid to the seller for each item that will be held under auction. Normally, the commission that will be paid to the seller is based on a certain percentage of the actual market value of the product (Explore Auctions). To avoid any possible future miscommunication and disagreement between the auction houses and the seller(s), seller(s) are required to sign an agreement contract which clearly states the percentage that was agreed upon between the auction house and the seller (Explore Auctions). Arranges the Viewing and Auction Event for the Benefits of the Sellers and Buyers It is the main responsibility of the auction houses to make necessary arrangements for the public viewing as well as the actual auction event. (Explore Auctions) In line with this matter, modern auction houses like Sothebys, Christies, and Philips de Pury & Company utilizes its official websites to allow the general public such as the local and international museums and global art collectors to have the option to bid on-line. This option actually enables each auction houses to have a better idea of the location where the highest bidder is located. (Christies d) In general, each auction houses has different office location where they can officially arrange the actual auction event. Depending on the geographical location of the highest on-line bidder, there is a strong possibility that the auction house would intentionally auction the item closest to where the highest on-line bidder lives. By doing so, there is a better chance for the auction house to sell each item at a relatively much higher market price which can be beneficial not only in the case of the interested buyer(s) but also on the part of the seller and the auction houses. Prior to the actual auction event, auction houses would normally published the items that are intended to be sold in public via auction method in a printed auction sale catalogues, dealers’ catalogues, and small gallery catalogues and checklists which are usually posted on the company’s website for public viewing (Christies a; Kempe; Phillips de Pury & Company a; Sothebys a). In line with the search for prestigious antiques, Kempe reported that there are a total of 23 catalogues that includes items found during the 17th century, 1,633 catalogues during the 18th century, and 9,709 catalogues during the 19th century which can be found at Frick Art Reference Library (Kempe). Since most auction house companies are engaged in global markets, these companies would deliver and sell the available catalogues upon each order request and/or catalogue subscriptions. To make it easier on the part of the auction houses to make necessary arrangements for viewing, evaluation, and the actual auction, these companies have decided to use item category such as: (1) Asian Art; (2) Collectibles; (3) Fine Art; (4) Furniture & Decorative Arts; (5) Jewellery & Watches; (6) Antiquities; (7) Motor Cars; (8) Books and Manuscripts; (9) Wine & Cigars; (10) Interiors; and (11) Islamic Art among others (Christies b). Under each item category, auction houses would assign a specific evaluation and auction date which will be publicly posted on the company’s website (Christies b; Phillips de Pury & Company b; Sothebys b).. In the case wherein a potential buyer has shown interest either by calling or sending e-mail to auction house, auction house’s employees will be assigned to call the on-line bidders to inform and remind with regards to the official schedule for the auction event including the venue at least two days before the actual event. Based on the result of the actual auction event, auction houses will then be in-charge of informing the seller as to whether or not the items that are placed on auction was sold or not. It is also the duty of each auction houses to inform the seller with regards to the amount of money the seller will be receiving in case the item(s) that was placed on auction were successfully sold. Collect Payments from the Buyers and Allocation of Agreed Value of Money to the Seller The role and responsibilities of auction houses does not end with the search for a large group of potential sellers and buyers and/or the preparation for the special auction arrangement between the buyers and the sellers. Another significant role of the auction houses is to collect payments from the winning bidder and eventually allocate the payment to the seller (Explore Auctions). Basically, it is the time wherein auction houses receive payment from the winning bidder and pays the seller with the agreed percentage of the item’s market value that the role of auction houses end. Discussion The main purpose of the local and international museums is to gather and collect historical arts and other related items such as paintings, sculpture, as well as the antique jars and vase that can remind the people of historical events or well-known individuals such as in the case of Mao Zedong. For this reason, local and international museums are very keen on participating in auctions that has items that can be worthy of keeping inside the museums. The process of buying and selling of various items through the auction houses have been practiced for a very long period of time. In line with the existence of auction houses even back in 1800s, there is a very huge possibility that some of the finest art works that are currently available inside the national museums have once been a private collection before it passes through the auction houses for public bidding (Kempe). Given that the government offers an annual budget coming from the collected taxes which aims to be used in the preservation of the national museums, most of the auction houses are very much interested on inviting some of the government preserved museums to participate in the public bidding of contemporary art designs and historical master piece. Since most of the available auction houses are able to take hold on various kinds of priceless work-of-art, both the local and international museums are very much eager to find ways on being able to purchase some antiques that are at the hands of the auction houses. Because of the relatively high priced items, some of the local museums end up joining their forces with foreign-based museums to enable them to purchase selected artistic items that are made available in the actual public auction of auction houses. In line with strengthening the purchasing ability of the local museums, the Fine Arts Museums of San Francisco including the Victoria and Albert Museum which is located in London entered into a 5-year agreement to increase the public exhibitions together (Vogel). By joining forces, both museums are able to gain benefits out of the economies of scale by cutting down on both museums’ organizational expenses. For this reason, these museums are able to save a part of the government allocated budget which will be used in purchasing expensive items that are avaible at the auction houses. In most cases, local and international museums actively participate in the market of auction houses as ‘acquirers’ or buyers (Rosenbaum). However, there are also cases wherein some museums would experience financial difficulty in preserving the overall stability of the museum. In other words, there are also cases wherein the local and international museums participate in the auction market as the sellers of prestigious items. Upon analysing the role of auction houses in the auction market, auction houses actually contributes a lot not only in the ability of each museums to collect hard-to-find historical items around the world which add up to the prestige of each museum but also the increase in the market price of these items. Basically, without the active participation and intervention of the large-scale auction houses like Sothebys, Christies, and Philips de Pury & Company, it is possible that the market value of the art items sold in auction will not be as high as compared to selling these items under the auction process. The role of auction houses in the collection items that are can be found in both within the local and international museums can be explained using the basic law of supply and demand theory. Basically, what an auction house does to increase the market prices of the so-called prestigious items is to gather financially capable individuals who are willing to pay a high price for the auctioned items. By increasing the demand for a unique work-of-art, wealthy and famous art collectors including the local and international museums automatically dictate a relatively high monetary value for a particular item. In other words, failure or the inability of the auction houses to gather financially capable individual(s) and/or public institution(s) would make the market value of the auctioned items low. A very good example is the case of the Mao Zedong’s painting. Before Christie’s accepted the painting for public auction, the painting was not considered as prestigious by many people. However, with the active participation of an auction house, the market value of Mao Zedong’s painting increased up to as much as US$12 million (Vogel). Another example is the case wherein Sotherby’s was able to sell a square blue and white jar which existed since the early 15th century at the market price of US$4.72 million (Melikian). Conclusion Auction houses plays a crucial role in enabling the local and international museums to gather and collect rare paintings and other work of arts that are in significance of the historical culture of a country, events, and/or globally well-known personalities. Auction houses act as a middleman between the potential buyers and sellers since it is the main responsibility of auction houses to inform the interested private collectors and/or government agencies and public institutions around the world that are likely to be interested in purchasing expensive collectible items. In the process of inviting qualified individuals and/or institutions to participate in the public bidding, auction houses increases the market demand for saleable rare to find items. Auction houses play the crucial role as a middleman in terms of trading items sold on auction. For this reason, auction houses like Sothebys, Christies, and Philips de Pury & Company has an important role to play upon finding a potential seller and buyers. In line with this matter, the major role of auction houses includes not only the search for potential buyers and the sellers who would actively participate in an auction event but also the preparation of the official arrangement of public viewing and auction event as well as the proper collection of payments from the buyers and the allocation of the seller’s commission. *** End *** References: "Christies." 2008a. Christies Publications: Catalogs. 11 October 2008 . "Christies." 2008b. Upcoming Auctions. 11 October 2008 . "Christies." 2008c. Contact Client Service. 11 October 2008 . "Christies." 2008d. 1944 Lots. 11 October 2008 . "Explore Auctions." 2008. The Role of An Auction House. 11 October 2008 . "International Herald Tribune." 17 November 1994. Austrian Auction House Aims for Global Expansion : Dorotheum Bids for Higher Role. 11 October 2008 . Kempe, Deborah. "Sold! The unique research role of auction sale catalogs." World Library and Information Congress: 69th IFLA General Conference and Council. Berlin, 2003. 1 - 4. Liston, David. Museum Security and Protection: A Handbook for Cultural Heritage Institutions. Routledge, 1993. Melikian, Souren. "International Herald Tribune." 23 April 2006. Art fairs steal the show from the auction houses. 11 October 2008 . "National Auctioneers Foundation." 2008. The National Auctioneers Museum. 11 October 2008 . "Phillips de Pury & Company." 2008a. Catalogue Subscriptions. 11 October 2008 . "Phillips de Pury & Company." 2008b. Exhibitions: Calendar. 11 October 2008 . "Phillips de Pury & Company." 2008c. Selling. 11 October 2008 . Rosenbaum, Lee. "Arts Journal." 14 July 2008. Market Nexus: Frick Appoints Sothebys Vice Chairman to Its Board. 11 October 2008 . "Sothebys." 2008a. Catalogue desk. 11 October 2008 . "Sothebys." 2008b. Browse Calendar & Catalogues. 11 October 2008 . "Sothebys." 2008c. How to Buy & Sell. 11 October 2008 . van der Wateren, Jan. 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