The suits take over Sotheby’s

Mar 23rd, 2015 | By | Category: Journal

Sotheby’s have revealed their new President is Tad Smith, the former head of Madison Square Gardens.  Mr Smith acknowledges he knows nothing about art or the art world but apparently likes Ai Weiwei and Damien Hirst (which confirms he knows nothing about art).  He said he recently bought a photograph of a floating ballet dancer by a French Street artist called JR which now hangs in his drawing room…so that’s a start of sorts.   In a recent interview he made much of his desire to develop the Sotheby’s brand.

Tad Smith, New President and Chief Executive of Sotheby's.

Tad Smith, New President and Chief Executive of Sotheby’s.

At the same time Domenico de Sole, the executive who built up Gucci with Tom Ford, has been promoted from the Sotheby’s board to Chairman.  De Sole commented on Smith, “Tad is a great strategist….He really understands brands and brand building.”

The third new face at Sotheby’s, who forms part of a this triumverate, is the activist shareholder Dan Loeb, who now sits on the board after his successful campaign to oust the former Chairman, William Ruprecht.

We can now expect considerable corporate talk about a five year plan to enhance shareholder value, multiple revenue streams, licensing the brand to third parties, cost cutting and so on.  The last person to try and introduce Sotheby’s to corporate reality was Alfred Taubman who famously said selling art was no different from selling root beer.  Unfortunately it was, and is, and his tenure didn’t end so well when he did time for colluding with Christie’s over fixing commissions.

The branding of Sotheby’s is certainly important.  They should have a reputation for reliability, transparency, honesty and selling genuine artworks.  However, in all this talk about branding the actual art seems to have been lost.  At the end of the day its the art that people want, not the brand.  And its the relationships that bring in and hold the buyers and sellers that are crucial.  Unfortunately developing these relationships, and marketing the art around the world, is very expensive which means Sotheby’s always struggles with profitability and no amount of rebranding is going to change that.

Some will argue that these changes are just Sotheby’s moving with the times and setting themselves up for the new century… line with their recent tie-up with Ebay.  There is no reason ebay will not work well for small value items but it will surely struggle with important pieces.

It would have made more sense to appoint an art world insider as Chief Executive who is familiar with how the art market really works.  The art market is bit like playing cricket, you have to have played it to really understand it.  Try explaining cricket to someone who has never played it…….”You can only be out when you are in. Say your opening, and you are bowled a half-volley outside off stump, and you drive it off the front foot to silly-mid-off and you get caught… then you are out and you should walk straight away.  Except the Austalians don’t walk…ever…and remain resolutely at the stumps until they are actually given out by the umpire.”

Loeb and De Sole are at least both art collectors and so have some experience on the buying side.  Loeb is the biggest shareholder with his Third Point Capital owning 9% but another activist shareholder, Marcato Capital Management, has increased their shareholding to about the same and are agitating for Sotheby’s to release some US$500m of capital by selling its London and New York properties.

Since Sotheby’s is the only listed art market stock it is important for the whole art market that Sotheby’s does well.  Loeb has obtained the control he wanted, has appointed people he is comfortable with in the key positions, and it will interesting to see how it all pans out.

Tags: art market, Dan Loeb, Domenico de Sole, Marcato Capital, Sotheby's fight with Dan Loeb, Tad Smith the new President of Sotheby's, Third Point LLC

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