Doubling Down on the Art Market
Phillips plans an aggressive round of auctions, despite soft sales of contemporary work
Wall Street Journal:By Kelly Crow: 9.10.09
As the world’s chief auction houses scale back in a grim art market, one auctioneer is taking the opposite tack.
Phillips de Pury & Co. is adding 18 new sales of contemporary art to its calendar over the next year and a half. At a time when Christie's has trimmed sales and Sotheby's has shrunk some once-hefty catalogs nearly to the size of CD cases, Phillips, the third-largest auction house for contemporary art, is enlarging its catalogs and tripling their print runs. Prices for contemporary art have plunged as collectors turned to tried-and-true Old Master paintings and Asian vases, but Phillips is placing some of its biggest bets yet on the volatile category. On Sept. 26, it will hold a London auction called "Now," featuring many artists who have never sold at auction before.
The plan is being steered by Bernd Runge, the auction house's new chief executive. A former Conde Nast executive, Mr. Runge was tapped early this year by Phillips's new owner, Mercury Group, a Russian retailing giant that acquired a majority stake in the privately held auction house last October. The new series of art auctions will roll out roughly once a month between London and New York, packaged with themes like "Sex," "Film" and "Black/White."
Mr. Runge, in his first interview since taking the post, said the monthly auctions will target local audiences in New York and London who haven't bought art before. He said that he is handling the logistics of the sales, along with the company's other business affairs, but said that the art will be chosen by the company's art specialists and its chairman, Simon de Pury.
"I'm almost an art virgin," Mr. Runge said. He said he is trying to catch up by attending art fairs and biennials.
Critics say that moving more untested artworks into the marketplace now could backfire if collectors hold on to their wallets, potentially rattling confidence in the overall art market. Others say the novelty of the plan—a disc jockey will play during a music-themed sale in October—could also inject life into a scene that's weary of feeling weary.
The art market has taken a battering this year, struggling even as other financial markets have taken small steps toward recovery. In the first half of 2009, Sotheby's sales were down 87% and Christie's sales were down 49% from the same period a year ago. Prices for new art have stopped plummeting, but the volume of contemporary art sales this summer was down 80% compared with last summer, according to ArtTactic, a London-based research firm that tracks global art sales.
Phillips is particularly vulnerable to art-market mood swings because of its tighter focus on contemporary art, photography, jewelry and design. Its auction sales total for the year currently hovers at around $60 million, well off pace from last year's $292 million total. At its last major sale in London this June, only one work sold for over $1 million, and the $8.4 million sales total fell just under its low estimate.
Mr. Runge has been tasked with turning the decline around. On a recent afternoon in London, he sat in a conference room flipping through the catalog galley for "Now," grinning as he pointed out magazine-style additions to the catalog format, including an interview with artist Keith Tyson . Before joining Phillips in March, he spent a dozen years as a Condé Nast International vice president, helping to launch 30 magazines including successful editions of Vogue and GQ in Russian and less successful editions like Vanity Fair in German, which recently closed.
"Now" is a 291-piece mix of prints, photographs, furniture and paintings made since 2000. Some pieces are brand new. Anton Skorubsky Kandinsky's 2009 self-portrait, "I Don't Want to be a Russian Artist, I Want to be a Chinese Artist," came off the wall of the Art Next Gallery in New York last month; its low estimate is $16,450. Other highlights include Mario Minale's 2007 chair made of plastic building blocks, "Red Blue Lego Chair," priced to sell for at least $32,800. Peter Fuss's 2007 sculpture, "For the Laugh of God," is a skull covered in imitation diamonds, priced to sell for at least $9,860. Two years ago, at the height of the contemporary market, artist Damien Hirst sold "For the Love of God," a skull covered in real gems, to a group of investors; Mr. Hirst said the price was $100 million.
Phillips was founded in 1796 by Harry Phillips, formerly the senior clerk of Christie's founder James Christie. In its early years, the house held sales for Marie Antoinette and Napoleon, and later made its reputation in English furniture and silver. It made its first major foray into contemporary art when Louis Vuitton Moët Hennessy bought the company in 1999 . In 2002, LVMH sold the company to its managing directors at the time, Simon de Pury and Daniella Luxembourg. Ms. Luxembourg sold her shares five years ago, and Mr. de Pury has run the company since then.
Today, Phillips' sales are closely followed by the art market. The house is known for taking early bets on artists who can eventually become major auction standbys, like Mr. Hirst. Phillips has nurtured a reputation for being more trendy and offbeat than its competitors. It once set up a ping-pong table during a cocktail reception, and it has hired bands like George Clinton & Parliament Funkadelic to play at its after-parties.
"Phillips is the bridesmaid of the auction world," said Richard Polsky, a private dealer in Sausalito, Calif. "It always wants to be seen as lively, nimble and fun—but now it also needs to be profitable."
The new themed sales will double the workload for the house's 150-member staff, which must continue to win business for its established sales while stocking works for the new ones. (Mr. Runge says he's planning to hire some part-time curators to help out.) Michael McGinnis, Phillips' worldwide head of contemporary art, said he initially wondered whether his team could cull enough pieces for the extra sales. Collectors don't like to sell in lean times unless they have to.
"I'm a pretty conservative guy, so of course I have reservations," Mr. McGinnis said, "but I'm learning there is enough material out there if the venue is there and the prices are fair. We'll just have to see what the market will absorb."
When Mercury Group's chief executive, Leonid Friedland, first expressed interest in buying a stake in Phillips in the summer of 2007, the auction house was performing at its peak and had just acquired a new European headquarters in London. That June, it set the record for a work of contemporary Russian art by selling Ilya Kabakov's "La chambre de luxe," for $4 million.
Mr. de Pury said he began discussions with Mercury that summer, but the deal crystallized the following summer—just as art sales were beginning to sour. Mercury acquired a majority control of the company on Oct. 6, 2008, for a reported $60 million. Mr. Runge and Mr. de Pury declined to comment on the price. A spokeswoman for Mercury also declined to comment.
Among the new owner's mandates: severely limiting the practice of paying guarantees for consigned works. With a guarantee, an auction house essentially pledges to pay a seller for an artwork whether or not it sells.
Two weeks later, Phillips held an evening sale of contemporary art in London at which 32 of the 70 works failed to sell, including Takashi Murakami's "Tongari-kun," which had been priced for sell for at least £3.5 million.
The Mercury Group soon tapped Mr. Runge to step in. "The potential for Phillips is enormous and exciting, but it's also just undergone a tremendous growth, an expansion into London and now, the new shareholders," Mr. Runge said. "It all has to be swallowed."
Mr. Runge is known for his expertise in magazines and luxury goods, but he has also attracted attention for widely publicized past Stasi connections. During the 1980s, he worked as a paid informer for communist East Germany's spy agency while he was a student and later a reporter for a news agency in Hungary, according to Stasi files released by the German government. Code-named "Olden," he kept tabs on fellow students, anti-communist dissidents and Western reporters. Mr. Runge declined to comment on the matter.
The news caused a brief stir in Germany five years ago, but Condé Nast vouched for him and so has Phillips. When Mr. Runge was hired, Mr. de Pury praised his global experience and said he "attached no importance … to some activities in the distant past."
Mr. de Pury s aid he has been working to make Mercury feel welcome . When he told Mercury that he had a summer tradition of taking a few of his top specialists on a weekend retreat, the new owners took the gesture one step further: They booked a weekend at a London resort for 30 of Phillips' leaders, old and new. "It was great," Mr. de Pury said. "We played croquet."
—David Crawford in Berlin contributed to this article.
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