notes

We were pleased to attend the Fresno Philharmonic’s program this last weekend. Entitled ‘Bolero’, it was one in a series of concerts designated ‘Masterworks’ featuring artists and works of particular note. Nothing on this last program was short of entertaining, and the guest artist Charles Ramirez who performed Rodrigo’s ‘Concierto de Aranjuez’ gave a rendition that was, appropriate to the series, masterful. A delightful surprise was finding Jose-Luis Novo on the podium. He provided some extempore commentary during the concert that was funny and insightful, and based on the response of both the orchestra and the audience, he’d be a worthy candidate to replace outgoing music director Theodore Kuchar.

With a full and appreciative house at the Saroyan Theater, it was almost like the good old days, my good old Philharmonic days, anyhow, truncated when we moved away from Fresno 20 years ago. Almost, or should I say reminiscent, because so many of those in attendance, and so many of those acknowledged in the program were to an uncomfortably large extent those same folk who were orchestra supporters from the time I served on the board in the early 1990’s. God bless them, they’ve kept one of our local treasures alive, but I must say, looking across the orchestra section of the hall, what I took in was a welter of white hair. When amidst a company out of which I find myself on the cusp of youth, one can only say that it is a shall we say mature company indeed.

This of course begs a question I’m certain the staff and directors of the Fresno Philharmonic  grapple with daily, how to keep the orchestra attendees at least a continuing body, and hopefully a swelling one. With Fresno’s population burgeoning, one wouldn’t think this would be a problem. Since the time I served on the board, the local population has nearly doubled, and one would expect at least some kind of incremental increase in attendance, funding, and services for the orchestra members.

Well, something(s) to ponder with thankfully a loyal cadre of supporters and attendees of still sufficient numbers who will doubtless happily soldier on, preserving- and promoting- what is surely an ornament for the community. I’m hopeful that very many others will sooner rather than later cotton on, hoick themselves up from in front of the TV and discover what glories are to be found at a Fresno Philharmonic concert.

Skate’s Market Research is reporting on how the major public components of the art market fared for 2014. The short answer is, not good, and the worst, according to Skate’s, since 2005. This would be particularly worrying for Sotheby’s, since in 2005 it was just trying to dig itself out of the morass of the price fixing scandal that sent  Sotheby’s chairman Alfred Taubman and CEO Dede Brooks to jail. In precise terms, at December 31, 2014, a share of Sotheby’s is worth 18.8% less than it was on January 1, 2014.

I had this last July written about China’s Poly Group as a possible, and as it seemed then, likely suitor for London based Bonhams, the third major international house behind Sotheby’s and Christie’s. By mid August, however, nothing more was heard on the subject. Based on the latest figures, however, Poly Group has lost nearly 28% of its value for the year, and one must surmise that the company couldn’t afford Bonham’s.

One other company I had written about was the Stanley Gibbons Group, whose significant acquisition this past year included venerable West End dealer Mallett. Although fairly flush with investor cash that allowed the acquisition, the company nevertheless lost nearly 23% of its value on the year.

While we’re all of us entranced by the occasional extraordinary consignments of Chinese imperial porcelain and European Impressionism and American contemporary art, it occludes the fact that all these businesses must slog along whether they have these elusive consignments or not. For a white, the major houses were limiting their consignments to amounts in excess of $5,000, which, frankly, seems little enough. Lately, though, with links with eBay and so-called design sales, what’s on offer is a duke’s mixture of bottom end material that no member of the accredited trade would ever have on offer. Interestingly, lately I’ve received customer satisfaction surveys from a couple of the salesrooms asking me to rate my purchase experience that for all the world are impossible to tell from the same thing I get after I have my car serviced.

With market cap falling,  Sotheby’s CEO Bill Ruprecht on his way out and Christies CEO Steven Murphy gone already, one wonders  about the fate of what was formerly the wholesale part of the trade in art and antiques. I hope that, whilst thrashing around looking for revenue and profit enhancement- and not finding it- the major players in the international market for art and antiques will retrench to their halcyon roots, and leave the retail market to the tender mercies of the accredited dealer.

News reports indicate Sotheby’s long time CEO Bill Ruprecht will leave the company as soon as a replacement is found. Although it is reported to be by his own choice, his contentious relationship with board and major shareholders makes his ‘consensual’ departure appear not ulike the prescient maidens of the village who offer themselves to the advance guard in order to seek protection from the ravages of the invading horde.

Up to this point, and presumably at the prompting of activist board members, Sotheby’s has established once again an online partnership with eBay- despite the dismal failure of a similar partnership some years ago, established a bricks and mortar presence in China, and offering aggressive advances to would be consigners in an effort to attract the  best consignments. This begs the question, to descend to the vernacular, how’s that working for you?

Not well, I have no doubt. As well as the experience with eBay, Sotheby’s nearly sunk itself not so many years ago by offering inordinate advances, only to find on sale day the consigned item fell well short of achieving a hammer price above what was advanced against it. Hard to explain this profound a misstep to the bank that provided the financing, hard on the operating statement of course, and, ultimately, hard to explain to shareholders.

We do trade with Sotheby’s from time to time, and as it happens attended a round of sales in New York just a couple of weeks ago. Although certainly not privy to any aspect of the saleroom that cannot be garnered by anyone else who reads their financial statements, I can tell you that the premises are crawling, absolutely crawling with staff. I would imagine that Sotheby’s does its best to mine the available cadre of interns from the art history departments of Columbia, CUNY, and as far afield as Princeton and Yale, but for the most part, staff are paid- not well, perhaps, but enough to earn their daily crust and exist without undue privation in one of the most expensive cities in the world. I know for a fact that the ax has fallen on the necks of a fair number of senior staffers over the last couple of years, but their departure has not made any noticeable dent in the legions of folk there earning a living.

I suppose what I mean to get at is, while profitability is achieved through a confluence of revenue and cost control- what we call pouring cash in at the top at a faster rate than it can leak out the bottom- the auction house business is an extraordinarily expensive business to be in. Moreover, it is an aspirational business- Sotheby’s is not a provisions market. It has never, nor have we for that matter, ever sold anything anyone actually had to have to get along in life. What they sell, and what we sell, are luxury goods offered as only one of a number of discretionary purchases by which the wealthy may indulge themselves.

A few years ago, and apropos of our tenth year in business, Keith and I spent some little while working up an economic and demographic profile of our client base. While I’ll coyly tell you that the precise components of our typical buyer are proprietary information, I can tell you that, based on our findings, we estimated that those individuals who fit it numbered around 50,000- in the world! To say that we, and Sotheby’s, and Christie’s, and Bonham’s, and every other member of the accredited art and antiques trade access a limited buyer pool is to make an extreme understatement. And do I have to say that this class of buyer is savvy? Believe me, they know what they want, what they want to pay, and where- anywhere in the world- it is available. I don’t think a local bricks and mortar outlet or dumbed down accessibility through eBay is necessary for the buyer who can travel anywhere in their Hawker 4000 and whose PA’s earn more than President Obama.

While of course any business wants to always appear to be in and ready for business, the efforts of Sotheby’s activist board and investors that ultimately resulted in the resignation of Bill Ruprecht will amaze me if they prove successful.  In the short term, I suppose they have, however- Sotheby’s stock rose 7% the day Ruprecht’s departure was announced.

The longest lived member of the retail trade, with roots extending well back into the 19th century, surrenders its independence through acquisition by the Fine Art Auction Group. Certainly, with Mallett’s operating statement so awash with red ink it resembled the floor of an abattoir, it is a wonder that they were able to continue to carry on in business. Their capital structure was replenished through sales of premises locations in the West End and a number of stock reduction sales (‘rationalizing inventory’ this was called- doubtless a less pejorative phrase than ‘dumping stock’) but one wonders, at this stage, what Mallett really has left to offer. Presumably the acquisition price includes an expansive view of financial blue sky.

Arch comments aside, most of us in the trade, while sniping at Mallett as the tony province of oil sheiks and Russian oligarchs and all other manner of the parvenu, will under a modest amount of grilling admit that, to a very great extent, Mallett amounts to the gold standard in the trade. I can think of very few items resold within the time at least since we’ve been active that did not prominently mention a Mallett provenance if there was one, which mention invariably resulted in a sale for a premium price.

With all that, Mallett has been first and foremost a retail dealer, prominent in the West End, albeit now removed from Bond Street, and on Madison Avenue. As well, they’ve been notable participants in all the best fairs, and are one of the founders of Masterpiece, arguably London’s premier fair. What, then, makes this inherently retail dealer an attractive acquisition target for a company that is essentially an aggregate of salerooms? Hard to fathom, but presumably there remains some drag left in the Mallett name, but how that contributes to the bottom line is impossible to assess. Moreover, with the core business of Mallett continuing to leak cash out the bottom at a much faster rate than it could be poured in at the top, a more patiently pursued acquisition might have been able to strike a deal with the eventual receivers.

And is there any other? What an astonishing performance- that they held on to that one run lead the entire sports population including myself has to have bar shaped bruises across the posterior from bouncing up and down on the edge of the seat. I cannot think of a time when the series MVP was more clearly defined as it was last night in Madison Bumgarner.  What can one say about his performance through the season, and certainly the post season that hasn’t already been said? And humble? What a gracious young man, who seems to have taken a number of leaves from Buster Posey’s book. I can’t help but include some kind of cliché about the graceful courtliness of the South, made manifest in the demeanor of these supremely talented young men.

Contrast this, sadly, with the hash Fox made of its post game coverage. Mind you, I think Joe Buck is likewise a class act, and enjoy him as much as the greats of my youth, Curt Gowdy most prominently among them. But the color commentators? Where’s Joe Garagiola when you need him? And the trophy presentation? How crass! An extraordinary performance by an extraordinary group of men, tarnished by a tawdry ceremony MC’d by an inept announcer in a cheesy little room. Come on Fox- spend some money. And what about that boob from Chevrolet, babbling on about the glories of the latest thing to roll off the line, and forcing into the hands of a confused looking Madison the keys to a new car. A Price is Right moment, clearly out of place.

Well, I suppose the afterwards were at best comic relief, but certainly a come down and dissonant with the precision and ultimate glory of the scene we’d witnessed for the preceding three hours. I suppose all of us, including the players, can laugh off the post game, but for me, next spring can’t come soon enough.