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“Overhead Premium”: Sotheby’s Invents a New Fee for Buyers

Sotheby’s has quietly upped its charges for purchasers of its offerings: An “Overhead Premium” of 1% of the auction hammer price will supplement its buyer’s premium, effective Aug. 1.

According to its announcement last month, little noticed by the public until Bloomberg‘s Katya Kazakina recently tweeted about it (more on that below), Sotheby’s new charge will be “payable by all auction buyers in our global salesrooms and online sales.” It will help to defray “the overhead costs relating to our facilities, property handling and other administrative expenses, and reflects the increasing costs associated with delivering great service and experiences in a highly competitive marketplace.”

The stated purpose of the buyer’s premium, when it was controversially introduced to the New York art-auction scene in 1977, was to defray the auction houses’ costs in providing services to buyers. But as I explained in Tricks of the Auction Trade, my 2007 Wall Street Journal examination of auction-house contrivances, consignors of highly coveted works have sometimes negotiated the seller’s commission down to zero and have even been given a cut of the buyer’s premium. That bonanza, known as “enhanced hammer,” allows the seller to receive an undisclosed amount in excess of the final bid.

I asked a Sotheby’s spokesperson if the decision to charge buyers an extra 1% to defray the firm’s overhead costs also entails an end to the undisclosed arrangements for “enhanced hammer” and reduced sellers’ commissions. (Those should arguably be revenue sources of first resort in defraying overhead expenses.) The spokesperson declined to comment on this.

Speaking of “overhead,” Sotheby’s last year unveiled a major renovation and expansion of its New York headquarters, designed by Shohei Shigematsu of OMA New York:

The view-obstructing columns in one of the recently redesigned galleries
Photo by Lee Rosenbaum
, May 3, 2019

As I described here, other recent major expenses at Sotheby’s were its merger-related costs of $132.1 million incurred in 2019. With the pandemic’s obliteration of New York auction houses’ spring calendars for in-person sales (including the major Impressionist/Modern and Contemporary events), the need for a cash infusion has become all the more pressing. That said, “the decision to move forward with the [overhead] fee was made long before the onset of Covid-19,” according to the Sotheby’s spokesperson.

The overhead-premium announcement, dated May 8, was likely sent to Sotheby’s clients but did not, to the best of my knowledge, become general knowledge until Kazakina, whose Bloomberg beat is the art market, got wind of it and tweeted this on June 12:

After I saw Katya’s scoop, I tried to locate an announcement of the fee increase on Sotheby’s website, but could find nothing. There was no posted press release, but the press spokesperson did send me the announcement (linked at the top of this post), at my request.

In response to my query as to whether Christie’s plans to institute a similar fee, a spokesperson for Sotheby’s chief competitor enigmatically replied:

Nothing to report on this.

Sotheby’s has already been charging more than Christie’s in the fee that it exacts from buyers for the priciest offerings: Sotheby’s buyer’s premium in New York on the portion of a hammer price in excess of $4 million is 13.9%, compared to 13.5% at Christie’s, New York.

In less figure-fixated news: Sotheby’s digital catalogue for its 30-lot evening sale of contemporary art, billed as a “New York Sale Conducted Remotely by Our Auctioneer in London,” has just gone online. A subdued substitute for the packed evening sales of prior years, the sale will be internationally livestreamed on June 29 at approximately 7 p.m. EDT, immediately following the Ginny Williams Collection sale, which begins at 6:30 p.m.

I posted images here of three highlights from Sotheby’s contemporary sale—a Francis Bacon triptych, Clyfford Still abstraction, Roy Lichtenstein brushstroke.

And here’s another highlight:

Jean-Michel Basquiat, “Untitled (Head),” 1982 (drawing on paper)
Presale estimate: $9-12 million

With bids beaming in from around the globe “via zero-latency video streams, broadcast to giant screens in an impressive ‘control center’ studio setup,” it should be quite a complicated juggling act on a technological tightrope for veteran auctioneer Oliver Barker. We’ll see if Ollie and his “impressive control center” are up to this challenge.

I suppose if he could keep his cool during the shredded Banksy incident, he can handle just about anything!

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