Hedge fund manager Dan Loeb, the new majority shareholder in Sotheby's with a 9.3% stake, released a vehement public letter this morning to Sotheby's CEO Bill Ruprecht. Citing poor leadership, lack of digital strategy and wasteful spending on lavish farm-to-table corporate dining events, Loeb called for an immediate replacement of Ruprecht. Who knew heirloom tomatoes could be so incriminating? Read the entire letter here. A recurring trope in Loeb's letter is Sotheby's inability to compete and innovate in the online art marketplace. Christie's has held a number of successful online auctions, most notably the Warhol Foundation sales, while Philips hosts a landmark digital art sale with Tumblr next week.
There is a demoralizing recognition among employees that Sotheby’s is not at the cutting edge - demonstrated by the Company’s inability to even develop a coherent plan for an internet sales strategy, much less implement one.
Loeb goes on to criticize Sotheby's inaction as a result of their strategy to bolster business through high value lots and ignoring work with lower price tags.
Sotheby’s current “strategy” is puzzling. The Company has stated that it intends to focus on “top clients” and high value lots, and shun the lower value lots that your top competitor has effectively captured by leveraging new technologies. Despite this “focus”, Sotheby’s market share relative to Christie’s in items over $1 million actually trails its overall market share. Strategically, we cannot help but ask if ceding the market for lower value lots to your key rival has allowed them to generate profits and relationships with emerging collectors which they are using to compete against you at the top of the market. This is just one of many examples where a lack of leadership by a sleepy Board and overpaid executive team has resulted in missed new opportunities.
Lower value lots sold via new technologies? While Loeb is referencing Christie's here, Amazon Art jumps immediately to my mind. Interestingly enough, Amazon and Sotheby's put together a short-lived partnership back in 2000. They pumped $45.4 million into a jointly operated auction site that was intended to be a 10-year project. However, Sothebys.Amazon.com closed after just one year due in part to customer service and shipping problems. That same year, Christie's attempted to launch a web auction site only to cancel it after disappointing early returns. Here we are in 2013, twelve years later, and Sotheby's has yet to re-enter the online art marketplace.
Another curious marketplace that Loeb zeroes in on is that of farm-to-table dining:
Typical of the egregious examples was a story we heard of a recent offsite meeting consisting of an extravagant lunch and dinner at a famous “farm-to-table” New York area restaurant where Sotheby’s senior management feasted on organic delicacies and imbibed vintage wines at a cost to shareholders of multiple hundreds of thousands of dollars. We acknowledge that Sotheby’s is a luxury brand, but there appears to be some confusion - this does not entitle senior management to live a life of luxury at the expense of shareholders.
Whether intentional or not, this narrative serves as a brilliant metaphor for the state of art market technology. On one hand, we have the old guard - the rich elite chomping down on overpriced heirloom tomatoes in a Michelin starred restaurant. They like their art rare, expensive and preferably organic. They like Picasso. On the other hand, we have the new guard - tech savvy millennials who order their evening fare from Amazon Fresh. Their art is accessible, democratic and inexpensive. They buy conceptual domain name art and digital editions from Sedition. They don't understand the rules of the art world and it's costing us, exemplified in the New York Times profile Does Anyone Here Speak Art and Tech?. In order to succeed online, Sotheby's must develop a strategy that serves both diners.
Spoken in an entirely different context, referencing the Guggenheim 2010 YouTube Play exhibition, Robert Storr also happens to have strong opinions about vegetables. He was extremely critical of Nancy Spector's stance that the exhibition was breaking down traditional art world boundaries:
“It’s time to stop kidding ourselves. The museum as revolving door for new talent is the enemy of art and of talent, not their friend - and the enemy of the public as well, since it refuses to actually serve that public but serves up art as if it was quick-to-spoil produce from a Fresh Direct warehouse.”
This is the dominant fear that envelopes the art world - a paranoia that we will devalue art by exhibiting, distributing or selling it online.
Under new leadership, Sotheby's has the opportunity to be an innovator in this space. They are far, far ahead of Amazon in terms of trusted fine art brand recognition and established personal relationships with dealers and collectors. Leverage this with a cutting edge digital strategy, and they could quickly become online art market leaders.
Is Fresh Direct really so bad, anyway? What if they also offered farm fresh, heirloom tomatoes? What if Sotheby's built an online marketplace that served Amazon and Michelin customers?