Issue #97  11/9/2005
What Has Happened to The Photo Market At Auction?

The question that begs to be answered is: how does a print go up 275% in value (as the Edward Weston "Breast" did) in just one year? Or even, how does an image go up 300% (as the Dorothea Lange "Angel, Breadline" appeared to go up in price)? Or the many Avedons, Newtons, Arbus's, Penns, etc. that have also soared by many multiples over previous records in these auctions? Or the Richard Prince copy of a Marlboro ad that wound up selling for nearly $1-1/4 million (see story below). Obviously, the answer is: when there are two or three (or more) players with a lot of money willing to pay any price (detached from any previous price marks) for certain images.

With the stock market going sideways, some big money appears to be dropping in this little pond with the encouragement of a handful of key dealers and auction people. But this money seems focused on certain iconic and--at least some--semi-rare (but not really unique) images. One major photo dealer actually said to me that the "middle market is dead" and that he would currently rather have one $500,000 image than five $100,000 images! Imagine, if you would, that the mid-market is now considered by some as $100,000. And the auction houses seem to be supporting this notion with their new cut-offs that appear to be around $40,000. But never fear: what was a $100,000 photograph literally yesterday may be a $500,000 image today.

This same effect of a very thin group of people buying at the top could have been seen in earlier auctions with Diane Arbus' work. When there was finally a good "Twins" at auction, two billionaires decided they wanted one, and, hence, the market for Arbus was built at a new level. Before then a Twins rarely sold for over $65,000 (and I am not talking about a later-printed Selkirt, which now sells for double that amount), but immediately afterwards was selling for nearly $500,000. Other images quickly followed suit, moving up rapidly in value.

It remains to be seen if this latest spurt in late 20th-century fashion/erotica and certain other 20th-century icons will create the same coattails. Christie's expert Phillippe Garner thinks it might for a good, if simple, reason. In referring to the recent Prince record price at Christie's, Garner felt that it was "symptomatic of a significant shift across the art market to focus on the more recent past. The second part of the 20th century seems to be the hottest section of the art market at the moment. I suppose that the time is close enough that collectors can connect to it."

San Francisco collector Paul Sack and I also had an interesting email discussion about this market price phenomenon through writer Brian Appel, who was preparing a story on these photography auctions for the website ArtCritical.com. I was a bit critical and concerned about the long-term prospects of these sharp upward movements unattached to any other market variable.

Paul seemed more sanguine about this and noted how hard it is to determine whether this is a bubble or a real, lasting change in the market dynamics. He appeared to feel that a number of committed collectors with deep pockets could indeed change the market and the effect might even drop down the chain of values, as the top icons disappeared from the market. Paul noted that the supply of top images is very small and the new players may supply all the demand necessary. He pointed out that the supply of iconic trophy prints could not, by definition, expand--except in, what I had called in earlier articles, 'the edgy decorator' category, which Paul seemed to imply had the weaker underlying premise.

He also argued that even more trophy hunters will be attracted to photography from the art market, "where", as he said, "new things by this year's flash artist sell for more than photographs whose position in art history has long been established."

As I responded in my own email, I hope Paul is right, but I suspect that eventually the pyramiding by just a handful of dealers and collectors may have a sudden and expensive stop, like most such adventures. Just where in that trajectory it hits apex is still unknown, but I think we are within perhaps about two-three years of it (or one good economic downturn that affects more than the stock market). You cannot see the same images double or even quadruple in a year or less and say what is happening at the New York auctions reflects a "reasonable" market. Price increases like these are not continually supportable, and the auction market is too thin to find a lot of new buyers at this level for the market for these specific objects to be continually sustainable for long at these extreme levels. That is a "greater fool" strategy that never works long term. Only slower, sustainable growth built on a broad market can be depended on for the long term. That is what I define as "market basics".

I would rather see the dealers and auction houses try to build a broader group of buyers that can grow gradually in their purchasing power, rather than what is happening now. Some dealers would argue that this high level market has been there all along--that there have been buyers at mid-six figures and even seven figures, only buying privately. Perhaps, but the activity at that level seems to have taken a sharp upturn recently.

History is important to learn from. Market peaks are always marked by frantic buying at what some might feel are unreasonable prices. Does anyone out there recall the "Internet Stock Boom" of just a few years ago? I think any major economic indicator going the wrong way may shock this market back the other way. What goes up, can come down, which is something many in this field have felt for most of its existence was largely impossible. But as the market prices on some key pieces have climbed to stratospheric levels akin to the art market, the photography market will start to act in similar ways to its sister market. And, believe me, the art market has suffered some intense downs.

Many of the images in these auctions, and I am not talking about any specific image now, appear to be bought more for "investment", rather than love of photography. Yes, we all want our images to go up in value, but investment is not the ONLY reason most of us purchase photographs. Many of the new buyers sure look like this is the ONLY reason for their buying pattern (well, perhaps some also want to impress their friends with their purchases). Worse, they have not educated themselves about the market and are paying extremely high (some would say outrageously high) multiples, based on the fact that they must feel someone else will pay even higher multiples.

Some have suggested that photography is cheap compared to the art field. I think they are comparing it to the wrong segment. Photographs are usually a multiple print of some kind. If you compare photography to other graphic multiple prints, you will see quickly that photography is not undervalued versus its real competition in the art field.

Perhaps I am being too pessimistic and these are simply well heeled patrons of the arts, whose love of photography is matched by the largess of their purse. If that is the case, mea culpa. But I have grave concerns about how this affects the overall market. The auction houses have rushed to give up their normal role as market wholesaler and liquidity provider, and become the ultra-retail market for these new buyers, taking over that traditional role from dealers, designers and galleries, who have more and more been relegated to consultative or artist reputation-building roles--particularly at these extreme price levels. I have even recently heard of a case where an auction house attempted to contact the client directly on an after-sale, instead of working with the dealer who brought the client to the house.

All of this may eventually come back to haunt us, if the economy turns down sharply at some point. What happens to a true mid-market for instance, if the auctions are no longer taking photographs under $40,000-50,000 in value--a very real possibility and largely what happened at Sotheby's and Christie's (except for the latter's multi-owner sale, and then mostly for contemporary art pieces) this outing? What happens when dealers understand that auctions make photographers' prices? No temptation to manipulate markets there, right? The market is purely altruist and honest, right? That has never happened before in the art market, right? And what happens to a market, if the dealers who built and build it are forced out by the monolithic auction houses?

Over the course of the last year, the auctions have been rather consistently higher in price by about 10-40% than photo dealers and galleries with the same material. Of course, then the galleries often follow the upward trend of the auctions later. Pace-MacGill was one of the exceptions, having reportedly raised its prices substantially on Irving Penn earlier this year, although I suspect that Peter MacGill may go back and make a few more adjustments upward after these auctions.

If collectors are truly interested in finding key pieces at more reasonable prices, I would suggest they start by price comparing and checking dealers and past auction records. One major dealer told me he had offered the underbidder of a very expensive Irving Penn, a price substantially under the one paid at Christie's for the same exact item. When I say substantially, I mean exactly that. The underbidder turned the dealer down, saying that they were just "caught up in the auction action."

Likewise Penn's "Woman with Roses on Her Arm", which had sold to an American collector at Christie's Elfering sale for $204,000 (momentarily holding the world's auction record for Penn), sold in a virtually identical print at Sotheby's for only $81,600 to Penn dealer Peter MacGill--that is $122,400 negative difference in only two days. Or, to put it another way, the collector who bought the first print paid 2.5 times what an experienced dealer did two days later. What do you think is the right price?

Also, one of Prince's Marlboro men was bought-in at Phillips at a mere $115,000, instead of the $1,248,000 that the one at Christie's sold for. Of course, the one at Christie's was a slightly smaller edition size (3 total versus 6), but come on now!

I have told many clients that the auctions are sometimes the absolute worse place to buy, especially for the inexperienced. Prices at auction are often, if not most of the time these days, over inflated by naïve and overexcited bidding, and prices vary widely from auction to auction. Perhaps some dealers may even be occasionally contributing to this trend by encouraging what I would call "wild" bidding, so that they can get a commission on the higher hammer prices or boost prices on their own artists. It is possible. I am not saying it has happened--yet. But a dealer needs to be responsible when discussing the value of a particular lot with a client before the auction. And collectors need to know that the "at least someone was willing to pay the last increment to what I won it for" concept is quite bankrupt. The auction stops when there is only one bidder, so the next time out, the price could be considerably lower--and often is, as witness the Penn above.

In a recent phone conversation, Christie's auction expert Philippe Garner called my categorization of an "edgy decorator" market, "a little harsh in assessing the material and the motivations of the buyers," although he did temper that critique by saying, "well, maybe some of them." Garner really feels that the second half of the 20th century's fashion and magazine photography "represents a very important chapter in the history of photography," and that most of the buyers "seriously believe in the work." He also feels that having work that is "scarce but not impossible to find that satisfies a hungry segment of buyers" is good for the market. He also notes that the market for classic photography has not grown as quickly as this other market.

Perhaps Philippe is correct in his assessments. Time will tell. Personally I think much of the work currently touted will look extremely dated and very soon. One advantage of classical photography is that it has a sense of universality and timelessness to it. Not to mention that it is truly rare--not mass-produced in multiple editions of 40 or more prints, as many of the high five and six-figure images were in these auctions.

Meanwhile most of the photography market is chugging along at a reasonable growth pattern, most photography dealers and galleries look reasonably priced compared to the auctions (especially in view of condition), and more and more the auctions seem to be appealing to a smaller and smaller audience--much of it unattached to the larger photography market--but an audience that is extremely well-heeled and uncaring about price. How each affects the other may be anyone's guess at the moment, but this is clearly a moment of change in the photography marketplace.

By the way, if you want to learn more about how to get the best out of your purchases whether at auction or from dealers/galleries, you may wish to read my article on "The Insider's Guide to Buying Photographs", which you can find by clicking: http://www.iphotocentral.com/collecting/article_view.php/7/5/1 .