This post was originally published on artnews.com
In a letter sent to clients on Thursday, Sotheby’s announced that the auction house was ditching the overhauled fee structure announced in February and enacted in May, and returning to its previous “bespoke” fee terms for sellers. The buyer’s premium will range from 15 percent to 27 percent of the hammer price, depending on the work’s monetary value.
The new terms are a stark reversal from the plan announced in February when the house said that it was standardizing the seller’s commission rate—capped at 10 percent on the first $500,000 of a lot’s hammer price, and waived for lots with low estimates above $5 million. Buyer’s premium under those terms was 20 percent of the hammer price for works up to $6 million, above which the rate lowered to 10 percent.
At the time, CEO Charles Stewart framed the change to ARTnews as a “smart disruption” and a sign of the art market’s growing “maturity.” He said it marked a turn away from the “bespoke pricing structure,” which moved sellers to fixate on negotiations over commissions, rather than starting a conversation on how to achieve the highest price for a work.
In Thursday’s letter to clients, which was reviewed by ARTnews, the house said, “The idea was to encourage growth in our markets by creating transparency, simplicity, and fairness on fees that have always been intimidatingly complex.”
“Over the past 6 months we have listened to the market, evaluating the needs and preferences of both our buyers and sellers,” the house said in the letter, conceding that the new fee structure evidently did not produce the desired effect.
In an interview with the Art Newspaper, Stewart similarly defended the decision earlier this year, but added that the selling fee overhaul was disliked by “people used to consigning and those with art advisers.” Stewart further blamed the overall market conditions in 2024—this year has been particularly challenging for the entire art market, most notably auction houses—and an overall “supply issue.”
“We need to be responsive. We’ve tried, we’ve learnt and we’ve listened,” Stewart said.
The fee structure announced Thursday is set to go in place February 17. With it, the house will not entirely return to the pre-2024 status quo. The 1 percent “overhead premium” on all bought lots is not returning, and the success fee to sellers of 2 percent of the hammer above a lot’s high estimate, introduced this year, will remain. The 15 percent to 27 percent buyer’s premium range is just a shade over the pre-2024 range of 13.9 percent to 26 percent.
The reversal comes during a tumultuous time for the auction house. On December 11, news broke that Sotheby’s cut 100 staff members from its offices in New York, with the majority of cuts including back-office works, junior staffers, and specialists in various departments. Additional layoffs are in process at other Sotheby’s offices around the globe, though the size and scale of those cuts is not yet known. (Sotheby’s had a round of layoffs in London in May, when approximately 50 staff were let go.)
Also, this fall, Sotheby’s closed a deal with Abu Dhabi’s ADQ sovereign wealth fund for an investment of nearly $1 billion—$800 million of which was used to pay down the company’s debt, according to the New York Times—and it officially completed its purchase of the Breuer building on Madison Avenue in New York, the former home of the Whitney Museum, for $100 million.
The new fee structure also comes after Sotheby’s recorded a much lower yield for Impressionist, modern, and contemporary art at its November marquee sales in New York ($533.1 million) compared to 2023 ($1.2 billion).
While the house has yet to officially release its total earnings figures for 2024, a Sotheby’s spokesperson said that it amounts to approximately $6 billion, a nearly 25 percent drop from the $7.9 billion it reported for 2023. The spokesperson added that the house has seen growth in private sales and its art-lending arm, among other sectors.
Christie’s released its earnings earlier this week, recording $5.7 billion for 2024, an approximately 8 percent drop from 2023.
Sotheby’s letter to clients is in full below:
Dear Clients
You may recall that, earlier this year, we announced a bold initiative to reduce our Buyer’s Premium to a flat 20% on almost everything we sell, and to create fixed financial terms for sellers bringing their material to auction. The idea was to encourage growth in our markets by creating transparency, simplicity, and fairness on fees that have always been intimidatingly complex.
Over the past 6 months we have listened to the market, evaluating the needs and preferences of both our buyers and sellers. So starting February 17, we will reintroduce bespoke terms for sellers while maintaining the underlying principles that motivated this change. Our Buyer’s Premium will be as follows.
This updated Buyer’s Premium will apply to all categories excluding wine & spirits, automobiles, and real estate. Terms will be posted to our website when they take effect and will include information about additional currencies.
We look forward to working with you in the new year.