Art Hangs On
by Liz Gunnison Sep 17 2008
Hirst sells for a record amount while the U.S. economy plunges. In the art world, all’s fine—but will that last?

In the first 10 days of September, shares of Sotheby's fell 14 percent. "Beautiful Inside My Head Forever," a highly anticipated sale of works by megastar Damien Hirst, was seen as a vital indicator of the strength of the contemporary art market—and investors doubted the auction house would be able to meet the $117 million minimum goal it set for the London event.

There was good reason to be skeptical: Financial markets were already suffering, and so far in 2008, 30 out of the 43 Hirsts auctioned off had sold at the lower end of estimates, according to a report published by research company ArtTactic. Several of the most expensive sold for substantially below their lower estimates.

But on Monday evening, as the collapse of Lehman Brothers and sale of Merrill Lynch led Wall Street toward its worst single-day loss in seven years and insurance giant A.I.G. teetered on the brink of failure, Sotheby's was bringing the hammer down on an $18.7 million bullock preserved in formaldehyde.

By the end of the evening, Sotheby's had realized $127 million in sales, sweeping past the night's presale high estimate.

The auction house's salesrooms were filled to capacity, with all of the nearly 700 tickets reserved beforehand. When the sale concluded Tuesday evening, 218 lots had been purchased for a total of $198 million—10 times the previous single-artist record, set in 1993 for 88 works by Picasso.

The Golden Calf, a white bullock sunk in formaldehyde with 18-karat gold hoofs and horns and a gold disk crowning its head, set an auction record for Hirst. The Kingdom, a tiger shark in formaldehyde, made $17.2 million, more than double the high estimate. A glass case filled with fake diamonds, Fragments of Paradise, went for $9.4 million—around five times the presale estimate.

"I think the market is bigger than anyone knows," Hirst said, in a message relayed by Sotheby's on Tuesday.

For Hirst collectors in particular, the show's success allayed fears that the artist's recently high level of production would pull prices down; it also shows that, at least for now, there is no sign of Hirst falling out of fashion. Not only were sales stunningly strong, but the 11-day presale viewing attracted more than 21,000 visitors, a Sotheby's London record.

The auction's triumph suggests that the current art market is invulnerable to a general economic slowdown, in part because purchases of high-end art tend to involve long waits for specific works or pieces by in-demand artists—not impulse buys easily discouraged by downbeat headlines. Plus, collectors are typically cash-rich individuals or institutions, and today more of them are from Russia and the Persian Gulf States.

"Sometimes calamitous events can effect auctions, but in this case the worst news was in the U.S. and the sale was in England," said Kimball Higgs, senior vice president of Gurr Johns, an art appraiser and consultant in New York. "Obviously the buyers were not nervous enough to discourage activity."

Sotheby's has not yet released a breakdown of buyers by nationality, but people who attended the sale noted a conspicuous absence of American buyers. Alina Davey, a Russian-speaking Sotheby's employee from the private client-services department, snatched up the most lots of any single buyer, for a total of $23.2 million—presumably for Russian clients.

But some doubt that the art market is immune to financial crisis.

"This looks like a repeat of 20 years ago, when global markets crashed and the art market kept chugging along for another year and then it crashed," says Todd Levin, director of the Levin Art Group in New York. "I've seen this before—people talk about there being all this global money, that's there's so much more wealth now—but I think that's nonsense. I'm waiting for the other shoe to drop."

He points out that Edward Ruscha's 1979 work I Don't Want No Retrospective, sold for $4 million at auction earlier this year—only for the buyer to later renege on the purchase.

Hirst's decision to sell directly through Sotheby's was highly unusual: Living artists typically sell new work through dealers and galleries. While the terms of Sotheby's agreement with the artist have not been made public, selling through the auction house cuts out dealers' commissions, which can be as high as 50 percent, making Hirst extra millions.

"It was an unusual situation, where the artist could sit down with the auction house before the work was even made—with zero transparency and 100 percent control—and orchestrate exactly how many works, of what kinds, and in what price ranges the market could bear," Levin says. "There is simply no way that Sotheby's would get themselves involved in such a massively epic opportunity for failure without calculating for every last possibility."

That includes, he says, accounting for a struggling world economy.