Duchamp, Koons, and Cattelan

Yesterday, Scott Lynn of Masterworks posted an article to LinkedIn titled “Why We Think Maurizio Cattelan’s $6.2M Banana Might Not Be a Smart Investment. Although I agree that one cannot necessarily expect "Comedian" to continue to appreciate (and certainly not at the same exponential rate that it has the past few years), I think that some of his logic and substantiation is worthy of critique (especially No. 3).

1. Lynn says that “market trends don’t favor Cattelan’s work.” He cites an 80% decrease in total auction sales prices of Cattelan since 2010, “signaling that his broader market trajectory is declining.”

However, one must be cautions not to assess an artist’s overall market simply by tracing relative annual sales results, which depend in no small part on the content of the consignments. For example, nothing like "Him," Cattelan’s sculpture of Hitler, which fetched $17,189,000 at Christie’s, New York in 2016, has been offered publicly for sale. If it were, one should expect a strong price, perhaps particularly in the wave of the current spectacle surrounding the artist.

2. Lynn states that “conceptual art has limited market appeal.” While I don’t necessarily disagree that conceptual art presents certain marketing challenges relative to traditional physical art, Lynn’s generalized statement may not apply to a particular and truly iconic work, which indeed, “Comedian” became, practically the minute it was first exhibited at Perrotin’s booth at Art Basel Miami Beach in 2018. Exceptional works do not necessarily conform to generalized rules.

In an attempt to substantiate the claim that "conceptual art has limited market appeal," Lynn cites a 1999 sale of Duchamp's "Fountain" (i.e., readymade urinal) for $1.6 million. However, Lynn (of all people) should know that the markets for modern and contemporary art have transformed fundamentally in the past quarter century. If "Fountain" were to be offered today and marketed as deftly as “Comedian” was by Sotheby’s, I have no doubt that it would be estimated at, and sell for a much stronger price than it did in 1999.

3. Lynn says that “editions could dilute value.” Here, in reference to “Comedian”, which is an edition of 3 + artist’s proofs, I emphatically disagree. Of course, a print from an edition of 50 will almost certainly be significantly less valuable than a unique work by the artist. This, however, is not the case for many small editions, such as those of certain sculptures.

The best example to demonstrate this point my be Jeff Koons's "Rabbit", which sold for $91.1 million at Christie's, New York in May 2019. This remains the highest auction price realized for a living artist. It is from an edition of 3 +1 artist's proof.

One might even surmise that in certain circumstances such as that of "Rabbit", the distinguished collections of the other editions can propel the price that prospective collectors are willing to pay for the rare available edition. Similarly, if another edition of "Comedian" were to be offered for sale, the spectacle of the edition sold at Sotheby’s last month may add to interest.

The High End of the Auction Market: November 2024

With Rene Magritte’s L'empire des lumières (1954) guaranteed to sell this week at Christie’s in the region of $95 million, it was a foregone conclusion that the high end of the November Evening Sales would be markedly different from May, when the the three big houses were led by the sale of Basquiat’s Untitled (ELMAR) at Phillips for a comparatively low $46.5 million.

The Magritte flew last night, fetching, with buyer’s premium $121.1 million, over $40 million above the artist’s previous auction record, set at Sotheby’s in 2022 for a painting of a similar subject. The price, among the highest realized at auction for a postwar painting, is still not remarkable in absolute terms; in the past decade we’ve become accustomed to nine-figure results for major works.

However, at a moment of correction in many market sectors, the strength of the Magritte sale suggests that the market for masterpieces may operate by its own logic and largely apart from trends seen elsewhere in the market.

If one were to wonder how the five $100+ million lots in the November 2022 Paul Allen auction would fare in today’s market, the Magritte sale may point to an answer. The Magritte’s realized price of $121.1 million is squarely within the range of the highest prices in Allen; more specifically, it would have been the third-highest sale in that auction, after Cezanne’s La Montagne Sainte-Victoire ($137.8 million) and slightly above Van Gogh’s Verger aves cyprès ($117.2 million). One might even extrapolate from the strength of demand for the Magritte that the paucity of highest-end consignments in recent auctions appears largely to be a supply-side matter.

Also selling this week for more than the above-mentioned $46.5 million Basquiat were Ed Ruscha’s Standard Station, Ten-Cent Western Being Torn in Half (1964) for a record-setting $68,250,000, offered by Christie’s sans guarantee with an estimate in the region of $50 million, and Claude Monet’s Nymphéas (1914-17) for $65.5 million at Sotheby’s.

Notation of auction prices

Some may rightfully be confused by the variation in notation of auction prices. Auction houses, on their websites, publish prices that include the buyer’s premium, though their pre-sale estimates do not account for the buyer’s premium. The art press usually refers to premium prices, and appropriately specifies them as such.

Artnet, one of the major databases for recording auction prices, only publishes the price including buyer’s premium, unless (typically for smaller auction houses and/or older sales) they publish only the hammer price — in either case specified accordingly. Another major auction price database, Artprice, typically publishes both the hammer price and the price including buyer’s premium, respectively specified as such. This may be most instructive to many, myself included.

There are, however, a few visible exceptions, who persistently cite only hammer prices, sometimes without specification. One is ArtTactic, an art market research firm. The other is BaerFaxt, an art market newsletter. Both, for example, posted to social media last night to announce the sale of Claude Monet’s Nymphéas (1914-17), using only the hammer price of $59 million; ArtTactic did not even specify it to be a hammer price.

The price that matters most for reportage is that which includes the buyer’s premium, in this case $65,500,000, which most closely approximates its Fair Market Value (FMV), a value type defined by the IRS as “the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.” (IRS Publication 561).

Fair Market Value is in fact the only type of value that can be used for an appraisal for any IRS tax purposes, and it is important to recognize, as the IRS has done for over 30 years, that Fair Market Value corresponds to the price including buyer’s premium. In 1992, the Internal Revenue Service specified in Technical Advice Memorandum 9235005 that for estate-tax purposes, FMV includes buyer’s premium. This is universally understood to be applicable to the calculation of FMV for any purpose, not limited to estate-tax purposes. In other words, hammer is only a portion of the total price, the remainder being the buyer’s premium.

The hammer more closely approximates another type of value, namely Marketable Cash Value (MCV), defined by the Appraisers Association of America as “the net value a willing seller realizes after disposing of property in a competitive and open market to a willing buyer. Both the buyer and seller must be reasonably knowledgeable of all relevant facts, and neither being under constraint to buy or sell.” However, the hammer is not necessarily the net price to seller; some (but not all) sales are subject to vendor’s commission (VC), and at some auction houses vendor’s commission may be negotiable.