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Unsold Warhol Nickel Vanishes in Opaque Online Auction

Source: Paddle8.com via Bloomberg

"50GBP" by Kate Brinkworth was the priciest lot that sold at "Currency" online-only auction on Paddle8.com on June 24, 2012. The work's final bid was $3,500. Close

"50GBP" by Kate Brinkworth was the priciest lot that sold at "Currency" online-only... Read More

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Source: Paddle8.com via Bloomberg

"50GBP" by Kate Brinkworth was the priciest lot that sold at "Currency" online-only auction on Paddle8.com on June 24, 2012. The work's final bid was $3,500.

Andy Warhol’s print of a nickel coin was expected to sell for as much as $30,000 in a money-themed online auction on Paddle8.com. Instead, the 1986 work failed to draw a single bid, the biggest casualty of the “Currency” sale in which 65 percent of the 20 lots went unsold.

None of this information can be gleaned now. When the auction ended at 5 p.m. on July 24, the estimates and final bids vanished from the site. So much for transparency.

“People thought that the art market going online would make things more transparent, and it’s doing completely the opposite,” said Clare McAndrew, founder of Dublin-based Arts Economics, a research and consulting firm specializing in the art market.

The five-year contemporary art rally has fueled a surge in online auctions and opened the doors for new companies that are betting consumers will buy works by Warhol and Banksy while lounging at home in their pajamas. Unlike regular auctions at Sotheby’s (BID), Christie’s or Phillips, where estimates and prices are posted on the auction houses’ websites and filtered into databases that track sold and unsold lots, results of online auctions often aren’t published, making an already opaque art market even less transparent.

Source: Christie's via Bloomberg

A 2009 drawing by Richard Serra, “Pamuk,” fetched $905,000 at Christie’s online-only sale on May 14, 2014. Close

A 2009 drawing by Richard Serra, “Pamuk,” fetched $905,000 at Christie’s online-only... Read More

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Source: Christie's via Bloomberg

A 2009 drawing by Richard Serra, “Pamuk,” fetched $905,000 at Christie’s online-only sale on May 14, 2014.

Auction houses, galleries and Web-only companies sold more than 2.5 billion euros ($3.3 billion) worth of art online in 2013, five percent of the global art market, according to the Art Market Report 2014 compiled by McAndrew and published by the European Fine Art Foundation. Public auction sales reached 22.5 billion euros in 2013, a five percent increase from 2012, according to the report.

Winklevoss Backing

The lack of transparency is making harder for buyers and sellers to establish a fair price for an artist’s work. Online auction companies said they omit sales results on purpose to protect clients, some of whom are artists and others that are nonprofits that rely on artists to donate works for their charity auctions.

“It’s about preserving the anonymity of what’s happening on our site, especially for our consigners,” said Osman Khan, co-founder and chief operating officer of Paddle8, a website that has raised $17 million in funding since 2011 with backers including Tyler and Cameron Winklevoss, twins who claimed Mark Zuckerberg stole their idea for a social-networking website to start Facebook Inc. “Even if it does sell, not every owner wants the work’s price publically disclosed.”

Distorting Markets

The opaque market makes it easier for buyers to quickly resell, or flip, an artwork for a profit. Sellers can test the market without fear of tainting the value of the work if it flops, said Thomas C. Danziger, a partner at Danziger, Danziger & Muro LLP who specializes in art law and has consigned artwork in online auctions on behalf of clients.

“If the work doesn’t sell, it disappears without a trace,” he said. “It’s as if the work hasn’t been up for sale. I can reoffer it the day after at Christie’s or Sotheby’s and nobody should know it didn’t sell before.”

At Paddle8’s 10-day “Currency” auction, the seven purchased pieces tallied $14,950, a fraction of the $264,700 high target set by the auctioneer. The most expensive work sold was Kate Brinkworth’s painting of red and black dices and other gambling paraphernalia, estimated at $4,000 to $6,000. The final bid was $3,500. The price isn’t in Artnet’s database.

While an attractive way for savvy market players to do business, “from the perspective of an individual or an expert, this definitely distorts the market,” said McAndrew.

Record Serra

Online auctions tend to focus on the lower- and middle market, with most pieces selling for less than $100,000. Among the bigger items, a 2009 drawing by Richard Serra, “Pamuk,” fetched $905,000 at Christie’s online-only sale on May 14 -- a record, if anyone had kept track.

The price isn’t available on the auction house’s website and isn’t listed in an auction price database compiled by Artnet, an industry resource. Serra’s auction record for a work on paper is $701,000, set at Sotheby’s on the same date, according to Artnet. Christie’s only mentioned the price on July 16, when it reported sales for the first six months of the year.

Federal law doesn’t mandate that auction companies post the results of their online auctions, experts said.

“We are all waiting for standard market practices and greater transparency around the actual results to get caught up,” said Noah Horowitz, executive director of the annual Armory Show art fair in New York and author of “Art of the Deal: Contemporary Art in a Global Financial Market.”

EBay Partnership

As a result, standards vary widely. Companies that offer online auctions, both commercial and charitable, among their services -- Paddle8, Christie’s, Artspace, Artsy and Artnet -- said they will give information on specific online sales if contacted directly.

Sotheby’s, which doesn’t currently have online-only auctions, last month entered into a partnership with EBay Inc. (EBAY) to sell artworks online. The companies said they are building a platform for collectors and first-time buyers to browse and purchase items including art, jewelry and fine wine.

Internet-based art auctioneers said the market will become more open as it expands and matures. Dallas-based Heritage Auctions generates detailed results after each of its auctions, whether they take place live or online. Visitors to Auctionata.com, a Berlin-based auctioneer of fine-art and collectibles, can view past auction results by clicking on an icon next to each sale. An Asian art auction on July 17, for example, drew 276 users from 31 countries and sold 57 of 124 lots, according to the website. The top lot, a 19th century Chinese bronze, fetched 7,500 euros, surpassing the estimate of 1,500 euros.

Schiele Drawing

Heritage Auctions and Auctionata send the sale results to Artnet’s database. They range from a Marilyn Monroe print by Lawrence Schiller that fetched $938 in an online-only session at Heritage last week to a 1916 Egon Schiele drawing that fetched 1.5 million euros a year ago.

Artnet, which sold $4,351,343 of art online during the first quarter, will start reporting the results in September as part of a redesign of its website, said Roxana Zarnegar, senior vice president of auctions and private sales.

As the Internet becomes “a more important part of the auction market there will be a strong trend towards the same type of transparency that’s common in offline auctions,” said Sebastian Cwilich, president and chief operating officer of Artsy, which has sold $1.8 million of art in charity auctions for nonprofits since last year.

The lack of transparency may have a much simpler explanation, McAndrew of Arts Economics said.

“The fact that they are not talking about it too much means it’s still at the very early stages,” she said. “If they were doing really well, there’s no doubt they would tell you everything.”

To contact the reporter on this story: Katya Kazakina in New York at kkazakina@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Mary Romano

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