Market Monday: Back to the Future

This week, a collection of stories where the old became new again, for better or worse...

Space, the Final Frontier: In another frying-pan blow to the head of anyone rooting for dynamism and flexibility in 21st-century art-dealing, Paula Cooper announced on Friday that it had added two previously independent gallerists/dealers to its org chart: Lisa Cooley, who just shuttered her namesake LES midmarket gallery five months ago, and Jay Gorney, who had been operating as a freelance (and free-form) adviser, curator, and dealer since leaving Mitchell-Innes & Nash in 2013. 

Of the two hires, Gorney's is the more troubling for the industry's trend lines. Although Cooley shrewdly assessed some of the key challenges now facing sub-elite gallerists during a pseudo-exit interview with ARTnews, I never saw her voice, let alone act on, any plans to pivot toward a more innovative business model. Gorney is a different story. Between mounting pop-up shows, consulting for the Sarah Charlesworth estate, and managing to present art-fair booths without an actual brick-and-mortar gallery, his unspaced identity was hard to pin down. But whatever observers chose to call Gorney, many saw him as a beacon of hope for a leaner, potentially disruptive way of exhibiting and selling significant contemporary artwork in our era.

Well, after a little more than three years, that beacon has officially shorted out. To be clear, I'm not criticizing Gorney (or Cooley, for that matter) for signing on with Cooper. But the move reinforces my belief that, without a dedicated physical exhibition space and/or a Scrooge McDuck vault of capital to burn, it's rapidly becoming untenable to compete in anything but the emerging tier of the traditional primary market. The business is too dependent on social activity and luxury brand-building to break away from the white cube. I know that's not what most people want to hear. But as the songwriter Craig Finn once put it (on a track whose title is eerily appropriate for this subject), you can't tell people what they want to hear if you also want to tell the truth. [ARTnews]

Forging Ahead: Three months after Sotheby's sparked fears of a potentially massive Old Master fraud after determining that it had unwittingly sold a fake Frans Hals work for over $10M, the same house revealed this week that it had mistakenly auctioned a second forgery in 2012 linked to the same dubious source. Laboratory analysis proved that paints used to render "St. Jerome"––previously attributed to the 16th-century Italian Mannerist known as Parmigianino––contained a modern pigment not synthesized until almost 400 years after the artist met his maker. Sotheby's announced that it would refund the painting's buyer in full, while simultaneously filing a motion to claw back the $672,000 in sales proceeds paid to the consignor.

Setting aside the obvious conclusions about a possible contagion spreading through an already-troubled market segment, I think the most compelling aspect of this story is a paradox about Sotheby's authentication process. The testing that pegged "St. Jerome" as counterfeit was performed by Orion Analytical, the scientific-research firm that Tad Smith and company just acquired last month to help combat the industry's persistent forgery problem. While the house undoubtedly would have preferred to uncover the foul play pre-sale, the Parmigianino case doubles as a niche marketing opportunity. If you're a dealer or collector specializing in artwork of ANY past era, wouldn't you prefer to do business with Sotheby's––the auction house that can now definitively prove the legitimacy of the works it offers as a normal part of the consignment process––instead of Christie's, which has made no obvious effort to update its practices on this potentially costly front?

In that sense, even though Sotheby's may lose a significant chunk of cash on "St. Jerome," it arguably gains a slight edge over its chief rival going forward. And in the long run, it's possible that said edge could be worth more to the house than a $672,000 refund for one rotten lot. [The New York Times]

Dropping the Hammer: Finally this week, a scant eight months after it made headlines by acquiring competitor Paddle8, online-auction startup Auctionata filed for insolvency in its native West Berlin. More bizarre, Paddle8 announced within 24 hours of the news that it would attempt to raise enough money from outside investors to buy itself back from its bankrupt parent company. Apparently, building a flux capacitor isn't the only way to try to turn back the clock...

I think it's fair to say that Auctionata and Paddle8 would like a do-over in a number of respects. The former may have had the resources to buy up the latter last year, but its 2016 also included accusations of "serious trade violations" by a major accounting firm, a string of layoffs, and an apparent inability to pay its employees' salaries in December. Meanwhile, Paddle8's recent past followed a similar plot line. The startup had allegedly been "missing its revenue targets consistently" in the months prior to the merger with Auctionata, then did its own downsizing after the deal closed. Not exactly an entrepreneurship highlight reel on either side.

Now, it's true that companies often struggle, and sometimes fail, because of their decisions about strategy, personnel, and other second-level factors. But sometimes the underlying problem is that they've simply chosen to embark on a suicide mission. To me––admittedly, an Occam's Razor kind of guy––Auctionata and Paddle8's similar difficulties suggest that the real flaw here is the midlevel digital-auction business itself. All the signs suggest that the market niche just isn't growing fast enough to sustain these two firms, either independently or combined. So regardless of whether Auctionata re-capitalizes or Paddle8 buys its freedom, it's plausible that neither will be long for this world. Online auctions––and online art sales more generally––may be the future. But sometimes the future is still too distant to save us. [artnet News]

That’s all for this edition. Til next time, remember: past is prelude.