But what no one thought extraordinary was that this machine, the pride of German ingenuity, was being sold in London by an English firm of auctioneers in a sale which included a mass of other purely German material, such as a picture by Caspar David Friedrich that was sold for pounds 2.3m (another record), letters by Richard Wagner, and the model of an Austro-Hungarian state coach. The lot was offered to Christie's Australian office by a descendant of the original owner, described as 'an astronomer and mathematician in the service of an Indian prince'.
For the art market and for the public at large, it seems perfectly natural that the tentacles of Christie's and its great rival Sotheby's should be global and that the action should be in London. (The well-hyped New York art market is mainly confined to modern American paintings.) For in general, London remains the centre of the world art market, thanks largely to the astonishing success of Sotheby's and Christie's over the past 35 years - even their two smaller London- based rivals, Phillips and Bonhams, have a growing international clientele.
Moreover, the deep recession in art has merely solidified their supremacy. Although they have had to draw in their horns, they have suffered far less than the dealers, at once their enemies and their best customers. Many dealers have gone bust, while others have had to retrench in the face of falling art prices and reluctant buyers. Simply by staying in business, the auction houses have captured an increasing share of what is left of the art market. The only threat - and a long-term one at that - is that the buying power may move to the Far East and the art action with it. Even then, both Christie's and Sotheby's are already there to serve their potential new customers.
The 'calculator' sale was only one demonstration of London's dominance. On Tuesday week Sotheby's is selling pictures owned by a descendant of the great Impressionist dealer Joseph Durand-Ruel, and next month a sale in Monaco will include the contents of the Portuguese house of the claimant to the French throne, the Comte de Paris (including tiaras, sapphire belts and other items).
The dominance of Sotheby's and Christie's is relatively recent. Until the mid-1950s, Paris was the centre of the world's art market. But the French were too greedy, too rigid in their rules, and this provided the late Peter Wilson of Sotheby's with his chance to create the modern art market (see box). He cultivated high-profile sales of well-known works, which helped to push up prices and stimulated popular interest.
But the international success of the two auction houses is not confined to the top end of the market. Over half the lots at Sotheby's 'Colonnade' sales (for items worth less than pounds 500 each) are sold to Europeans. 'With us it's normally 40 per cent, but up to 60 per cent in East Anglia, where continentals come on day trips to our sales in Ipswich and Norwich,' says Christopher Weston, the long-serving chairman of Phillips. 'The Spanish are buying increasingly heavily, and the Italians are prolific buyers, they've lots of money and taste. But there are fewer 'big shippers' - the dealers, mostly German, who used to buy whole van-loads of furniture. We've got 400,000 active names on our mailing lists.'
As Christopher Elwes of Bonhams puts it: 'London is the great entrepot of the art trade.'
Like other markets, the art market is inher ently manic-depressive. It has been decidedly jumpy since it topped out in the winter of 1989-1990, after a boom in which the price of run-of-the-mill Impressionists rose 155 per cent in 30 months.
Yet despite the well-publicised troubles of the poor souls who find that their Renoirs and, above all, their Warhols are unsaleable, the art market has some bright points. The highly sophisticated index compiled by Nicholas Sokolow, the former Christie's director, and Tobias Poensgen, an ex- Warburg man, shows that the art market in general has some pretty solid 'support points' as the stock market chartists put it. Old Masters, for example, did not rise nearly as far, nor suffer nearly as badly, as Impressionists.
For in hard times the art market simply freezes, as only the most financially hard- pressed owners offer their precious possessions. This is one of the reasons why art is such an excellent defensive investment. Even during the great slump of the early Thirties, only those sectors - notably armour, tapestries and British 18th-century portraits - which had been ultra- fashionable in the 1920s suffered at all badly.
The Big Two, Christie's and Sotheby's, had become so dependent on the Impressionists that they looked in bad trouble when the market dried up between 1990 and 1992. They sacked up to one in five staff and profits disappeared - indeed, Sotheby's is still suffering losses.
But as intermediaries with relatively little capital tied up in stocks of artworks, they were not nearly as badly placed as London's dealing fraternity. Most dealers, but particularly the well-known Bond Street names, have large sums invested in the stock in their showrooms. That requires substantial borrowing. As prices rose in the 1980s, dealers had to borrow more to finance their purchases. When recession struck and the art market froze over, therefore, many fell victim to high interest rates.
The first symptom of trouble was that dealers stopped buying from the auction houses, which, as a result, started to put more effort in selling to private customers than to the 'trade'. 'We're no longer wholesalers, we're retailers,' says Christopher Weston. 'Five years ago we had 70 per cent trade customers and 30 per cent private. Now the percentages are reversed.'
'What comes out of recession is not the same as went in,' said Sir Hugh Leggatt, doyen of London's art dealers. As he closed his firm, probably the oldest in London, after 172 years, the 73-year-old complained: 'When I started in art, what mattered was to be able to spot a good picture. What counts now is to have a first-class financial brain.'
Some outside investors merely pulled out: Harlech Television sold off three galleries, Frost & Reed, Jeremy Maas, the most respected dealers in Victorian art, and the print dealers CCA. It had bought them when the art market appeared to offer a profitable and socially correct form of diversification.
Other outsiders simply pulled the rug, sometimes on notable and long-established names, as Throgmorton Trust did with Ackermann & Son, long the leading dealer in sporting art. One of the worst casualties was Bluetts, established for over a century; it shared the troubles of its parent, Chelsfield, which claims it fulfilled its legal and moral obligations to the letter.
Other collapses left a bitter legacy, partly because of the alleged fickleness of outside investors. In the words of Michael Gillingham of Jon Sparks, formerly suppliers by appointment of Chinese art to the Queen Mother, which collapsed when its financial support was removed: 'Like many others, we borrowed at the top of the boom to continue to be able to buy and sell first-class objects. We took on a backer. Many of my colleagues now want nothing to do with backers, they regard them as stab-you-in-the- backers - if a backer fails to grasp that art is a violently cyclical trade, he has not understood the most important lesson.'
In contrast, the art market's principal banker, Hill Samuel, has not lost its nerve. But then its managers have been working with dealers since 1969, when Hill Samuel opened a West End branch in St James's Square, almost next door to Christie's. According to Blair Hesketh, the manager in charge of the bank's art-dealer clients: 'Art dealers are much like other businessmen. You go on their track record and their reputation, and for security you rely on covenants on all their assets.' Unfortunately, as he says: 'The liquidity dried up so badly that if you didn't sell you can't pay the rent.' So Hesketh has had to steer some clients into a peaceful liquidation, or into giving up their increasingly expensive premises in and around Bond Street. 'Some of our most successful dealers don't have galleries at all,' he says.
The shakeout has left the Big Two still hungry. 'Sotheby's is still going for market share,' says one insider. 'Dede Brooks (the new boss of auction operations worldwide) is a hard taskmaster.' The continuing competition between the auction houses has meant that anyone selling more than pounds 100,000 of goods does not pay any fee, and as a result the auction houses get their profits from the buyers. The pressure on their margins was amply demonstrated earlier this year, when Sotheby's, swiftly followed by Christie's and Phillips, increased the buyer's premium from 10 per cent to 15 per cent on the first pounds 30,000. This was a step which it was reckoned could boost profits by 50 per cent - a jump which points up the increasing overheads with which the Big Two have landed themselves.
Hard times have affected the cautious, aristocratic Christies's rather less than the more entrepreneurial Sotheby's. Their sales were level pegging last year for the first time since another troubled period, in the late Sixties, when Christie's sales fell behind. Inevitably, because of its buccaneering, expansionist ethos, Sotheby's was worst hit by this recession, as it was at the end of the Sixties (by a severe downturn on Wall Street) and in the early Eighties.
It was in the turmoil of 10 years ago that Sotheby's lost its independence to Alfred Taubman, who had made a large fortune developing shopping malls in the United States. It marked a crucial point for both the main auction houses. They realised that if they did not organise themselves seriously as businesses their survival would not be assured. It was a fortunate decision. Without the restructuring they went through in the Eighties, they would not have made it through the early Nineties recession so successfully, and might not now be consolidating the biggest share of the market they have ever enjoyed.
When Taubman took over Sotheby's, he left the existing management largely intact, installing only a civilised American former museum curator, Michael Ainslie, to oversee the London operations. He also intensified the auction house's financial involvement with its clients, lending them money and providing more guarantees at higher prices. But the recession hit even Taubman. In its annual listings of the Truly Rich, Forbes magazine downgraded his fortune to a mere dollars 400m (a couple of years ago he was a real billionaire). As a result he sold three important paintings and minority stakes in his shopping malls, plus a third of his Sotheby shares.
Sotheby's started cutting costs at the end of 1990, but as profits fell by two-thirds to little more than pounds 4m in 1992 (with the real estate division contributing more than pounds 1m on sales of pounds 6m) the cuts grew deeper. Not for the first time, Sotheby's had over-expanded - it has 88 offices today against 18 only 20 years ago.
Organisationally, the crucial step was the installation of two key American figures, Diana Brooks, as head of the world-wide auction business, and Roger Faxon as the managing director of Sotheby's Europe.
Faxon, a former head of Columbia Pictures, is one of the few orthodox businessmen ever employed by a London auction house. They have tended to recruit among experts, themselves often lifetime employees recruited young. Faxon was sent to London 18 months ago to instal some business-like practices. 'We had to adjust the staffing to the flow of property,' he says firmly.
The change in the power structure means that Lord Gowrie, the chairman of the London business, seems to be sidelined, although Faxon firmly denies the assertion of Anne Somers Cocks, editor of the trade's monthly Bible, The Art Newspaper, that 'there's no sense in which Sotheby's is an English company any more'.
Faxon is very aware of the need for tighter financial discipline - Sotheby's will now lend only 25 per cent of the estimated value of a lot, against a half four years ago, and the minimum loan has been raised to pounds 15,000. By the end of 1991 Sotheby's had lent pounds 112m to clients - five times Christie's' 'loans to consignors' (unlike Sotheby's, it offered no term loans and was therefore committed only until it sold the picture or object involved).
In theory, it was Christie's which required lessons in business practice, since it was notoriously the haunt of 'gentlemen pretending to be auctioneers' as opposed to Sotheby's 'auctioneers pretending to be gentlemen'. This was always slightly unfair. For although one Old Etonian, Sir Anthony Tennant, has just succeeded another, Lord Carrington, as chairman, the firm has often been run by less aristocratic figures, such as the present chief executive, Christopher Davidge. His grandfather started as a porter and rose to be the firm's chief cashier. His father also worked for the firm, but was so badly treated that Davidge trained as an estate agent before joining.
With the help of Lord Carrington he has transformed the firm's fortunes since the bad days six years ago, when a senior director, the late David Bathurst, had to resign after lying over sales of pictures in New York. At the time Christie's looked vulnerable to such predators as Michael Ashcroft, who accumulated a 24 per cent stake (which he sold at an dollars 80m loss).
THE big two's losses of expert staff helped their smaller rivals, Phillips and Bonhams, able to operate on lower overheads. They also benefit because 'there's no brand loyalty any more', as Weston puts it. In addition, a few dealers have been lured into the auction houses. The 73-year-old Cyril Frankel has brought the world of ceramics flocking to Bonhams, where Daniel Fearon, the former head of Glendining's, the specialist coin and medal dealer, has created a successful department in one of the many areas where a single expert can be followed by the whole specialist dealing fraternity.
Both of the Big Two's smaller rivals have managed to carve niches for themselves. Phillips has retained its margins on sales down a mere 11 per cent to pounds 80.8m in 1992, and has by far the best network of provincial salerooms. But the most spectacular turnround has been of the formerly family-controlled Bonhams, London's fourth-largest house. Thanks to two ex-Christie's executives, Paul Whitfield and Christopher Elwes, sales have jumped from under pounds 9m in 1986 to more than pounds 25m last year, 22 per cent up on the previous year.
In doing so they applied the lessons they had learnt as successive heads of Christie's in South Kensington, which is reserved for lower-priced lots and where sales have grown even faster than at Bonhams. Whitfield and Elwes competed vigorously for new clients. Like South Ken, they refused to increase the buyers' premium, and took the initiative in opening on Sundays and in accepting credit cards. They transformed the firm from effectively a mere 'clearing-house for the trade' into a user-friendly saleroom, backed by intensive direct-mail campaign, paying vendors more quickly than its rivals, and helping potential buyers.
Having seen off the heaviest competition from established dealers, and streamlined their operations, the auction houses still have the weaknesses of current art market conditions to contend with. Apart from the top end of the market, today's problems do not spring from lack of demand. Weston is not alone in being cheerful. 'Just look at the thousands of professional people retiring early with a nice nest-egg. They've got no mortgage and they've finished educating their children.' Blair Hesketh of Hill Samuel believes that 'the market has turned round since Christmas. There's more liquidity around'. But it remains highly price-conscious. In January the London Contemporary Art Fair attracted 20,000 visitors, compared with 16,000 in 1992, and sales were healthy, although mostly under the pounds 10,000 mark.
Curiously, the problem is supply: 'The dearth of saleable goods is worse than I've seen at any time in the last 37 years,' says Weston. 'The middle range of goods depends on the scale of residential moves, and it won't get better until the residential market gets more active.'
Fortunately for the auction houses, the elderly continue to die and leave pictures and objects to be sold. As a result, 'coffin power' has always provided a regular flow of material. But recently a new source of supply has opened up, what might be described as 'receiver power' - Phillips sold the contents of Asil Nadir's four-and-a- half-room office for pounds 4.5m, says Weston, 'partly because we were prepared to take the whole lot, whereas Sotheby's would only have wanted the cream'. (However, Sotheby's did scatter the effects of the late Robert Maxwell after Phillips had done the valuation.)
In theory the problems of Lloyd's underwriters should ensure a steady flow of business. Indeed when the troubles erupted, Sotheby's sent a rather tactless letter to every Name it could find, a piece of barefaced hustling now replaced by a much more urbane missive - including the revelation that in happier days Sotheby's had provided a valuation service to enable potential Names to use the contents of their houses as part of their qualifying capital base.
The dealers, able to offer instant cash, should be better placed than the auction houses to help beleaguered Names, but the auction procedure can be speeded up in an emergency. Last November Phillips organised a sale in 10 days to help a landowner whose bank was demanding pounds 120,000. They got him over pounds 150,000.
Unfortunately, much of the art being offered, either by owners or by the banks which took it as collateral for loans connected with property as much as with Lloyd's, is of poor quality: even a (rather inferior) painting by George Braque, once owned by the financially troubled French actor Alain Delon, went for well below its estimate in Paris recently.
The biggest hope, for the auction houses anyway, comes from broadening the market even further. Phillips has catalogues on 77 subjects, with separate specialists for railways, toys and die-cast models; toy soldiers and figures; and dolls, teddy bears and juvenilia. It even runs sales of scripophily and paper money. Not to be outdone, Sotheby's sold a letter last Tuesday in which Greta Garbo really did write 'I want to be alone', for pounds 26,450. And Bonhams is offering a selection of vintage fountain pens.
Despite the roller-coaster character of the art market since the mid-Eighties, therefore, the London auction houses have never been fitter or potentially more profitable. They have emerged from the recession with a bigger market share, weaker competition from the dealers, more efficient and cost-effective operations, and more focused management. It may take years before we see the kind of buying frenzy that gripped parts of the market - particularly in Impressionist paintings - only a few years ago. But it is clear that the auction houses are poised to take advantage of whatever upturn there is. London, it seems, is not about to lose its pre-eminence in this field, at least.
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