Sotheby's Holdings, Inc. History
New York, New York 10021
Telephone: (212) 606-7000
Fax: (212) 606-7107
Sales: $447.1 million (1998)
Stock Exchanges: New York London
Ticker Symbol: BID
NAIC: 7389 Business Services Not Elsewhere Classified
Sotheby's Holdings, Inc. is the holding company for Sotheby's, one of the world's premier fine arts auction houses. The company got its start in the mid-18th century, focusing on the British book market, and later in the century branched out into other markets. Sotheby's began to expand beyond its British base in the 1940s, and it had established a significant worldwide presence at the time of the art boom in the 1980s, which pushed its sales totals up dramatically. After the bottom fell out of that market, the company found new categories of collectibles to sell. Fine arts still account for about half of auction sales, and 80 percent of the lots Sotheby's sells now are valued below $5,000.
The history of Sotheby's may be traced to 1744, when the English bookseller Samuel Baker held his first auction. During this time, book collectors had become increasingly interested in enhancing their holdings by purchasing works from the libraries of collectors who had died. Baker's first auction, in March 1744, featured 457 books previously belonging to Sir John Stanley. Baker sold the contents of Stanley's library for £826. Following this event, Baker and his associates became the premier auctioneers of British libraries. Baker auctioned the book collections of several famous clients, including Prince Talleyrand, John Wilkes, John Bright, the Marquess of Landsdowne, the Dukes of York, Buckingham, and Devonshire, and the Earls of Pembroke, Sunderland, and Hopetoun. One client, Richard Rawlinson, had amassed so many books that the only room left for him to sleep in was the hallway of his living quarters. Upon Rawlinson's death, it took Baker 50 days to disperse the collection.
In 1767, Baker took on a partner in his business, an accomplished auctioneer named George Leigh, who was noted for using props, such as a snuff box and an ivory gavel, in conducting sales of books. When Baker died in 1778, his estate was divided between Leigh and Baker's nephew John Sotheby.
Under the leadership of John Sotheby, the auction house expanded its activities beyond books for the first time, including the sale of prints, medals, coins, and rare antiquities. The company's staff also expanded, and, in 1842, Sotheby's senior accountant, John Wilkinson, was permitted to purchase a 25 percent share in the partnership. In 1861, the last member of the Sotheby family died, and Wilkinson took over as the company's leader. Three years later, Wilkinson promoted another long-time employee, Edward Grose Hodge, and changed the enterprise's name to Sotheby, Wilkinson, and Hodge, the name it would carry for the next 60 years.
In the late 19th century, Sotheby's dominated the book trade of London. Key to this success were the activities of Bernard Quaritch, a book dealer who purchased the property of such prominent figures of the day as Disraeli and Gladstone, both British prime ministers, and other leading cultural and political figures. Quaritch maintained a high profile, bringing free publicity and renown to Sotheby's and helping the company to maintain its preeminent spot in the industry.
In 1878, Thomas Hodge, the son of Edward Grose Hodge, joined the firm, and in 1896, as the previous generation retired, the younger Hodge became the sole active partner in the business. Over the course of his career, Hodge developed a rich store of knowledge about the antiquities that Sotheby's sold. In addition to his concern for old things, Hodge was notorious for his attachment to old ways; for example, he loathed the telephone and insisted that all of his letters be handwritten, not typed.
New Directions in a New Century
When Edward Hodge died in 1907, his son sold three additional shares in the Sotheby's partnership. These were purchased by Montague Barlow, a lawyer and Member of Parliament; Felix Warre, a banker; and Geoffrey Hobson, an official in the British Foreign Service. The new partners undertook as one of their first major projects the sale of the Huth library. This property, which had taken 50 years and two generations to amass, took 12 sales over 11 years to disperse, netting £300,000.
In 1917, Sotheby, Wilkinson, and Hodge moved its business offices from Wellington Street in London, to 34/35 New Bond Street. At the time of the move, company employees carefully detached a black basalt bust of the lion-goddess Sekhmet, carved in ancient Egypt around 1320 B.C., from its place of honor in Sotheby's offices and installed it over the front entrance of the firm's new premises. The statue had come to the company in the 1800s as part of a collection of Egyptian artifacts and was sold for £40. When the object's buyer never appeared to collect it, the orphaned goddess was adopted by Sotheby's and became its muse, giving the company the oldest privately owned monument in London.
In the wake of World War I, a way of life for many of Britain's old landed families began to come to an end. As a result of the break-up of Britain's vast country estates, Sotheby's began to receive commissions to auction the contents of many country houses. At the suggestion of a young company employee, Sotheby's began to hold these sales on the premises of the estates. The first such sale was at Kinmel Park in Wales, where the sole surviving member of the manor's family lived alone in a house with 57 bedrooms. Sotheby's continued to hold on-site estate sales throughout the 1920s and 1930s.
During this time, Sotheby's began to see the bulk of its business shift away from books and literary property, in favor of paintings and other works of art. Nevertheless, Sotheby's did continue to conduct major sales of libraries. The Britwell collection took 21 separate sales to disperse and set a new record for the sums fetched by a library at auction. In addition, the company presided over the sale of Yates Thompson's collection of illuminated manuscripts, Anton Mensing's collection of early printed books, and the unpublished papers, containing three million words, of Sir Isaac Newton.
In 1937, Sotheby's conducted its most notable house sale of the prewar era, when it dispersed the contents of 148 Piccadilly, formerly owned by the Rothschild family. The BBC broadcasted the auction live, and £125,000 was netted from the sale, an enormous sum for the time. Within two years of this sale, however, Britain had entered World War II, and the war-time economy naturally brought changes to Sotheby's activities.
After the war, Sotheby's experienced a boom in operations. In 1946, the company sold £1.5 million worth of goods, a figure that would not be equaled for the next eight years. As British regulations governing monetary exchanges were relaxed, Sotheby's was allowed to expand its operations beyond Great Britain for the first time in the late 1940s. With this new freedom, the company sought to become a dominant player in the international auction business.
American Expansion in the Mid-1950s
A key step in this strategy was taken in 1955, when Sotheby's inaugurated American operations, opening an office in New York. With this move, along with gains in other areas, the company's receipts climbed to £1.7 million in that year. The most striking development in Sotheby's business in the late 1950s was the rapid increase in popularity and price of Impressionist and Modern art. In 1957, Sotheby's held its first auction devoted exclusively to these works, when it sold the Weinberg collection in London.
On October 15 of the following year, Sotheby's sold the famed Goldschmidt Collection. This group of seven paintings was sold at an evening auction, a black tie event attended by many celebrities and covered extensively by the press. In just 21 minutes, the works were sold for £781,000, the largest amount ever attained in a fine arts sale. The Paul Cézanne painting entitled Garçon au Gilet Rouge was sold to Paul Mellon for £220,000, more than seven times higher a price than any other modern painting had ever fetched. The auctioneer, Sotheby's president Peter Wilson, responded famously to this bid by asking, "What, will no one offer any more?" At the end of the Goldschmidt sale, the audience of 1,400 stood on their chairs and cheered for an extended period of time. With this event, an international boom in art sales was launched.
In June 1959, another major sale strengthened the market for art works, when Rubens' altarpiece The Adoration of the Magi, painted in 1634 for a Flemish convent, sold for £275,000, following two minutes of bidding. The painting was offered for sale by the Duke of Westminster, whose family had owned it since 1806. Because it measured 8 feet by 12 feet, Sotheby's had to winch the work into its West Gallery through a hole made in the floor and then break down two walls to get it into the main gallery for sale.
On the day after the Rubens sale, Sotheby's set another record, when it sold the Westminster Tiara for £110,000, twice as much as any other piece of jewelry had ever fetched. This diamond crown featured two enormous pearl-shaped diamonds, known as the Arcot Diamonds, surrounded by 1,240 smaller stones. It was purchased by Harry Winson, who reset the stones in different pieces of jewelry. By the end of 1959, with contributions from these two landmark sales, Sotheby's annual sales had reached £6 million.
Throughout the late 1950s and the early 1960s, the main thrust of Sotheby's growth was in markets outside the United Kingdom. In 1964, the company dramatically enhanced its foreign operations when it purchased Parke-Bernet in New York, the largest American fine art auction house. With this acquisition, Sotheby's became Sotheby Parke Bernet. The American arm of the firm reaped its most handsome profits from the sale of Impressionist and Modern pictures in the mid-1960s. In October 1965, for instance, Cézanne's Maison à l'Estaque brought a record $800,000.
With these strong returns from its American branch, Sotheby's increased its international presence in the late 1960s. In 1967, the company opened offices in Houston, Los Angeles, and Paris. The following year, operations in Toronto, Florence, and Melbourne were inaugurated, and, in 1969, Sotheby's added Edinburgh, Zürich, Munich, and Johannesburg. The company's Swiss location soon became a center of European jewelry sales.
More Expansion in the 1970s
In the 1970s, Sotheby's continued to expand its reach. In 1971, the company opened a second London showroom, in the section of the city known as Belgravia. This facility specialized in art from the Victorian and Edwardian eras. In 1973, Sotheby's moved overseas again, opening an office and showroom in Hong Kong, which soon handled the sale of the Chow collection of Ming and Qing porcelain. In the following year, the company expanded its European holdings, purchasing Mak van Waay, a Dutch seller of fine art. From this base, Sotheby's began to conduct annual sales of Flemish and Dutch Old Master paintings and drawings. Also in 1974, Sotheby's opened offices in Stockholm, Milan, Brussels, and Dublin. In January of the following year, Sotheby's expanded into that area of Europe controlled by the French customs service, signing an agreement to conduct auctions in Monaco. In this way, the company was better able to circumvent the French government's state control of all auctions. The company's first Monaco sale, held in the Winter Casino, was an auction of furniture and silver owned by Baron Guy de Rothschild. In 1976, Sotheby's expanded its Swiss operations to include winter jewel auctions held in the resort of St. Moritz. In May 1976, the company successfully auctioned the renowned Pink Diamond, for a record price of $1.09 million.
The following year, Sotheby's turned its attention to its home base, undertaking a significant expansion in Britain and Ireland. The company opened a salesroom outside London, in Billingshurst, Sussex, and also began to conduct auctions in Scotland. Eventually, Sotheby's grew to include eleven offices and ten further representatives throughout Great Britain.
In the spring of 1977, Sotheby's decided to sell shares in the partnership to the public for the first time. The company's initial stock offering proved highly popular, and the price of shares had soon more than doubled. In the wake of this move, Sotheby's pushed on with its international expansion. At the end of the 1970s, the company opened a third Swiss office in Geneva. In 1979, Sotheby's also opened an office in Spain, which was inaugurated in May 1979, with the house sale of El Quexigal, a former residence of the Hohenlohe princes. The company had also opened offices in Rome and Hamburg by the end of the decade.
Bidding for Control in the 1980s
In 1980, Peter Wilson, Sotheby's long-time leader, stepped down from his post and was followed by a number of other executives in quick succession. In 1982, the company's chief expert on Chinese art was appointed head of Sotheby's International outside the United States. The following year, the company faced a major threat in the wave of corporate takeovers that swept the financial world in the early 1980s, when two investors amassed a large number of Sotheby's shares and attempted a hostile takeover of the company. It was rescued by A. Alfred Taubman, an American businessman and patron of the arts, who formed Sotheby's Holdings, Inc., to purchase Sotheby Parke Bernet Group plc. With the approval of the company's leaders, Taubman purchased all of Sotheby's on November 9, 1983.
The sale and purchase of Sotheby's itself came as the business of selling things in general entered a boom period. The company set records for prices of art works sold at auction in 1983 and 1984 and recorded its highest annual totals of sales in 1984 and 1985. The dramatic growth rate continued throughout the following two years, and, in 1987, Sotheby's reported an 85 percent annual increase in auction sales, as the company passed the $1 billion mark for the first time. In that year, the company sold the Duchess of Windsor's jewels for £31 million and Van Gogh's Irises for $53.9 million, an astounding figure that was later revealed to have been enhanced by the auction house's offer of a loan to the buyer.
Sotheby's Holdings executed an initial public offering in 1988. The firm's fantastic success continued, as annual sales rose to $1.81 billion, a three-fold increase over the last five years. The company auctioned off a part of the Andy Warhol estate and also conducted sales in the Soviet Union and China for the first time. The following year, Sotheby's moved further afield, opening offices in Tokyo and Budapest and conducting an auction in Vienna.
By the end of 1989, the company's sales had doubled again over just two years, with strong returns from contemporary and impressionist art. There seemed to be no end in sight to the boom, and, in July 1990, Sotheby's annual sales reached $3.2 billion.
Challenges in the 1990s
By the start of 1991, however, the bubble had burst. A severe worldwide economic downturn, as well as anxiety surrounding the Persian Gulf War, brought an end to the auction returns of the late 1980s. The company's contemporary, modern, and impressionistic art sales were hurt particularly badly. By December 1991, annual sales had dropped to $1.1 billion. Sotheby's annual sales figures remained in the $1 billion range for the next few years.
Taubman, whose vast financial empire was crumbling, sold some of his Sotheby's shares in the spring of 1992. Forbes estimated Taubman's wealth fell from over $2 billion to about $400 million between 1989 and 1994. Fortunately, he had $40 million a year in Sotheby's income to sustain him during this period. Michael Ainslie, who had served as CEO since 1984, left the firm in 1993 after becoming enriched by bonuses and stock options. He was succeeded by Diana Dwyer "Dede" Brooks, who had first joined Sotheby's in 1979.
Brooks set about cutting costs and reorganizing management. She also, in January 1993, increased its buyer's premium, which helped to improve its profits. By 1994, improving prices in some areas, such as jewelry, began to indicate a slow recovery in the market. Given its illustrious history, wide range of operations, and expertise in the field of fine arts, Sotheby's was well situated to take advantage of any upturns in the art market.
However, Christie's, led by Christopher Davidge, was making impressive gains in market share. In 1995, although Christie's did secure several important collections, Sotheby's landed a Picasso that sold for nearly $30 million and edged out its rival yet again.
Robert Lacey's history of Sotheby's suggests that this was a difficult transition period. Three of the firm's top experts left the field around the same time. Moreover, when Brooks attempted to conduct an important auction herself, it failed. Sotheby's posted just under $1.6 billion in 1996 auction sales, and Christie's outsold them by the slimmest of margins, giving Christie's its first lead in 42 years. Although Sotheby's posted more profits, it was a historic marker of defeat.
To bolster sales, the definition of what was appropriate for the firm to auction was enlarged to include baseball cards, celebrity memorabilia, and even an abandoned lunar rover, permanently fixed on the moon. Thus, the company's customer base broadened. In 1993, the firm reached an agreement with Disney to auction simulated "celluloids" as souvenirs of its films. Although no longer part of the filmmaking process, these reconstructed frames proved popular to collectors and attracted bids of up to $20,000 each.
Journalists continued to report on the perceived competition between Sotheby's and rival Christie's. Christie's was holding impressive sales during this time, including a single modern art collection which landed $206.5 million. Moreover, Christie's posted a turnover of $2.02 billion for the year 1997, passing Sotheby's for a second year running. Still, Sotheby's profits were $18 million better, perhaps because Sotheby's kept a better eye on costs than its rival. It exercised an option to buy its New York headquarters building, thereby saving millions each year in rent. Plans were in the works to more than double the height of the building to create an art marketplace of unprecedented scale.
Then, a February 1998 auction of the personal effects of the Duke and Duchess of Windsor was a tremendous success which garnered enormous media attention. A piece of the Windsors' wedding cake in its original box fetched nearly $30,000. Dede Brooks reportedly performed masterfully, redeeming her earlier attempts. The sale attracted 1,095 buyers--more than half new to Sotheby's.
January 1999 marked the debut of sothebys.com, a web site offering information on art collections, auctions, and catalogs. Shortly thereafter, Sotheby's opened its refurbished Grosvenor Galleries in London specifically to handle new categories of collectibles such as pop memorabilia. While critics in the art world worried that the reputation of Sotheby's might suffer from over-commercialization, the company benefited in the form of a boost in sales, and industry analysts attributed much of Sotheby's turnaround to CEO Brooks. As it moved into the 20th century, Sotheby's was well-positioned to appeal to a broader customer base. Moreover, it could always count on the auctioneer's old allies, death and taxes.
Principal Subsidiaries: Sotheby's, Inc.; Sotheby's Financial Services, Inc.; SPTC, Inc.; SFS Holdings, Inc.; York Avenue Development, Inc.; Fine Art Insurance Ltd. (Bermuda); Oatshare Limited (United Kingdom); Sotheby's (United Kingdom).
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Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.