Sotheby’s Drastically Alters Fee Structure
By Elizabeth Gillett
Image courtesy of Sotheby’s.
On Thursday 1 February, Sotheby’s chief executive officer, Charles Stewart, announced a massive overhaul of Sotheby’s fee structures and commission rates. The art market, and specifically the auction sector (which is notoriously arcane) has just become more accessible. In an interview with ArtNet, Stewart stated that this step is a ‘kind of growing-up moment’ for the organisation. These changes—which do not affect the sale of cars, wine and liquor, or real estate—are also expected to lead to an increase in hammer prices, benefiting buyers and sellers, as well as the auction house.
Sotheby’s, whose gross sales were reported at 8 billion USD in 2022, has been a leader both in innovation and in sales—from having the first auction with works by living artists to being the first to sell a lot at over 100 million. Along with Christie’s, Sotheby’s dominates the market with a total global market share of 22.1%. In comparison, Phillips, grouped with Christie’s and Sotheby’s by UBS and Art Basel as the third ‘top-tier auction house’, only possesses 1.8% of the global market share. As Sotheby’s sets the example, opening up the art world to new collectors, it also provides an opportunity for other organisations within the art market to follow.
Designed to benefit both buyers and sellers (who have previously criticised Sotheby’s high buyer's fees and opaque seller terms), these new terms deemed ‘fixed and unambiguous’ by Sebastian Fahey (Sotheby’s managing director of global fine art) will simultaneously address both of these concerns.
This new set of terms will also allow new buyers and sellers to comfortably enter the market. The increase of online auctions and digitisation, pushed forward by the COVID-19 pandemic, has brought a ‘consistent influx’ of new buyers. In addition to decreasing barriers to entry, Fahey states that delays caused by ‘trying to calculate what the next bid would be and what the commission would be on that, and then potentially also turning that into another currency’, will likely decrease, allowing for smoother processes.
Buyer's premiums will be lowered to 20% for lots below 6 million and to 10% for lots with hammer prices above 6 million. In addition, the 1% overheard premium and the 2% success fee—for when a work is sold for a hammer price above its high estimate—will be eliminated.
Jean-Michel Basquiat, Self-Portrait as a Heel (Part Two), 1982, acrylic and oilstick on canvas, 243.8 x 152.6 cm. Image courtesy of Sotheby’s.
Jean-Michel Basquiat’s Self-Portrait as a Heel (Part Two), which sold for 42 million at Sotheby’s’ Contemporary Evening Auction in November 2023, was subject to an additional 6.37 million in fees under the previous structure, but sold under the new model, this cost would be lowered to 4.8 million, saving the buyer 1.57 million in fees.
Meanwhile, Christie’s buyer’s premium remains complex with high fees of 26% up to 1 million, plus a 21% fee up to 6 million, and a 15% fee for lots sold above 6 million.
Sellers will also benefit from the new terms, with commission rates maxing at 10% on the first 500,000 and being waived for lots with low estimates above 5 million. For lots in the 20 to 50 million range, sellers will receive 40% of the buyer's premium in addition to the hammer price. Furthermore, Sotheby’s will receive a 2% performance fee if the lot hammers above the high estimate. Finally, if the lot is guaranteed by the auction house or a third party, the auction house will charge a commitment fee of 4% of the guaranteed amount.
Previously, commission rates were often undisclosed, prompting extensive negation and further promoting the exclusivity of the art world, making it incredibly difficult for new sellers to enter the arena. With the exception of lots above 50 million, these new terms are no longer negotiable. According to Fahey, these new arrangements will provide both buyer and seller ‘an understanding of what fees they should expect to pay when they come to Sotheby’s.’
The change to Sotheby’s buyer’s fee structure will be put into place on 20 May, following the New York Modern and Contemporary sales. On the seller's end, consignments signed after 15 April, will be subject to Sotheby’s new terms.
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