Sotheby's slashes buyer's premiums, alters fee structure

Auction house calls the changes its 'most significant' in over 40 years

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Sotheby’s is revamping its fee structure, making what it called “the most significant changes to [its] fee structure in more than 40 years.”

The auction house will drastically alter both its buyer’s premiums and seller’s fees, according to its announcement Monday.

With a stated goal of removing “barriers to entry and to provide buyers with increased spending power,” Sotheby’s says the new rates will represent a 26 percent reduction in buyer’s premium for “the vast majority of lots.”

The new structure for buyer’s premium, which went into effect Monday, will include a 20 percent buyer’s premium on purchases up to $6 million and 10 percent on the portion of the hammer price above $6 million. Previously, Sotheby’s charged 26 percent up to $1 million, 20 percent between $1 million and $4.5 million and 13.9 percent above $4.5 million.

Compared to the previous structure, buyers will be saving anywhere from 12.3 percent to 30.4 percent.

For example, on a lot that sells for $20 million, the buyer will pay 20 percent ($1.2 million) on the first $6 million and 10 percent ($1.4 million) on the remaining $14 million for a total of $2.6 million.

“Since 1979, when Sotheby’s first introduced buyer’s premium in our salesrooms, the market has largely shifted the transaction burden onto buyers,” Sotheby's CEO Charles Stewart said in a statement. “The result has been high costs for buyers and tiered commission structures that require a calculator to even understand, as well as an entirely opaque fee structure for sellers which distracts from what is most important to them. We are confident our simplified and clarified terms will benefit both buyers and sellers going forward.”

Altan Insights, a collectible data and analysis platform, said the “savings” are not exactly straightforward. “To a buyer, the sales price is the sales price as they likely care very little how the final price is divided between hammer price and buyer’s premium, affecting their total willingness to pay very little.”

Altan also noted the changes will make waves when it comes to the consignor side, however. “If sale prices remain roughly the same, while buyer’s premium is lowered, hammer prices will be higher, resulting in higher proceeds to the consignor.”

These changes could force competitors such as Christie’s to reevaluate its own fee structures to remain competitive, both with respect to attracting bidders as well as consignors. Currently, Christie’s has a 26 percent buyer’s premium (up to $1 million), 21 percent (from $1 million to $6 million) and 15 percent (over $6 million) on all categories except wine in its New York salesroom.

Sotheby's also has completely dropped its 1 percent “overhead premium."

Additionally, the auction house made major changes to its seller’s fees. Now, consigners will pay 10 percent on the first $500,000 of the hammer price of each lot, topping out at a maximum of $50,000, for all items with a low estimate of $5 million or less. For lots with low estimates between $5 million and $20 million, the fee is waived and the seller will receive 40 percent of the buyer’s premium. The auction house also notes it offers a “bespoke” arrangement for items above $50 million.

All lots which exceed Sotheby's high estimate will be subject to a 2 percent “success fee” (as long as they are not guaranteed).

Phillip Hoffman, the CEO of the Fine Art Group and former Christie’s CFO, told The Art Newspaper that these changes are an attempt to improve profitability “by stopping giving away so much to sellers through complicated negotiations on things like ‘enhanced hammer’ and reduced vendor’s commission deals.” Hoffman also added that this was particularly intended to affect “the middle market between $50,000 and $5 million.”

Pi-eX, a research firm covering the international auction markets, reported that combined revenue from public auctions at Christie’s, Sotheby’s and Phillips for the first quarter of 2024 were down 14 percent year-over-year from $1.32 billion in 2023 to $1.13 billion in the first quarter of 2024.

Will Stern is a reporter and editor for cllct. You can follow him on X at @Will__Stern.