Good idea; needs to be cheaper

Roland Sledge, a 65-year-old lawyer for an oil and gas company in Houston, is no art world habitué. He began collecting prints and works on paper a little more than a decade ago, focusing on Abstract Expressionism, and has done some business with small New York galleries, “though I mostly just stumbled into things that I liked,” he said in a broad Texas accent.“I don’t have a lot of connections,” he added.
But Mr. Sledge, and a growing number of collectors like him, have lately been demonstrating that connections may not be as important as they once were and that online sales, a segment of the art business given up for dead not long ago, are becoming an increasingly important part of its future.
Over the last year and half, Mr. Sledge has collected almost exclusively online, buying nine pieces at an average of about $4,000 each at online-only auctions through Artnet, the art market information company. Artnet tried and failed to become one of the pioneers of online sales in 1999, suspending those auctions two years later after it lost millions of dollars and decided that the market wasn’t ready. But it got back into the business in 2008, and after less than three years, the auctions now account for fourteen percent of the company’s income.
The glamorous, newsmaking sales of Sotheby’s and Christie’s these are not. The average price of an artwork won through an Artnet auction is about $6,800 now, up from $5,600 last year, which wouldn’t come close to paying the commission on most high-end auction sales. But Artnet is one of many companies that believe the time might finally be right for a sizable portion of the art market to begin migrating online, the way sales for specialized items like rare books and antiques already have.
The VIP Art Fair, a weeklong online event that mimicked the mechanics of a traditional art fair with virtual booths, attracted a large international group of blue-chip galleries last January and, despite some well-publicized technical glitches, was seen as a success by dealers and collectors. Art.sy, a venture that will use Pandora-like technology to help art buyers find pieces and the galleries selling them, has already lined up heavyweight supporters like the dealer Larry Gagosian and Jack Dorsey, a founder of Twitter. And most major auction houses also now allow online bidding for sales happening in the physical world.
But while online bidding and fairs and services like Art.sy essentially serve as a digital bridge to bricks-and-mortar galleries and auction houses, Artnet officials say that much of the art market below a certain price level will soon operate almost entirely in the virtual realm. Auctions on Artnet take place around the clock, eBay-style (though the lots close only on weekdays, so far), and the company vets sellers and relies on their photographs and descriptions of the provenance and quality of artworks.
A buyer, who pays a fifteen percent commission to Artnet, usually sees only a single picture of the work and often doesn’t talk to the seller, who could be an art dealer, a private collector or an artist’s family. (Sellers pay a ten percent commission.) After the auction, the buyer pays the seller, and the work is shipped.
“It’s one thing to point out to someone where they can find something and give them a gallery’s phone number,” said Hans Neuendorf, the company’s chief executive, referring to many other online art-selling services. “It’s another thing to make a sale online. That’s a sea change, in my opinion,” said Mr. Neuendorf, who presents himself as a kind of revolutionary, “and it’s happening.”
Art sellers have been waiting for it to happen for many years. Sotheby’s tried online-only sales for lower-priced works in the late 1990s, but, like Artnet, it abandoned the initiative a few years later, convinced that buyers simply were not willing to pay four- or five-figure sums for art they had not seen in person.
Mr. Neuendorf said several factors led Artnet, a public company based in Berlin, with offices in New York, to venture back into the field. One was the comfort people have begun to feel with online commerce in general, he said. But the more important factor was the considerable increase in the last decade in the number of people who spend money on contemporary art as a pastime or as an investment. They tend to see online art sales as more accessible and transparent than sales in the gallery world, with its reputation, fair or not, for being a kind of exclusionary club. And as many online art vendors like to point out, there are far more $5,000 and $10,000 prints and photographs in the world than there are $50,000,000 Warhols changing hands at marquee auctions.
Michael Moriarty, the chairman of Skate’s Art Market Research, a consulting firm that closely follows Artnet’s business, said his analysts had been skeptical about Artnet’s ability to make online auctions a significant part of its business. Artnet has long been known as the Bloomberg terminal of the auction business; it made its name even before the advent of the Web by building a database of historical auction prices that now numbers in the millions, on which collectors, dealers and auction houses like Sotheby’s and Christie’s rely.
But the company’s online auction business has now moved more than 6,500 pieces, generating $2.5 million in commissions on $12 million in sales for http://en.wikipedia.org/wiki/Bloomberg_Terminal in 2010, including a few high-dollar outliers, like a Richard Prince painting that sold for $295,000 (before commissions). The business is not yet profitable for Artnet, but the company says that is only because it has been spending considerable money to develop the auctions. It projects that they will begin to turn a profit toward the end of next year.
“Now it seems that the technology has reached a point, and the market has evolved to a point, where this kind of business is really gaining traction,” said Mr. Moriarty, a former lawyer for the Securities and Exchange Commission. Of Artnet, he added, “It’s not going to be long before they’re going to have to worry about a lot of competition.”
If Mr. Sledge is any guide, art buyers still need a little live reassurance from human beings that what they are seeing and reading about on the screen is what it appears to be. The former East Village art dealer Gracie Mansion, who now works as a specialist for Artnet’s auctions, speaks often with Mr. Sledge when he has questions. “She’ll go and take a close look at the information she has and tell me there’s some foxing on it or some other problem,” said Mr. Sledge, whose name was provided to a reporter by Artnet, along with those of several other frequent buyers. “I didn’t even know what foxing was, to tell you the truth.” (Foxing refers to spots or browning on paper works.) He added, however, that his main reason for starting to buy through online auctions (one recent acquisition was a small Elaine de Kooning work on paper) was the prices: “My sense is that a lot of the sellers aren’t taking a haircut by having to go through galleries, and so those savings are coming to me.”
Mr. Neuendorf said that while Artnet operated in a different world from Sotheby’s and Christie’s, he believed that it had only begun to mine a huge swath of the secondary art market that will move onto the Web. “I think they’re very happy doing what they’re doing; we’re not even on their radar,” he said of the major auction houses. “And that’s good,” he added with a wink, “because it gives us time to catch up.”

Rico says that, without bricks and mortar (and employees) to pay for, they need to lower their commissions...