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Non-Tech : Sotheby's (BID) Auction House
BID 56.990.0%Oct 14 5:00 PM EST
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To: Nancy W who wrote (118)1/20/1999 11:47:00 AM
From: Steve Andrew  Read Replies (2) of 236
 
To All...

This internet announcement and strategy is quite interesting but not as pure an internet play as you all may assume. The company is essentially sloughing off many of its lower margin, lower $$ # auctionable items to i-net auctions and that will be good and profitable for them, however, they have a very high commission structure and are HIGHLY UNLIKELY to slash it much, making them vulnerable to others who charge nearly minimal fees (EBAY model). Their strategy of signing up art dealers and galleries is best described as a "strong-arm tactic" of offering these dealers a 7 day period to respond with a 3 year exclusivity clause that only saves them the "vendor" fee of 6%. Most good dealers are loathe to trust Sothebys as they have seen them encroach on their biz in mostly untolerable ways in the past. I really doubt this strategy pays off as large as they would portray to the public. They also do not plan ANY migration of their higher end auctions to the internet and have very high labor and real-estate costs that will continue to weigh on margins and the bottom-line. The existing staff is also quite annoyed with the company's edict of sending them out to attract this low end biz. There will be some backlash within the fine art world....I guarantee it and that will not help Sothebys expand as significantly as they would otherwise like the investing public to believe. I am not suggesting anyone go short or boot their longs(although I have)if they feel so attached...but be careful...it isn't always as great as it sounds.

Steve
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