5 Exciting Technologies that are Shaping the Future of the Auction Business
The auction model landscape is continuously evolving and adapting to new market opportunities. In more recent times, those opportunities have often emerged under the lure of technological innovation. In my previous article, in which I explored the rise of major auction models, I also scratched the surface of how new technologies have created openings to experiment with and employ certain auction formats. For instance, live-streamed auctions arose in 2020 as a response to the pandemic restrictions, and the Penny auction experienced a rebirth in the early 2000s as Internet access proliferated around the world.
The 2020 global pandemic fuelled a remarkable embrace of digital solutions for the art market, and both auction houses and online auction platforms played a significant role in that collective adoption. More than three years on, many of the key technologies powering those digital solutions, such as Cloud platform services, low-latency high-resolution video streaming capabilities for mobile devices, holographic imaging systems, and NFT platforms built upon blockchain technology, have become more ubiquitous and entrenched in the broader economy. Over the past several months, AI technologies have come onto the scene in a big way, garnering massive investment and attention from almost every industry sector. These big technology trends have disrupted the high-touch nature of the art business, expanded the pathways to discovering art, aroused a younger generation of collectors, and impacted how artworks are bought and sold at auction.
Today, it is possible to browse art collections, bid during live auctions, and complete artwork transactions from any corner of the globe with the help of a small device that fits into our pocket. Art collectors and dealers can interact with each other digitally and engage with multiple sales channels, increasing the availability of art for sale and the speed at which these transactions occur — and modern technologies play a crucial role in making it all happen.
In this article, I will examine some of the most impactful technologies in more depth and consider how these may shape the auction model landscape moving forward.
Auction Houses Expand into New Formats with Live-Streaming
During the pandemic, digitalization significantly reshaped the auction industry, propelling the trend of omnichannel online and in-person live-streamed auctions. Luxury auction houses, including top-tier Sotheby’s, Christie’s, and Phillips, were the first to adopt the change, and it has paid off. In 2020, global online-only sales across the entire art market doubled compared to 2019, and the elevated online sales level has since persisted, albeit with a slight decrease from 2021 to 2022.
Source: The Art Market 2023. A report by Art Basel & UBS
When the pandemic hit, and social distancing measures forced in-person auctions to close, Christie’s and Sotheby’s started live-streaming their auctions to bring the energy and the spectacle of the live salesroom right into the users’ homes. In tandem with this new live-streamed auction format, online auction functionality allowed their clients to browse and bid more conveniently and acquire coveted works at a better price.
The world’s premier auction houses were particularly well-positioned to recognize and take advantage of the digital opportunities presented by the pandemic. They started investing in technology solutions in the late 2000s when Christie’s LIVE™ was launched, an app that allowed users to perform online bidding in real time. With live-streaming video, they now could bring a new level of excitement and anticipation to their buyers in remote locations.
For its part, Sotheby’s augmented their online auctions with multicamera global livestreams. Online bidders enjoyed more interactivity and personalization than ever, with dedicated screens displaying bids placed in real time. The company’s auctions generated $363.2 million and sold 93% of available art pieces in 2020 — a major increase from the $80 million Sotheby’s garnered through online bidding in the prior year.
Source: Sotheby’s YouTube Channel
Phillips auction house also created a new online and mobile live-bidding platform with a digital salesroom where clients could view livestreams and place bids from anywhere in the world via WebRTC technology, allowing viewers to see the real-time media communications directly between them and the auctioneers, enabling live interactions.
Even though the in-person format for art sales events like auctions and art fairs is more commonplace today in 2023, digital media, boosted by reliable and high-quality video streaming capabilities, has proven to be an outstanding sales tool for artworks and luxury goods. Investing in digital solutions has allowed auction houses to sell rare pieces to an international clientele with greater transparency for collectors, and their heightened access to information and ability to conduct independent research online helps them make more informed decisions about their art purchases today.
Technologies to Enhance Our Connection with Artworks
Along with the adoption of online and live-streamed auction models, top-tier auction houses have continued embracing cutting-edge technologies that allow them to redefine how collectors engage with and appreciate art, regardless of location or budget. Augmented Reality (AR) and Virtual Reality (VR) technologies presented a way to revolutionize the art auction experience in this regard.
Christie’s, for instance, has leveraged AR technology, including “superzoom” functionality, to enable prospective buyers to closely examine artworks selling at auction. This intimate experience, accessible through Christie’s mobile app, allowed remote users to explore even the most minute details of a piece, creating a deeper connection with the artwork.
NFTs and Blockchain Alter the Auction Dynamics
A few years ago, non-fungible tokens (NFTs) sparked a revolution in the art world, challenging traditional notions of ownership and provenance. In a now famously groundbreaking moment in March 2021, an NFT artwork by the artist known as Beeple sold at a Christie’s auction for $69.3 million, a testament to the growing legitimacy of NFTs among high-net-worth art collectors.
NFT marketplaces, like OpenSea and Rarible, have democratized the art world by allowing artists to sell their digital creations to collectors directly without depending on the services of an intermediary. Nonetheless, top-tier auction houses have been able to capitalize on NFTs as a new growth opportunity by embarking on separate NFT initiatives.
Christie’s launched its own fully on-chain NFT platform, Christie’s 3.0, which enabled it to conduct auctions on the blockchain, two of which were held in 2022. The company reported selling 87 NFT lots in total in 2022 for just less than $6 million. Sotheby’s also expanded into this domain with Sotheby’s Metaverse, their proprietary platform for NFT sales. The company reported that its NFT sales volumes had increased nearly 25 times throughout 2021.
In the summer of 2023, Sotheby’s made headlines by announcing its transition to the Dutch auction model for its Generative Art (Gen Art) Program. The reason behind the decision? NFT platforms widely use Dutch auctions, as the strong demand and fast-paced nature of NFT sales let marketplaces sell large quantities of lots quickly. According to Sotheby’s statement, “Dutch auctions add a new psychology to the traditional auction format, incentivizing bidders and setting a new model for price discovery.”
Another interesting phenomenon is the role NFTs and blockchain technologies play in the secondary art market, which is also the market for auctions. Specifically, these technologies have shown they can bring about new behaviors and market dynamics, attract a new class of collectors, eliminate barriers to paying royalties, and influence the auction model landscape for digital art by offering the ability to include royalty payments as part of an auction sale.
Some NFT art companies, like DADA.nyc, for example, encode royalties into NFT smart contracts, which empowers artists to earn royalties on secondary sales, creating new revenue streams for artists.
Personalization, Price Evaluation, and Fraud Detection with the Power of AI
Artificial Intelligence (AI) is gaining momentum in numerous industries, and the auction domain is no exception to this trend.
For instance, by analyzing historical sales data, AI algorithms can complement traditional methods of evaluating artworks by predicting their value and thus help auction houses set appropriate sales estimates. The partnership between the Thread Genius startup and Sotheby’s in 2018 is an example of this strategy implementation. Besides predicting an artwork’s price, Thread Genius could anticipate future material changes in the value of the work or even predict trends in art collecting by examining Sotheby’s auction database.
AI can help in a similar vein by optimizing reserve auction prices. Setting the right reserve price in auctions is essential, as it affects the bidding behavior, competition, and sale revenue. Since finding the optimal reserve price is not easy and involves analyzing large amounts of data, AI algorithms capable of determining optimal reserve prices can be valuable. By leveraging the power of such algorithms, sellers can optimize their reserve prices and maximize profits.
Based on visual recognition and collector habits and preferences, AI algorithms can also select the most suitable artworks for a potential buyer, just as AI is used to recommend what to listen to or watch on Spotify and Netflix, adding speed and power to personalization services for art collectors.
Another area where AI is making a significant impact is detecting forgeries. The art world has long been plagued by fakes and forgeries, with some estimates suggesting that as much as 50% of the fine art market could be comprised of counterfeit works. AI has the potential to significantly reduce this figure by analyzing artworks to determine their authenticity. Auction houses could well take advantage of AI technology to optimize and lower the cost of their due diligence services.
In November 2022, Art Recognition, the Swiss company that developed the AI technology used to help adjudicate whether valuable artworks are real or fake, was approached by the owners of the Portrait de femme (Gabrielle) painting to examine the artwork and validate it to be a real Renoir.
The company used photographic reproductions of 206 authentic paintings by the French impressionist to teach its algorithm about his style, which, to human observers, is characterized by broken brushstrokes and bold combinations of complementary colors. Based on this assessment, it concluded there was an 80.58% chance that Portrait de femme (Gabrielle) was painted by Renoir.
Encouraged by this result, the painting’s owner approached another Parisian group of experts, and after requesting a scientific analysis of the pigments in the painting, they also concluded that it was a genuine Renoir.
Extending Global Reach with Holographic Technology
According to the Telegraph newspaper, in 2022, “If visitors to an exhibition at Christie’s in London had reached out to lay a hand on Edgar Degas’ Petite Danseuse de Quatorze Ans, their fingers would have passed straight through it” — they could only see the slowly rotating sculpture as a hologram, a technology developed and patented by Proto Hologram, a global creator and provider of the Proto OS & holographic communications platform.
Hologram technology provides auction houses and art galleries with ample opportunities to bring rare artifacts to a broader audience, from any storage location to any auction room or exhibition hall, especially those too fragile or cumbersome to transport across countries and continents. This exciting technology offers the potential to conduct simultaneous auction sales around the globe, allows visitors to get up close to a hologram to examine it, and provides collectors with a more interactive, immersive, richer viewing experience than a two-dimensional, and flat-screen format.
Final Thoughts
As the technologies covered in this piece continue to evolve and advance and other new technologies emerge, it is fair to assume that more tectonic shifts and opportunities will transform the auction model landscape in new and surprising ways. I am looking forward to seeing what impact future technology trends will have on the auction space and the wider art market, especially the fluidity and vast potential of AI and holographic technologies.
Author: Doron Fagelson,
Vice President of Media and Entertainment Practice at DataArt
Originally published on https://www.dataart.com/blog/
