Adam M Levine says museums must look for new ways to raise revenue.
The practice has given dealers and collectors the option to underwrite a particular lot by agreeing to place a minimum bid in advance. This allows vendors and auction houses to feel confident of a minimum return and offsets the risk of the work failing to get away.
The guarantor meanwhile also benefits in the event they get outbid. Usually this takes the form of a financial incentive, most commonly receiving a cut of the buyer’s premium charged by the auction house.
Recently it emerged that a major US museum has gone down this route too. In seemingly the first time that an institutional buyer has chosen to become a third-party guarantor, the Toledo Museum of Art in Ohio has spoken openly about how it has benefitted financially from these arrangements.
Here the museum’s director and CEO Adam M Levine explains to ATG the thinking behind the strategy.
Q: How and when did you first have the idea for the Toledo Museum of Art to provide guarantees for artworks that it hopes to acquire at auction?
A: The idea that art museums might benefit from the use of auction guarantees was introduced in a 2013 article entitled ‘Art Museums and Auction Guarantees: Some Thoughts on a New Business Model’, which was published in the journal Museum Management and Curatorship. At the Toledo Museum of Art, we began the conversation in earnest in 2022 and underwrote our first guarantee in 2023.
Q: Did the idea have to be approved by the museum’s board? How long did this take?
A: The museum, in consultation with our art committee and in accordance with our bylaws, thoroughly evaluated the concept of auction guarantees to ensure it aligned with our mission and strategy. We ultimately received unanimous support.
Q: Is the scenario that the museum will arrange a guarantee with the auction house against the chosen artwork? If it is outbid, does the museum receive a percentage of the hammer price? And if the price does not go above the guaranteed price, then the museum can buy the artwork at that price?
A: Yes, that’s correct. The museum works with the auction house to set the guarantee for an object we are interested in acquiring. If we are outbid, we receive a share of the upside. If the final bid does not exceed the guaranteed price, then we purchase the artwork at that price.
Q: When a guarantee is signed, is it the case that no money changes hands from the museum until after the auction?
A: That’s correct. No money is exchanged until after the auction. The guarantee is a financial commitment rather than an upfront payment.
Q: Can you tell us with which auction houses you’ve had these arrangements?
A: We have worked with Sotheby’s and Christie’s.
Q: How many artworks has the museum purchased in this way so far?
A: No acquisitions have resulted from the two auction guarantees we've entered so far.
Q: How much has the museum generated from this initiative?
A: We have earned approximately $500,000 from two auction guarantee agreements.
Q: Have you had negative comments from the art world or museum world? Have you encountered any issues or setbacks in this project?
A: No. The strategy has been applauded by other museum and industry leaders. It really is a win-win for the museum. The guarantee allows us to establish the price we’re willing to pay for an artwork. If we are outbid and don’t get the artwork, it is disappointing. But, in those instances, we walk away with funds to supplement the museum’s income.
Q: Do you think others will follow and more museums will get involved?
A: As museum budgets become tighter and tighter, the industry must look for new ways to increase our revenue. Auction guarantees represent a new approach that presents a highly responsible way for museums to earn income from the value of their knowledge and expertise.
Q: Will the Toledo Museum continue to make these arrangements when pictures it wants to buy come to auction?
A: Acquiring artwork for our collection is squarely centred in our mission. And, if using the strategy of auction guarantees puts us in a more competitive position to expand our collection - pictures or otherwise - then we will definitely consider it.
Adam M Levine is the Edward Drummond and Florence Scott Libbey President, Director and CEO of Toledo Museum of Art.
