Phillips’ new CEO Stephen Brooks talks about his growth agenda – ARTnews.com
Stephen Brooks began his new role as Managing Director of Phillips Auction House this month. Previously, he served as COO of Christie’s auction house for over a decade. Prior to joining the auction world, Brooks had a career in the London financial markets as CFO of an investment bank and a large asset management firm. Brooks spoke to Marion Maneker on the phone about the success of her predecessor Edward Dolman, as well as his hopes for continuing the rapid growth of the company, the need to attract new buyers to new markets and the role of financial guarantees. (the minimum amount a shipper receives for the sale of a property) are now playing out in the industry.
Stephen, you succeed Edward Dolman who transformed Phillips over the past seven years as CEO. Dolman, who introduced you to Christie’s 11 years ago, becomes chairman of the Phillips holding company. He barely leaves the stage. In fact, I’ve been told that Phillips had his best first half of the year in 2021. How are you going to overcome all of this?
Before I started at Phillips, I remember seeing a survey of Ed’s employees as CEO, with a rather intimidating 97% approval rating! So you’re right, it’s a difficult act to follow. There were many who thought that the mission Ed was embarking on was going to be very difficult, and to the credit of Ed and his team, it is. The company has undergone such a significant transformation. It’s three times bigger than 5 years ago. They opened in Hong Kong, built a new headquarters in London – it’s an organization that has changed dramatically.
When I was chatting with Phillips and Ed’s owners, the first conversation I had with them, I said I won’t just come in as a caretaker. I want to have a growth program. I asked them, “Are you determined to pursue a growth agenda? So I think he did the really tough thing building a team with real depth. You can build an infrastructure; you can work on marketing plans; you can do the big thing on a large scale. But you have to start with the best.
The joy for me is that Phillips has 6 collection categories, not 70 collection categories. The agenda is very focused. You are therefore able to assess where the growth potential lies. It is very clear that the prospect of double digit growth is possible from here. My job is to figure out how to do this.
It looks like Phillips’ growing market share has changed the dynamics of your business. Rather than fighting for a limited market share, the focus seems to be on expanding into new markets. The considerable rise of Asia is one of them. The other part is made up of new buyers in all kinds of different categories.
These are new markets. But it’s also about new types of customers. Phillips is aimed at a different audience, an audience of new collectors who can expand and develop in ways more traditional houses cannot.
I think there are new products in terms of watches, sneakers, more design material, different artists, different types of artists. It has always been an auction house that focused on finding and developing new markets for artists. This is the place people like to go to experiment. It’s a fabulous brand identity. It’s very organic.
You rightly started by referring to the first six months of the year. I have to say it was a surprise after a pandemic. It’s one thing to get back to pre-pandemic levels, but it’s pretty impressive to get 15-20% more than your highest sales ever. The warmth towards Phillips and the appetite for what is on offer is incredible. This kind of consumer desire to participate in auctions is very present. Phillips grew up incredibly fast. It’s probably five hundred employees now, when it was a hundred and fifty people and five years ago.
Getting back to new customers and new players, it seems like one of the really smart things Ed did was create this Poly Auction alliance. It boosted your sales in Hong Kong. Is there more to do there? Is there a way to incorporate this more into sales outside of Hong Kong?
It’s a bit of a wait and see for me, to be honest. There is a nice sale coming up for the fall season which looks like the cooperation with Poly Auction is working very well again. But this is the start. It will be good to see how this particular sale works. It’s a mind-blowing start. Once we close the next sale, we’ll see if this partnership resonates more broadly for the organization. Will it extend to shipments as well as buyers?
And what about hybrid sales?
I think it will evolve from here. Hybrid sales are with us. But I think this year we’re in the middle. Why would you want to go back and fall back on some of these great developments? It is a much more participatory and accessible form of engagement with the art market.
When you reintroduce live bidders, even if they are auction house reps, will it stay in the TV studio? Will people come back? Will there be any benefit to being seen bidding?
I suspect we’ll try to bring all of these components together in one experience, and we’ll get better as we go through it. It is demanding for an auctioneer to juggle live and internet auctions. But our auctioneer is very good at it. I think it will become more and more engaging.
I think what’s interesting, if part of this is that cultural goods have become a store of value, they need to be traded more in a real-time market. This would allow owners to market more effectively.
Why would you have a market that seems to be closed most of the year? You want to extend it more consistently across the entire calendar to make it more accessible because that’s the whole business model. I mean, at the end of the day, we’re just middlemen connecting buyers and sellers. The more often we do it, the more financially viable it is. But this requires the development of infrastructure. It requires the ability to be turned on throughout the year. And there are logistical requirements that must be taken into account.
The other big change was therefore the way guarantees were financed on large collections. Your move to Christie’s coincided with the move from direct warranties to third party warranties. It has become the norm rather than the exception.
When I started at Christie’s it was because of the 2008 financial crisis and lines of credit were being pulled everywhere. It was the Lehman crash with the whole credit crunch. The auction houses wanted to protect their balance sheet risk. They wanted to make sure that this risk was managed in a much more sophisticated way and that process started around that time.
Since then, financial engineering has become a key part of the art market. The role played by auction houses is to use the skill set necessary to navigate their way through a complex compilation of deals and risk management processes. It has become a core competence of the staff of these organizations.
I think Phillips is as well placed as anyone at building chords. As you know, my own experience is in this space, and I have been fortunate enough to be involved in some of the art market’s most complex and important transactions during my time at Christie’s, including the incredible Rockefeller collection which sold out in 2018.
Traditionally, Philips has not been able to compete at this level. When you are 150 employees and a private company, it is very difficult to set up the financing to make a Rockefeller collection. It’s a lot to swallow. By financial engineering, I think you mean creating a risk stack so that the transaction can take place and the risk can be attributed to different parties over time, rather than having to put all the moving parts together at once. .
It’s something that is done in real estate, business takeovers, and pretty much any market because you ultimately provide a service that the art market needs. When the value of these objects is so high that if you sell the family silverware, metaphorically, so many actors in the art market feel the need to obtain a guarantee or to ensure the result before embarking on it . A lot of it is the mindset of financial services, but it’s really about providing a service to those who need it.
In 2009, you arrived at Christie’s. You come from an institutional background in the city. These players are still there. But now there is a wide variety of sources of capital, some institutional, some private, some semi-private.
It would be nice if there was some sort of a standard way of doing this, but the reality is that there is no standard artwork and there is no standard way to exploit the capital. This is everything you described configured to suit the circumstances you are facing.
It is quite difficult to predict how this will develop over time. But the financialization of art markets is a path that I see becoming more and more sophisticated. Perhaps we will see institutional solutions to this. It has been said that insurance companies play this role. The question is, can you manage the risk? The objective is to obtain a standardized return on the whole. It’s a great idea. But, in practice, it becomes very difficult to do.
Dealing with complexity is a core skill set of the organization’s ability to provide the right kind of finance package for our clients and to manage that service.
Is it safe to say that we are getting back to where we started, that one of the key factors for Phillips to have their next double digit growth stage is to provide this kind of sophistication and professional service over the guarantees of third ?
I wouldn’t distill it that much. I think there is definitely a next phase of Phillips, which is multifaceted. I would like to have much larger evening sales. To be fair, evening sales are about the same size as they were four or five years ago. They have changed the quality and mix of products, but they must continue to develop. And that requires several things, in my opinion, to amplify the marketing capacity of the brand. But yes, its ability to build the right kind of financial constructs for clients is also at the heart of this growth.