The business of Sotheby's---the design of an auction house

 The New Yorker has a story about Sotheby's, focusing on its new owner, but with some interesting descriptions of the auction business.

How a Billionaire Owner Brought Turmoil and Trouble to Sotheby’s
Patrick Drahi made a fortune through debt-fuelled telecommunications companies. Now he’s bringing his methods to the art market.  By Sam Knight 

"A major auction house has many parts. “Sotheby’s is really three businesses, which had been run as one business,” a former employee who joined under Tad Smith told me. Since the late eighties, Sotheby’s has offered loans and other financial products, secured against art (in fact, anything that the auction house will sell) as collateral. When Drahi acquired the company, Sotheby’s Financial Services was lending around eight hundred million dollars a year.

"Next, there is everything under a million dollars in value: the wine, the jewelry, the furniture, the sneakers, the watercolors, the Hermès handbags. These are the collectibles—a nice watch, a decent painting, a rare manuscript, the family silver—that have kept the auction houses ticking for the better part of three centuries. The average price of a Sotheby’s lot is still around fifty thousand dollars.

"And then there is the top end. And the top end is where everything goes to hell. According to the consulting firm Arts Economics, less than half a per cent of works sell for more than a million dollars, and yet these lots make up more than half the total revenue of fine-art auctions. An even smaller fragment—sales of more than ten million dollars—contributes around a quarter."