Interesting reading from today's Journal

[alt.watch.obsessive]

INVISIBLE HAND

How Top Watchmakers

Intervene in Auctions

Luxury Timepieces Get

Pumped Up in Bidding;

'It's a Bit Dangerous'

By STACY MEICHTRY

October 8, 2007; Page A1

GENEVA -- In the rarefied world of watch collecting, where Wall Street investment bankers and Asian millionaires buy and sell at auctions, a timepiece can command a higher price than a luxury car. At an April event here, a 1950s Omega platinum watch sold for $351,000, a price that conferred a new peak of prestige on a brand known for mass-produced timepieces.

Watch magazines and retailers hailed the sale, at an auction in the lush Mandarin Oriental Hotel on the River Rhone. Omega trumpeted it, announcing that a "Swiss bidder" had offered "the highest price ever paid for an Omega watch at auction."

What Omega did not say: The buyer was Omega itself.

Auctioneer Osvaldo Patrizzi, president and co-founder of Antiquorum, left, and Stephen Urquhart, president of Omega, at the Omegamania auction in Geneva on April 15.

Demand and prices for expensive watches have been surging, fed by global economic growth. But there's another factor behind the prices: an alliance between watchmakers and a Geneva auction house called Antiquorum Auctioneers.

Antiquorum sometimes stages auctions for a single brand, joining with the watchmakers to organize them, in events at which the makers often bid anonymously. This is a technique of which Patek Philippe and other famous brands, as well, have availed themselves.

"It's an entirely different approach to promoting a brand," says the cofounder of Antiquorum, Osvaldo Patrizzi, "Auctions are much stronger than advertising." Mr. Patrizzi worked with Omega executives for two years on the auction, publishing a 600-page glossy catalog and throwing a fancy party in Los Angeles to promote the event. "We are collaborators," he says.

But now there's ferment in the world of watch auctions. First, they're starting to raise ethical questions, even within the industry. "A lot of the public doesn't know that the biggest records have been made by the companies themselves," says Georges-Henri Meylan, chief executive of Audemars Piguet SA, a high-end Swiss watchmaker. "It's a bit dangerous."

More unsettling, Antiquorum's Mr. Patrizzi, who essentially founded the business of watch auctions, is under fire by the house he cofounded. Its board ousted Mr. Patrizzi as chairman and chief executive two months ago -- and hired auditors to scour the books.

The business of auctions for collectibles is not a model of transparency. The identities of most bidders are known only to the auction houses. Sellers commonly have a "reserve," or minimum, price, and when the bidding is below that, the auctioneer often will bid anonymously on the seller's behalf. However, the most established houses, such as Christie's International PLC, announce when the seller of an item keeps bidding on it after the reserve price has been reached.

Omega

Omega's president, Stephen Urquhart, says the company is not hiding the fact that Omega anonymously bid and bought at an auction. He says Omega bought the watches so it could put them in its museum in Bienne, Switzerland. "We didn't bid for the watches just to bid. We bid because we really wanted them," he says. Omega's parent, Swatch Group Ltd., declined to comment.

Through the auctions, Swiss watchmakers have found a solution to a challenge shared by makers of luxury products from jewelry to fashion: getting their wares perceived as things of extraordinary value, worth an out-of-the-ordinary price. When an Omega watch can be sold decades later for more than its original price, shoppers for new ones will be readier to pay up. "If you can get a really good auction price, it gives the illusion that this might be a good buy," says Al Armstrong, a watch and jewelry retailer in Hartford, Conn.

Niche watchmakers have used the auction market for years to raise their profiles and prices, mainly among collectors. As mainstream brands like Omega embrace auctions, increasing numbers of consumers are affected by the higher prices.

Omega and Antiquorum got together at the end of 2004. The watchmaker was struggling to restore its cachet. Omega once equaled Rolex as a brand with appeal to both collectors and consumers, but in the 1980s, Omega sought to compete with cheap Asian-made electronic quartz watches by making quartz timepieces itself. Omega closed most of its production of the fine mechanical watches for which Switzerland was famed, tarnishing its image.

A decade later, Omega tried to revive its luster by reintroducing high-end mechanical models. It raised prices and signed on model Cindy Crawford and Formula 1 driver Michael Schumacher for ads. When this gambit failed to lure the biggest spenders, Omega turned to a man who could help.

Mr. Patrizzi, 62 years old, had gone to work at a watch-repair shop in Milan at 13 after the death of his father, dropping out of school. He later moved to the watchmaking center of Geneva, at first peddling vintage timepieces from stands near watch museums.

He founded Antiquorum, originally called Galerie d'Horlogerie Ancienne, in the early 1970s with a partner. At the time, auctions of used watches were rare, in part because it was hard to authenticate them. But Mr. Patrizzi knew how to examine the watches' intricate movements and identify whether they were genuine.

At first, prominent watchmakers were wary. Mr. Patrizzi approached Philippe Stern, whose family owns one of the most illustrious brands, Patek Philippe, and proposed a "thematic auction" featuring only Pateks. The pitch: Patek would participate as a seller, helping drum up interest, and also as a buyer. A strong result would allow Patek to market its wares not just as fine watches but as auction-grade works of art.

The first Patek auction in 1989 featured 301 old and new watches, with Mr. Patrizzi's assessments, and fetched $15 million. Mr. Stern became a top Patrizzi client, buying hundreds of Patek watches at Antiquorum auctions, sometimes at record prices. The brand's retail prices soared. Over the next decade, the company began charging about $10,000 for relatively simple models and more than $500,000 for limited-edition pieces with elaborate functions known in the watch world as "complications."

Patek began promoting its watches as long-term investments. "You never actually own a Patek Philippe," ads read. "You merely look after it for the next generation." Mr. Stern says he bid on used Patek watches as part of a plan to open a company museum in 2001. Building that collection, he says, was key to preserving and promoting the watchmaker's heritage, the brand's most valuable asset with consumers. "Certainly, through our action, we have been raising prices," he says.

Auctions gradually became recognized as marketing tools. Brands ranging from mass-producers like Rolex and Omega to limited-production names like Audemars Piguet and Gerald Genta flocked to the auction market with Antiquorum and other houses. Cartier and Vacheron Constantin, both owned by the Cie. Financi

[freddy333]

Interesting.

The Wall Street Journal ran a very nice (and rather extensive) feature on high-end watches on Saturday. Several articles on different aspects of collecting, values & auctions. If you can find a newsagent that still has a copy, I would recommend picking it up. Well worth the trouble.

[Watchwatcher]

I read that article too... and those guys dare call the rep trade a scam!!!

[Victoria]

I read that article too... and those guys dare call the rep trade a scam!!!

There's a saying in Spanish.

"Just because my house isn't clean, doesn't mean you're not dirty."

I don't think there are many clean hands in business, anywhere.

Interesting.The Wall Street Journal ran a very nice (and rather extensive) feature on high-end watches on Saturday. Several articles on different aspects of collecting, values & auctions. If you can find a newsagent that still has a copy, I would recommend picking it up. Well worth the trouble.

Or you can go to the public library, and read their copy there. I certainly will do that, and thanks for the heads up -- both of you!

[freddy333]

I don't think there are many clean hands in business, anywhere.

Behind every big business lies a big crime. --J.P. Morgan

[Victoria]

Behind every big business lies a big crime. --J.P. Morgan

"In modern business it is not the crook who is to be feared most, it is the honest man who doesn't know what he is doing."

-- William Wordsworth

[UB7]

This is a very informative/interesting article...What intrigues me is that I was an accountant for PriceWaterhouseCoopers for 4 years when I was living in NYC and knew nothing about this so called audit, how ever at the time I was working with PWC I was not into watches as much as I am these days...I guess the audit was done very discretely on the down low...Very interesting read, thanks for posting it!

I guess this answers the question as to why the daytona is the most overpriced watch out there!

Edited October 8, 2007 by UB7

[freddy333]

I guess this answers the question as to why the daytona is the most overpriced watch out there!

The Daytona is kind of an anachronism in the collectible watch market. That is, it went from being an ugly duckling that relatively few people wanted (believe it or not, during the 1960's and 1970's, ADs often had to offer sizable discounts to move them out of their display cases) to THE most sought after watch in the world. The metamorphosis resulted from the perfect storm of sudden resurgence of interest in luxury mechanical watches during the tech/stock market boom of the 1980's; the urban myth of (and resulting connection to) Paul Newman appearing in the motion picture Winning with a Daytona on his wrist (though there is no photographic evidence to support this)

(Screenshot from 'Winning')

a number of Italian magazines featuring photos of Paul Newman wearing a 'Newman' Daytona that was given to him by his wife, Joanne Woodward;

(One of the photos that appeared in a number of Italian magazines during the early 1980's which sparked the Daytona craze in Italy)

and Rolex's brilliant marketing strategy of bottlenecking the production & distribution of the Daytona when demand began rising steadily for the watch during the mid-90's.

[TeeJay]

Might just be my imagination or a trick of the light, but in the screenshot, the bracelet on Paul Newman's watch doesn't look like anything Rolex built, but rather one of these...

Intersting that Omega would bid to keep hold of their own watch... Surely they could've just taken it from the production line to their museam themselves, and for much cheaper than bidding on it

[freddy333]

Might just be my imagination or a trick of the light, but in the screenshot, the bracelet on Paul Newman's watch doesn't look like anything Rolex built...

Yes, that was my point. Although it has become Daytona lore that Paul Newman wore a Daytona in the film, the photographic evidence would seem to contradict this, which is why I described the story as an urban myth.

[TeeJay]

Yes, that was my point. Although it has become Daytona lore that Paul Newman wore a Daytona in the film, the photographic evidence would seem to contradict this, which is why I said described the story as an urban myth.

Are there any other suggestions or theories as to what the watch could actually be other than a Daytona?

[offshore]

I'm going to be a bit of a naysayer here.

Personally I see this only as exactly what the auction business is really like, and about.

Look @ fleabay... a "legitimate" auction business, full of shills, dummy bids and misrepresentation.

Go to a property auction, the 1st bids are almost always auctioneers bids, or shills. And how many times at the end of an auction have you seen the "last bidder" disappear, and the 2nd last bid be offered back to that bidder.

Auctioneers the world over are earning their living from sales, hardly unusual that they will do whatever is needed to effect a sale. Vendors bids, dummy bids, absentee bidders, favoured regular bidders, the list goes on.

It is a crapshoot at an auction, and unless a newb bidder is aware of all the "tricks of the trade" he is almost certainly going to get done.

This said with more than a passing knowledge of the business, having worked in it for a time.... and having had a very close mate who ran a large onsite auction house for many years.

I spent much time in his auction rooms, and saw all sides of the business.... and it can be plain scary when you see the backside of this form of purchasing.

But bargains do exist, and whilst they do, the ever hopeful will continue to flock to the doors to try their luck.

So this is no real surprise at all.

Offshore

[Guest Carl]

Well, I liked the pictures!

Carl

[archibald]

Great read...thankls for posting!

High end auctions have been f'd up for a long time--isn't like 1/2 of Christies' staff in jail at the moment?--but I only see something really, really corrupt by auction-house standards if the watch companies are producing ALL the bids or if the top individual collector's bid was a fraction of theirs...like $40,000 for the 300k Omega. The article is unclear on that. BTW, this practice is common in all high end collectibles--the Wine Spectator had a big piece on Winemaker's doing the same thing--increasing the cachet of their brands by pumping up acution values of their older vintages at auctions...then sending out Press releases so the press touts how valuable their wines will eventually become.

[freddy333]

And is there a reason why these high-profit shenanigans comes as a surprise to anyone???

Archi, we live in a place where this stuff was invented......and practiced on an hourly basis.

[Watchmeister]

The article is very revealing and I was amazed at the number of watches that the Company's were buying in. That particular watch auction house appears particularly corrupt But here is the other side of this. In order for Omega to pay $351,000 for one of their own watches they had to be bidding against someone else (unless they had their own shills and were bidding against themselves). The other side of this is that you can find knowledgeable and honest folks at the auction houses. And you can occasionally find excellent deals on used watches for the less sought after pieces.