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ONE
INVISIBLE
HAND Luxury
Timepieces Get By STACY
MEICHTRY 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. 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.
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.
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'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.
Financière Richemont SA luxury-goods group
in Geneva, have starred in separate single-brand
auctions organized by Mr. Patrizzi.
"Patek opened a
lot of doors for us, but we also opened a lot of
doors for Patek," he says.
Brands began to
vie for his attention, sending Mr. Patrizzi watch
prototypes to assess and, they hoped, occasionally
wear. They hired his assistants at Antiquorum as
their auction buyers, cementing ties. "He was a
kind of spiritual father for me," says Arnaud
Tellier, who worked under Mr. Patrizzi before
becoming Patek's main auction buyer and director of
the Patek museum.
Friends describe
Mr. Patrizzi as a rare intellectual in a market
with many coarser types. Guido Mondani, a book
publisher and watch collector who met Mr. Patrizzi
two decades ago, says he was charmed by the
auctioneer's encyclopedic knowledge of watch
history. Mr. Patrizzi began advising the publisher
on which watches to add to his own growing
collection, and wrote volumes on collectible
watches that Mr. Mondani published.
Mr. Patrizzi
discovered a rare defect in a Rolex Daytona owned
by Mr. Mondani: Its dial was sensitive to
ultraviolet rays and could change color. The result
was a sensation in the collector's world, with the
price of what became known as the Patrizzi Daytona
reaching nearly 10 times its retail price. Last
year, Antiquorum auctioned Mr. Mondani's Rolex
collection for about $9.4 million at current
exchange rates.
Mr. Patrizzi
himself amassed a collection of antique cuckoo
clocks and grandfather clocks, which grace his home
in Monaco. He recently built an Alpine chalet near
the chic French village of Megève and filled
it with clocks dating as far back as the 15th
century.
When he spoke to
Omega executives at the end of 2004, Mr. Patrizzi
felt that an Omega-only auction might be what the
brand needed to revive its image. There was one
problem. Antiquorum couldn't vouch for the
authenticity of watches that are mass-produced;
since they are worn more, their watch movements
have often been opened and tampered with in the
course of repair. So in an unusual arrangement,
Omega agreed to guarantee the authenticity of all
watches sold at the auction, and refurbish those
needing it beforehand. Omega supplied vintage
timepieces from its own collection for the
sale.
To build
interest, Mr. Patrizzi and Omega officials traveled
to 11 cities, hosting events such as a flashy party
at the Beverly Wilshire Hotel with celebrities such
as actors Charlie Sheen and Marcia Gay Harden.
Antiquorum and Omega joined in publishing the huge,
glossy auction catalog. When the sale, dubbed
"Omegamania," took place in April, it was shown on
jumbo screens at the BaselWorld watch fair and
streamed live on the Internet for online
bidding.
It brought in
$5.5 million. Besides the $351,000 platinum watch,
Omega outbid collectors on 46 other lots, including
many of the most expensive. Mr. Patrizzi estimates
Omega bid on 80 lots in all, out of 300.
A Singaporean
collector, told of Omega's role, called it
"heinous." Melvyn Teillol-Foo, who bid over the
Internet and bought a few pricey watches, added:
"If it turns out they bid against me and got me to
$8,000, I would be ticked off."
The auction is
boosting retail demand just as Omega is introducing
pricier models, says a Seattle retailer, Steven
Goldfarb. He says his top-selling Omegas used to be
$1,400 models, but Omegas costing three times that
are selling now. "Customers are conscious of the
fact that an Omega watch sold for $300,000," he
says. "They have no idea who bought it."
But just as Mr.
Patrizzi basks in one of his big successes, his
position in the industry is at risk. On Aug. 2, as
he vacationed during a traditional holiday time for
the industry, Antiquorum's board met and voted him
out as chairman and chief executive of the auction
house he cofounded. Mr. Patrizzi, who owns a
minority stake in the firm, says he learned of his
ouster from lieutenants who were locked out of the
company's Geneva headquarters the day of the
meeting, and later fired.
Named interim
chief was Yo Tsukahara, an executive at ArtistHouse
Holding, a Tokyo company that owns 50% of
Antiquorum. ArtistHouse then formed a different
Antiquorum board. Mr. Tsukahara hired auditors from
PricewaterhouseCoopers to scour Antiquorum
computers, financial records and inventory.
Pricewaterhouse wouldn't comment.
Mr. Patrizzi's
"thematic auctions" for a single brand of watches
weren't an issue, Mr. Tsukahara says in an
interview. They were a "win-win situation," he
says.
Mr. Patrizzi's
relations with ArtistHouse had been worsening for a
year. One issue was his resistance to adopting more
rigorous accounting in compliance with the Tokyo
Stock Exchange. Mr. Patrizzi opposed an ArtistHouse
push to replace Antiquorum's accountants, according
to Leo Verhoeven, a Patrizzi ally and an executive
at Habsburg Feldman, a Geneva company that owns 43%
of the auction house.
Mr. Verhoeven
adds that when Mr. Patrizzi stuck to the watch
industry's summer holiday schedule of mid-July to
mid-August, he caused a timing issue for
ArtistHouse, which landed on a Tokyo Stock Exchange
list for companies that don't report earnings
promptly enough. Mr. Tsukahara blames the delay on
Antiquorum, saying that auditors were unable to
account for several high-priced watches during an
inventory check, forcing ArtistHouse to write off
their value.
Mr. Patrizzi
denies watches were missing. Giving Mr. Patrizzi's
version, Mr. Verhoeven says two watches were
consigned to retailers and two were sold in private
sales that hadn't yet been booked because of an
accounting backlog. Messrs. Patrizzi and Verhoeven
say they have sought preliminary injunctions in a
Geneva civil court challenging the legitimacy of
Mr. Tsukahara's newly created board.
Mr. Patrizzi says
that days before his ouster, he sensed trouble was
brewing. The line of antique cuckoo clocks on the
wall of his Alpine chalet went "a bit out of
whack," he says. "One was 10 minutes too fast.
Another was 10 minutes too slow. I said, 'Oh God,
something is about to happen.'"
--Miho Inada in Tokyo
contributed to this article.
Write to Stacy
Meichtry at stacy.meichtry@wsj.com
How Top Watchmakers
Intervene in Auctions
Pumped Up in Bidding;
'It's a Bit Dangerous'
October 8,
2007; Page A1
