Under the deal, Amazon, which launched its auction site in March to compete with top Web auctioneer eBay, has agreed to purchase 1 million shares of Sotheby's stock at its closing price yesterday of 35.44. Amazon also has agreed to pay $10 million for a three-year warrant that allows it to buy an additional 1 million shares for $100 each.
The site is expected to launch later this year with an auction of items from the Halper Collection of baseball memorabilia, a portion of which will be sold in a live auction at Sotheby's New York galleries in September.
In April, Amazon.com said it would buy Livebid to expand its auction business with live events. LiveBid will allow Amazon's online customers to cast their bids simultaneously with traditional bidders during a Sotheby's auction.
Analysts said today's deal gives Amazon access to Sotheby's brand prestige and authentication services. In turn, Sotheby's sellers will now have access to Amazon's 10 million customers--all potential bidders.
Forrester Research analyst Evie Black Dykema said the sale of higher ticket items is the next wave in the auction market and more partnerships between bricks-and-mortar auction houses and online auctions is expected.
The sale of items priced at more than $500 is expected to grow from 5 percent of the person-to-person online auction market in 1998 to 63 percent by 2003, according to Forrester. The market for these costlier items is expected to comprise $4 billion of the total $6.4 billion person-to-person auction market by 2003.
Mike May, analyst at Jupiter Communications, said today's deal opens the door for Amazon to enter into higher-priced categories including automotive, travel, and real estate. The move also could help Amazon move into the sale of luxury goods such as jewelry and high-end cosmetics, he said.
"For any of these long-term benefits to really take root Amazon will have to continue to rely on brand elasticity," he said. "It's going to take an awful lot of stretching for this brand to reach from 50 percent-off books to a $300,000 Picasso painting."
May said he believes Sotheby's sellers may benefit most from this partnership, by getting access to 10 million potential bidders who will go anywhere the art is sold to buy. Sotheby's, which began as a book auction house in London in 1744, has 107 offices located in 41 countries.
Amazon.com's investment in Sotheby's comes after cybershop competitor eBay acquired Butterfield & Butterfield, one of the world's largest auction houses. Last month, eBay also expanded its scope by investing in auto collectibles firm Kruse International to offer used, collectible cars and rare parts for out-of-stock cars.
The Amazon-Sotheby's joint site is targeted to antiques collectors and dealers worldwide. Some of the items featured will include coins, stamps, sports, Hollywood memorabilia, fashion, animation art, and other collectibles, along with general art and antiques, books, and jewelry.
In recent days, Amazon.com has been on an Internet buying spree, making significant investments in other Net retailers, including Drugstore.com, an online retail and information source for health, beauty, personal care, and pharmacy, Pets.com, one of the largest pet-supply companies on the Internet, and online grocery HomeGrocer.com, with home delivery services in the Seattle and Portland, Oregon areas.
Separately, Sotheby's on January 19 said it would spend $25 million to build and promote its own e-commerce site, as reported. Sotheby's said it will continue building that e-commerce site, which will begin offering traditional fine and decorative art, jewelry, and books online this fall.