Despite a Strong Miami Fair, Art Basel’s Parent Company MCH Group Is Under Pressure to Cut Costs and Streamline Its Business

It’s no secret that Art Basel parent company MCH Group has struggled with budget and management issues over the past year, including a recent decision to give up one of its two major divisions—providing services for live events—in order to more fully focus on fairs. But its troubles are far from over. New documents obtained by Artnet News reveal how the company is continuing to work to refine its approach amid mounting pressure from investors.

In late September, shortly before releasing financial results for the first half of 2019, the company announced its decision to dissolve its Live Marketing Solutions division. The board concluded that MCH was better positioned for sustainable success with its trade fairs than with its experiential marketing sector.

A recent MCH memo, dated November 28, less than a week before the opening of the major Art Basel Miami Beach fair, suggests the company is making concerted efforts to address what were described as “two main issues.” These are “quarrels concerning the general strategic direction of the company” and “exhibitors withdrawing from the fairs.” (For observers who know the company mainly through its art fairs, it’s important to note that the latter point mainly concerns the group’s watch fair, Baselworld, and its motorcycle fair, Swiss-Moto.)

With respect to the upcoming Art Basel Hong Kong, the memo states that MCH is now also facing “political problems because of the protests in the city.”

Art Basel Hong Kong. Courtesy Art Basel.

Art Basel Hong Kong. Courtesy Art Basel.

The memo further includes nearly 100 pages worth of recent press clippings from the US and Europe, accompanied by a note that the decision to sell the Live Marketing Solutions portion “was met with harsh criticism from important shareholders, most importantly Erhard Lee, whose company owns [about] 10 percent of MCH, and Sergey Skaterschikov, who became a shareholder with 3.85 percent in October 2019…. Some news outlets speculate that Skaterschikov is only interested in Art Basel and might aim to split up MCH Group.”

Asked about Skaterschikov, a Russian investor whose past dealings have involved both an attempted takeover of Artnet and purchasing and selling off a controlling stake in ARTnews, a representative for MCH Group told Artnet News, “We do not know his intentions. The decision to buy or sell MCH shares is the decision of the shareholders.” The representative added that MCH “does not have any plans to sell Art Basel—not at all.”

It is not clear if this type of missive—with dozens of pages of accompanying press reports publicly documenting its internal struggles—is routine, or if it is part of a larger effort to shore up support for major strategy decisions going forward. The MCH rep did not comment further.

The Louvre Abu Dhabi. Photo peter via Wikimedia Commons

The company has experienced a wave of stops and starts with respect to new initiatives. Last year, it announced it would stop investing in regional art fairs and divest from many of the local art events in its existing portfolio. Then, this fall, it announced a new initiative called “Art Basel Inside” that aimed to bring influential entrepreneurs and cultural leaders to Abu Dhabi for a three-day conference in February 2020. But three months after the initial announcement, on November 27 (one day before the internal memo), Art Basel abruptly called off the planned arts conference in the Gulf. The company did not provide details about exactly why, after at least two years of work, the $15,000-a-ticket event was axed, beyond noting that the time frame had been too ambitious.

In an email responding to Artnet News’s questions about the memo, MCH’s representative explained the company’s current thinking about the future of its business. The rep suggested that like many industries, the live event business has been transformed by online commerce, requiring a thorough re-examination.

“Baselworld’s decline in 2017 and 2018 were—among other things—one of the reasons why MCH initiated a fundamental transformation process in 2018, which is necessary due to the changes in the global live marketing and event market,” the representative said. That’s why, in September, MCH “redefined its future strategic orientation” to focus less on live event marketing and more on “the art market (Art Basel) and the watch and jewelry industry (Baselworld).”

For now, MCH appears to be bringing Art Basel’s leadership even further into the fold. Late last month, MCH Group announced that Art Basel global director Marc Spiegler was appointed to its executive board. He will be responsible for MCH Group’s “entire product and service portfolio in the ecosystem of the global art market, which plays a key role in the company’s strategic alignment,” according to its statement. Spiegler joined the MCH Group in 2007 as co-director of Art Basel and has been has been global director of the fair since 2012.

Meanwhile, sales at Art Basel Miami Beach, which wrapped up over the weekend, were steady, exhibitor reports to Artnet News. However, fair organizers reported attendance of 81,000, a drop of 2,000 visitors from the previous edition.

The post Despite a Strong Miami Fair, Art Basel’s Parent Company MCH Group Is Under Pressure to Cut Costs and Streamline Its Business appeared first on artnet News.

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