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.”

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 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.