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What's in it for the Cruiselines?
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Well, looks like the cruiselines are putting on auctions
by parkwest and others out of the goodness of their heart. JUST KIDDING.
This is all about the money. The cruise companies aren't
going to give up their floor space for free, if they weren't getting a cut from
the auctioneering groups through their consession agreements, they would
probably put in another casino, spa area or other revenue stream.
Let's take a look at what kind of revenue stream we are
looking at. The image below comes from Exhibit A in a lawsuit that Parkwest is
currently a participant of in Florida (case1:08-cv-21331-AJ)
What we are looking at is a portion of a Cruise ending
report from parkwest. On this cruise it looks like they held 5 'auctions' (i
prefer to call them retail selling events without advertized prices) out of the
13 days, or about 40% of the cruise' length .. let say just about everyother
day for the sake of math later.
let's tak a look at the breakdown:
139084.12 for artwork with 15% buyers premium (nearly 21k
for buyer premium)
4410.00 for framing
7937.00 for shipping
1424.95 for intransit handling (getting to and from the
boat)
1340.73 for sales tax for michigan and florida
residents
less 1115.00 for those lucky winners of the 500.00 bid
credit or those that upgraded/traded in old works.
for a grand total of 154891.80 or 30978.36 per auction
day.
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Now let's look at how many ships parkwest is on, from
their own statements they are on more than 80 cruise ships from 8
cruiselines. Now lets say those ships are cruising on average 340 days per year
( assuming 25 days not sailing but in port replenishing or in for repairs),
half of that would be 170 days that auctions were held. Multiply that by 80
shjps we get 13600 auctions.
Now let us take that and multiply it by 30978.36 we get a
whopping 421,305,696 dollars.
Yes folks, 421 Million Dollars. and that is parkwest
only. But wait, from parkwest reports that their sales are only 300-400 million
dollars and only half of that comes from ships. so it should only be 150 - 200
million dollars. Yep that is what we've heard from parkwest, but we already
know about their MATH ? Parkwest is a closely held private company so they
don't have to report their actual numbers to anyone .. except maybe, just maybe
the IRS. Parkwest want's everyone to believe that they make money at the 3 to 5
land auctions they hold weekly at hotels and at their VIP land auctions they
hold like everyother month. I am really skeptical of that. parkwest is trying
to make us believe that maybe 200 land auctions bring in half of their money
compared to 13600? Nope, i am not buying that for an instant, land auctions are
in my opinion, a way to extract more money from cruise goers that didn't have
their wallets lightened enough on the ship. Plus they don't have to pay the
cruise lines for sales made in the hotels now would they?
OK so we have 421 Million dollars. How much is the
cruiselines take. Folks, It is huge. Let's take a look at a consessionare on
another cruise line that parkwest is not on .. but use to be. Norwegian cruise
lines. Here is the SEC 8-K
filing for
the consession agreement between NCL and Fine Art Wholesalers Inc. It is
offering to pay NCL 35% of total revenue .. yes 35%. I am going to take a guess
that FAWI beat out parkwest to take over the NCL auctioning by maybe 5 % and
that is why they are not on NCL. So if parkwest offers 30%, and they have sales
of 421 Million We are looking at over 125 Million dollars in commissions to the
cruiselines.
125+ Million Dollars
!!! Does anyone but me think that this might be a reason for the
cruiselines to sit idly by and not step in on behalf of the cruising public?
Folks this is a cash cow for the cruiselines, all they have to do is get people
on the ship and the auction companies do the rest. It is all about the money. I
will however say, that this 125 Million dollars has probably reduced the cost
of cruising for a vast majority of passengers, but it is being subsidized by
those thinking that they are getting a really good deal on a famous artist. I
can't afford to subsidize anyone else. Can you?
Ok, you are probably saying .. well you are just
guessing. I'd say, you are right. but with the FAWI agreement in hand showing
the 35%. I don't think i am too far off do you? You can see an agreement
between parkwest at sea and a group called Cruise Management International
headed up by Phillip Levine
here
if you read through the document .. they have asterixed their
percentages but we should be pretty close. this looks like it started in 1996
and automatically renews every 2 years. |
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Upon closer examination, I am wondering if parkwest
is in violation of this agreement. I'd heard that it was taking up to 10 weeks
to deliver the artwork to the 'winners' of the ship auctions. But on page 5
section 4 of the document between PWS and CMI it states:
In addition, in the event PWS has not
shipped art within sixty-six days after the ending date of a particular cruise,
then CMI will have the right to withhold payment to PWS for the purposes of
making refunds for that art to the purchaser.
IHey maybe those customers that haven't received their
artwork after 60 days have passed can call CMI and request a refund .. heck
maybe they can call phillip levine. and after doing some cursorary
investigation i've found that ruise Management International, Inc. is a
subsidiary of LVMH Moet Hennessy Louis Vuitton. If someone requested a refund
from CMI, I wonder if they get vouchers to purchase Hennessy Congac or some
really nice LV bags? Hmm, very interesting, wonder if it is moet champange that
they serve ? Nah, probably sparkling wine from somewhere less expensive. I
wonder how much a cut goes off to LVMH?? and they also get a cut too. Look at
the page 4 section 3.
The term "Net Revenue" shall
mean the "Gross Revenue" less the "Cruise Line Fee" as
defined below. The CMI Fee shall be [*] of the Net Revenue
So looks like there are a lot of shares in the 'winners'
pool. in my opinion .. it is not the purchaser of the art. |
From looking at the document there be some issues where
parkwest may potentially be in violation of the agreement.
1. If it takes more than 60 days for the 'winner' to
receive their posters from parkwest. anyone out there past 60 days complain to
the cruiseline or CMI yet?
2. If parkwest has been contacting individuals that
attended an auction but did not purchase anything, they could be violating the
agreement paragraph 5H. where it states :
H. (i) This paragraph 5(H) deals with the
use of cruise ship passenger names, and lists and records of such names. For
purposes of this paragraph 5(H), except 5(H) (vii), references to cruise ship
passenger names (and lists and records of such names) are
only to persons who have purchased art from PWS during a cruise.
I am not a lawyer nor play one on TV nor even onboard
infomercials but it looks like park west at seas' customers are only suppose to
be those that bought works. So the big question is, how many of parkwests'
1.2MM customers are actual customers. and is parkwest violating their agreement
by trying to invite and sell 'non customers' artwork at on shore events, and
would that be a violation of the agreement. Hopefully, someone that understands
contract law could read the document and determine if my interpretation is
correct.
As a closing thought, i see that parkwest really attempts
to pad their profits by charging shipping and handling, plus some intransit
handling fee of 1% .. wasnt' that already part of the S&H fee? or is this
just another way to get money for themselves that they don't have to share with
the cruiseline. and what about the buyer's premium? considering that this
'Auction' is more like a retail sales event, were we get to name our price as
long as it is more than you will take .. would this be like a tax for not
knowing the difference between retail sales and an actual auction?
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