Artprice: Exclusive Interview with Thierry Ehrmann by Trading and IPO

Thierry Folcher, Founder of Trading and IPO: My first question is... why in
European equity markets, particularly in France, does Artprice trigger such
irrational reflexes, both positive and negative? Some traders regard Artprice as
some kind of magical stock that escapes the rules of technical analysis and
common reasoning.

Thierry Ehrmann, Founder and CEO of Artprice: the story of Artprice is a story
that has had a colossal impact on the Art Market. I remember the famous Art
Market sociologist, Raymonde Moulin, who thirteen years ago explained to me
that, whatever Artprice's fate, Artprice's existence had already had such an
impact on the Art Market that turning back would be impossible.
It took me a number of years to understand exactly what the great Lady - who
more or less invented art market sociology - really meant.

Thierry Folcher: What do you mean by "impossible to turn back"? Can you clarify
this idea?

Thierry Ehrmann: For reasons of supply and demand as well as production
techniques several centuries old, the art market was unknown to the general
public in terms of information and the margins practiced by a large number of
players (dealers, galleries, brokers, etc.) were generally charging more than
700% supported by a very high level of market opacity and the total absence of
centralized global data.

Thierry Folcher: How could such a margin exist?

Thierry Ehrmann: In effect, that type of margin - in any sector- would almost
certainly lead to accusations of criminal fraud or, in the best case, of willful
misrepresentation.
The simplest explanation is that, among other factors, for centuries artworks
such as oil paintings took months to produce and then months to dry. Today, in
addition to acrylic paint that dries in one day, artists now have a whole range
of methods derived from industrial and information technologies at their
disposal, allowing them to significantly increase their production. As a result,
today's art market can operate with more standard commercial margins reflecting
the pace with which artworks are produced and exchanged.
Our databases contain biographical data for over a million artists who every
year inject a considerable number of works into the art market.

Thierry Folcher: Why then do some Art Market players not take into account this
revolution by trimming their surreal margins?

Thierry Ehrmann: You have just put your finger on the origin of the intense
anger expressed against Artprice on stock market trading forums by Art Market
players, posing as Artprice shareholders. In the past, dealers, brokers and
market operators, primarily French, operated within a form of quasi-monopoly
that allowed stratospheric margin (sometimes exceeding a coefficient of 10).
Since 1556, for example, French auctioneers have functioned in a de facto
monopoly that lasted for more than five centuries and created very strong
addictions in terms of economic behavior, especially in such a closed
environment where family transmission from generation to generation was standard
practice.
I would however like to stress that 98% of the negative commentaries regarding
Artprice come directly from the Paris market. This is very disappointing indeed:
we work with 72 countries, with which we have never experienced any problems in
nearly 27 years. In fact... only France has these kinds of monopolies... and
look where France's art market is today... more or less ruined, with a 3% share
of the global market.

Thierry Folcher: So some members of this "monopolistic corporation" consider
Artprice as the cause of their fall?

Thierry Ehrmann: It's much worse than that. Since the advent of two factors in
particular, namely the 3 billion people worldwide connected to the Internet and
mobile Internet (Gartner Group predicts 2.4 billion new connectors in 2014),
some members of this corporation see their clients consulting the Artprice
databases for price information, indices and statistics on the very place of
their sales.
To illustrate... imagine a collector who has trusted a dealer for 20 years. He
consults Artprice and realizes that his next acquisition is pure folly in terms
of margin. So he goes home and intuitively checks his major acquisitions in
recent years in Artprice's databases. And that's when the penny drops. Not only
has he been the victim of willful misrepresentation (to say the least), but his
social status as a collector has been undermined by expensive purchases over
many years.
This example illustrates what amounts to a complete overturn of the existing
status quo: our collector launches legal proceedings against his dealer and
radically changes his purchasing behaviour by making Artprice his permanent
reference.

Thierry Folcher: How is it that no-one else has tried to set up another Artprice
in the 20th or 21st century?

Thierry Ehrmann: The reason is simple: to be a competitor to Artprice you would
need, on the one hand, huge capital to purchase the main historical price
quotation books, editorial archives, publishing companies, manuscripts and
catalogues in different continents, and on the other hand, to perform over a
million hours of work over almost 18 years to build and develop more than 120
databases that are protected in the United States, Europe and Asia by
Intellectual Property rights covering both the content and its organization.

Thierry Folcher: If I follow your reasoning, Artprice has done that?

Thierry Ehrmann: Indeed; step by step that is what we have done. This daunting
task could not be undertaken by just any industry because it requires - in
addition to colossal investment - a passionate interest, an incredible amount of
patience and, above all, an extraordinary level of determination to acquire art
information throughout the world in all formats, whether it be publishing
companies, editorial archives, manuscripts and catalogues, and then build up the
databases that underpin Artprice's standardized art information database. In
effect, the combination of my legal training and my activity as an artist-
sculptor for over 30 years has helped me to develop close exchanges with the art
world. My retrospective exhibition (1982 - 2012) last year made me realize just
how important this unique relationship has been for the development of Artprice
as a business.

Thierry Folcher: Returning to my first question... how do you explain the
persistence of certain criticism leveled against Artprice in France?

Thierry Ehrmann: The answer is very simple. Every day Artprice impacts hundreds
of thousands of transactions in the world, particularly through its millions of
members who constantly consult its databases to know the price of a work,
understand its basis, and obtain transparent market statistics in a market which
until recently was totally opaque, allowing certain players to accumulate
immense fortunes.
Every day we are officially solicited via a multitude of letters rogatory and
court requisitions from legal teams (operating in 70 different countries)
working on cases relating to works of art and, of course, by Interpol.
Indeed, as we are the only organization capable of ensuring the perfect
traceability of works of art over time, we are a veritable gold mine for legal
departments around the world, a fact that helps to explain the blind hatred of
certain people with regard to Artprice, particularly among a certain number of
French operators whose indictment or status as assisted witnesses does not make
things easier...
It is obvious that our impact on the art market significantly reduces the
various forms of fraud and, believe me, there are lots.

Thierry Folcher: So Artprice destroys the sky-high margins of some... but are
there also some positive impacts?

Thierry Ehrmann: Yes indeed; fortunately our business has a number of very
positive consequences. In fact our comprehensive art market information has
allowed some players to become very wealthy. I am currently in the process of
collecting these stories for a forthcoming book I am writing about the secret
workings of the art market which will include a chapter on this subject.
Artprice is the global reference database with by far the most comprehensive
information about artists and their works (past and present) all over the world
and we also have a totally unique database for signatures and monograms which is
automatically consulted at the beginning of any search involving a re-discovered
art work.

Thierry Folcher: Why was Artprice the only company in the late 1990s to start
this titanic task without any real competitor?

Thierry Ehrmann: The explanation is simple: the main operators were working on
the assumption that collectors are people of a certain age who are rich,
powerful and disdainful of computers, considering their time as valuable and
therefore un-inclined to consult databases on the art market via the Internet.
For these operators, the transparency risk was limited to the price quotation
books that gave a simple selection of auction results for just one year, without
reproducing any pictures of the works involved. Moreover, no-one, apart from us,
imagined that the number of people connected to Internet would soon exceed three
billion.

Thierry Folcher: So, compared to that assumption, what is actually happening
today?

Thierry Ehrmann: In 2013, with Artprice and an iphone, ipad or an Android
smartphone, in just a few seconds, for a few euros, the collector or art
enthusiast has access, wherever he may be, to comprehensive information about an
artist and the work he would like to acquire without the constraints of using a
computer.

Thierry Folcher: I get the impression you are saying that the real revolution
was not so much the advent of the Internet in the 2000s but rather the arrival
of mobile Internet with smartphones and tablets?

Thierry Ehrmann: That's right; the Internet with its 50 million users worldwide
in the early 2000s fuelled all kinds of speculative fantasies, but ultimately
no-one expected that the tablet and smartphone would allow billions of people to
connect to the Internet anywhere, without any computer knowledge in just a few
years.

Thierry Folcher: So... do you see any other revolution on the horizon for 2014 -
2015?

Thierry Ehrmann: Yes. The technologies 4G, LTE (Long Term Evolution) and 4G + in
Asia and the USA will revolutionize the Internet by allowing automatic payment
and incredible connection speeds.

Thierry Folcher: What do you mean by "automatic payment"?

Thierry Ehrmann: Did you know that, according to several major research firms,
in 2013 it takes a minimum of 14 minutes to buy information worth just a few
dollars or euros?
For example if you try to buy a press article in French or English costing
between €1 and €5, you have to type in your name and address, your bank card
details (number, expiry date, security code), and, since last year, to make
matters worse, a security sms sent by the bank to type into the vendor site. The
whole rigmarole is far too cumbersome!

Thierry Folcher: If I understand your reasoning, France's Minitel in the 1980s,
with its automatic kiosk system, was a futuristic experiment?

Thierry Ehrmann: Well in that respect yes. Joking aside, you are absolutely
right. With the 4G kiosk, anyone will be able to consume paid information in
just a few seconds and information will be automatically charged to his/her
phone bill or company. Apple with its Apple Store has perfectly understood this.
To understand how the current situation of purchasing information on the
Internet is grotesque, I often invite my staff to imagine a situation, by
analogy, where for each local or international telephone call they make, they
would have to spend 14 minutes entering personal data and bank details before
being able to place the call.

Thierry Folcher: The 4G and LTE kiosks... are they are adaptable to Artprice?

Thierry Ehrmann: Of course. In 1991, you could connect to Artprice via 3617 (FFr
5.57 per minute, i.e. with inflation, €1.20 / minute) and it generated a net
margin of 45%, despite the fact that the data had no pictures or statistics and
were not exhaustive.

Thierry Folcher: So it's a case of "Back to the Future" then?

Thierry Ehrmann: In reality, from an IT point of view, the Minitel and the
tablet are exactly the same. They are passive devices, without hard drives,
functioning with operating systems that are insensitive to bugs and viruses and
which allow access to information, such as that accumulated by Artprice, in just
a few seconds, on ultra powerful servers that host all the IT, as in the case of
Artprice, which has its own clean rooms and which operates on its own optical
fiber network. The reality is that Internet commerce, whether for tangible goods
or intangible services, represents such a percentage of the global economy that
the banks, contrary to their best interests, sacrificed simplicity of payment
via the kiosk system for a credit card payment system, with the whole rigmarole
mentioned above, in an attempt to keep control over dematerialized transactions
in the 21st century.

Thierry Folcher: So are the telecom operators going to take over online
payments?

Thierry Ehrmann: It's obvious. They have proprietary engineering on their 4G
networks that is ten times superior to that of a banking network of the credit
card type, and they are looking for revenue on content with real added value.
They will charge a commission of about 18 to 25% on a kiosk at €1 per minute.
This commission will cover the payment service, its promotion and the payment
guarantee. And client anonymity, if desired, can also be guaranteed.
Eventually, kiosk revenue will become by far the largest revenue per user for
telecom operators who need irreproachable and credible multi-lingual content. In
fact, for telecom operators Artprice represents a perfect example of what they
are looking for in the area of paid, irreproachable content... and available in
seven languages including Mandarin, with a truly global market. With 4G kiosks,
the operators will see a massive increase in net profits.

Thierry Folcher: You seem very sure about this new economic model...!

Thierry Ehrmann : Yes, because we are in exactly the same logic as when France
Telecom, 33 years ago, did not have a kiosk system because the data flow on
Minitel was too slow to bill customers on a per minute basis. This was the
initial period of Minitel with 3614 involving tedious subscriptions... as we
currently have on Internet.
In the second phase, France Telecom introduced a much faster dadta flow to the
Minitel network via its professional subsidiary Transpac and switched to a kiosk
mode which at the high end cost between €1 and €2.20 per minute.
Indeed, this was the origin of the fortune of our holding company Server Group
which validated this economic model for 25 years in all the sectors of the
economy in which our databases operated.

Thierry Folcher: Do you have any special relationships with 4G operators?

Thierry Ehrmann: We are fortunate to have, among others, Verizon USA, which is
wired to our data centers' proprietary fiber optic networks. This is rare in
France.
Verizon is launching in a 4G LTE network in New York and it worth noting that
Verizon has the majority share of the market in New York State of and that New
York represents, alone, more than 90% of American art market. I also invite you
to an article published in Les Echoes of 30September 2013, whose title sums up
Artprice's vision of the 4G revolution: "In the United States, a real goose that
lays golden eggs for operators"... and the article starts with "Americans spend
almost twice as much as Europeans on their mobile subscriptions".

Thierry Folcher: Does the 4G technology really work?

Thierry Ehrmann: Our tests, both in terms of speed and in terms of the analysis
of Artprice clients connected via 4G to our databases, show that customers with
connection speeds multiplied by 10 spend more time connected (average connection
time) and are released by the kiosk system from the archaic payment method I
have already described.
This is why I can state with the utmost certainty that we are only just at the
very beginning of the digital economy over the Internet.
In 2015, we will be wondering: how did we put up with such a level of
unparalleled stupidity in terms of payment?
And how did we live with such slow Internet speeds? It's difficult to imagine
the extent to which the new Internet with its new protocols such as 4G, LTE and
the new IPv6 standard will make the current period look completely passé.
According to all the major research firms, there are 3 million people accessing
Internet for the first time every day! No media in the world has ever
experienced such phenomenal growth in such a short time.

Thierry Folcher: A lot of people still do not understand your assertion that
Artprice is responsible for the standardization of the art market and therefore
the owner of this standardization. Could you explain this concept in a simple
way?

Thierry Ehrmann: It is true that in most economic sectors standardization is
often associated with ISO standards or very sophisticated specifications.
Artprice, simply put, after more than a million hours of work by art historians,
researchers, editors and IT specialists managed to create a unique identifier
per artist and a sort of registration card (by analogy ) for the artworks that
determines their traceability and therefore their provenance.
Unfortunately this daunting task, in accordance with accounting standards, is
now recognized as an expense in the framework of prudential approach.

Thierry Folcher: So are you saying Artprice's balance sheet does accurately
represent the economic reality of the company and could therefore mislead
investors and shareholders?

Thierry Ehrmann: Indeed... the current chart of accounts for the financial
statements of individual companies reflects the economic history of the
twentieth century when intangible wealth was in its infancy and thus booked as
an expense item. Today, enriched data (Artprice's raw material) is considered by
all the major consultants like Roland Berger, Deloitte and Gartner Dataquest as
becoming the principal source of wealth creation and profit in the 21st century.
Remember what Paul Getty said: that the petroleum of the 21st century would be
intellectual property, and that is precisely the raw material that is at the
heart of the Artprice's industry.

Thierry Folcher: There is a lot of argument and debate about Artprice's market
capitalization - in both directions. What is your view?

Thierry Ehrmann: Once again, the people who criticize our market capitalization
have a backward-looking approach. I could mention many companies, including some
listed in France such as Genfit, Nicox, Carmat, ABScience that all have very
strong capitalizations between €100 million and €500 million and turnovers of
between €0 and €5 million, with annual recurring losses of more than €10 million
on average.
These companies face a common industrial challenge, given their chronic losses,
with the potential risk of not being able to raise the capital they need through
capital increase. Nevertheless, their businesses are very courageous and
necessary for the economy of the future.

Thierry Folcher: So you do consider Artprice as being comparable to these four
companies?

Thierry Ehrmann: Not at all. While I deeply respect these four companies, I
remind you that Artprice does not post any structural losses, has enjoyed
capital growth without any capital increase since its IPO in 2000 and that its
research and development had led to the normalization of the art market and
therefore to a dominant position. Moreover, this position has been achieved in a
perfectly lawful manner from a regulatory perspective - i.e. without any abuse
of its position - and from the intellectual property perspective.

Thierry Folcher: So you consider that your capitalization is not representative
of the true value of the company?

Thierry Ehrmann: It's obvious; our capitalization does not take into account a
multitude of intangible and tangible resources that are perfectly real, highly
sought-after and growing every day.

Thierry Folcher: Turning now to the art market which is the core of your
business: what is your outlook?

Thierry Ehrmann: The first is democratization of the market. The number of
collectors has grown from roughly half a million major collectors in the 1950s
to over 70 million with investment capacities above $1 million per year in the
art market (excluding their business and real estate assets). In terms of global
revenue, the art market has experienced exponential sales growth. I don't mind
telling you that the major international banks and stock exchanges have all
asking us to create derivative financial products based on our indices that are
quoted every year in over 6,300 print, online and broadcast media. Similarly,
there are lots of new art-based funds appearing and some are not small. In
short, the financialization of the Art Market is indeed underway.

Thierry Folcher: How do you explain the fact that the art market is experiencing
continuous growth, even in countries in recession?

Thierry Ehrmann: Over the last decade the democratization of art has been
spectacular. Let me remind you that 51% of the world's artworks change hands for
less than €1,500 and are therefore in direct competition with the luxury goods
industry. However, a work of art appreciates in value over time, a rule which
does not apply to luxury goods. Moreover, the art market is now universally
recognized as a genuine safe haven in major economic crises.

Thierry Folcher: You often talk in your press releases about the phenomenal
growth of museums in the world. Can you quantify the impact of this growth?

Thierry Ehrmann: Yes; I can confirm that more museums have opened over the last
decade than during the entire 20th century, and that the number will nearly
triple over the next ten year. You see, we have evolved from a situation of a
cultural elite who visited museums to a situation of mass cultural tourism that
affects hundreds of millions of people. The business press on all continents
regularly comments on the double-digit growth of the museum industry, a rare
growth rate these days, and this naturally has a positive impact on the art
market by creating demand for new works for the museum's collections.

Thierry Folcher: To return to the Internet... the key word is Big Data . Where
are you in this area?

Thierry Ehrmann: I invite you to read our regulated information releases in
which, as early as 2005, we were already talking about storing and analyzing
billions of client behavioral logs in full compliance with the European and
American French legislation. This marketing term (Big Data) refers to the
perfection of data mining which was only accessible to groups with powerful IT
infrastructure, which is indeed our case.

Thierry Folcher: Are you still having problems with the French auction market
supervisory body (the CVV)?

Thierry Ehrmann: Yes, our relations are difficult because the CVV has fuelled
irrational fears regarding the Internet. We are regularly accused, along with
Ebay, of being "Internet giants who mislead the consumer" which is a) absolutely
false and b) has caused real material harm both vis-à-vis our clients and our
shareholders.
In France, which represents less than 3% of the global market fine art auction
market, the last thing we need is to be fighting a rearguard action when Asia's
global market share has increased from 2% in 2000 to over 50% of this year, with
China now accounting for over 41%. That's why we have decided to set up a
permanent physical presence in Hong Kong and have developed long-term
partnerships and alliances in both Singapore and China.

Thierry Folcher: Indeed, you often talk about the Asian market. Where are you in
concrete terms?

Thierry Ehrmann: Greater Asia, including China, Taiwan, Singapore, South Korea
and Indonesia, requires a very different cultural approach to that used in the
West in terms of marketing and customer support and this logically requires
management styles that are specific to the West and to Greater Asia.

Thierry Folcher: Could you be more clear?

Thierry Ehrmann: Greater Asia weighs currently accounts for more than 50% of
global fine art auction turnover and by 2015 this share will be 70%. That said,
we are talking about several million wealthy collectors who are new to
collecting and who have a notion of the historical time scale that is very
different to ours in the West.
As such, in collaboration with our partners, we have produced several digital
and paper books such as "The collector's guide" co-edited with our long-time
partner Art Stage Singapore. We did the same with our Chinese partner Artron.
These various works for Greater Asia represent advice about how to start and
subsequently build up a collection of works. It is an educational approach that
does not exist in the West and that will require time and resources. In
exchange, we are certain of creating clients who will fully appreciate the
usefulness of our databases and whose loyalty will only grow as they develop
their collections.

Thierry Folcher: Do you consider that the auction brokerage arm of your
Standardized Marketplace has not had the success you were expecting?

Thierry Ehrmann: The answer is complicated. The start-up exceeded our
expectations in terms of the volume and quality of artworks. Unfortunately, on
the very first day of its launch, the Conseil des Ventes Volontaires (CVV)
issued a statement mentioning non-existent legal proceedings against us...
which, to say the least, was a significant blow.
Moreover, Artprice's share price took a sharp dive in the minutes after the
CVV's fictitious statement was issued. As I say, a most unfortunate turn of
events... And the wound is still very present in our share price, particularly
as it has been exacerbated by various interviews given by the CVV during 2013.
(see Les Echos of 25 March 2013 ). And all this despite the fact that in order
to meet the specifications of the law of 10 July 2011, we implemented a highly
sophisticated infrastructure in which we forbid ourselves any form of
intervention so as to satisfy the recommendations of the CVV.

Thierry Folcher: Your answer leaves me somewhat confused. Are you saying you are
not interested in providing a service to your customers if the process is
tedious and cumbersome. What exactly is your position?

Thierry Ehrmann: Our position is almost impossible because we built a perfect IT
and legal structure resulting in 27 steps, but, under the Law of 10 July 2011,
we are prohibited from any form of intervention or from giving advice to our
customers and trusted third parties (escrow and release). The transfer of these
works to the fixed-price arm of our Standardized Marketplace - which has
experienced dramatic growth since its creation in 2005 - completely confirms
these obstacles in all respects. Remember that we receive no commissions on the
phenomenal reservoir of artworks that are bought and sold on our fixed-price
Marketplace.

Thierry Folcher: At one point we saw a number of 7-digit bids placed on
Artprice.com. What happened to them?

Thierry Ehrmann: Once again, faced with the specifications, the legislation and
the CVV, the deals' protagonists (buyers and sellers) - who were well known in
Asia - were subjected to constraints that for Asians, with their very developed
culture of honor, were nothing short of humiliating. And that is why we
eventually decided to withdraw all the works with 7-digits from the auction-
brokerage site and not accept any others, in order to improve our chances of
succeeding when our Asian equivalent of this auction-brokerage site is launched.

Thierry Folcher: So what is the solution... if there is one?

Thierry Ehrmann: We have to physically set up the entire infrastructure of the
auction brokerage arm of our Standardized Marketplace at our Hong Kong offices
with an autonomous jurisdiction that, under the laws in force, will allow us to
operate an auction brokerage activity via internet perfectly lawfully.
Are you aware that the CVV is planning to introduce additional legislation (for
the third time) during the fourth quarter of 2013 that will make it even more
difficult for Internet operators? From an economic perspective, it is
incomprehensible when we see the state of the French art market which, every
year, is becoming increasingly marginalized on the global art map.

Thierry Folcher: So are you going to leave France?

Thierry Ehrmann: Put it this way... quite apart from any conflict that Artprice
may be having in its home territory, it behoves any industrialist to move closer
to the heart of his market, and, for us, that means Greater Asia, which accounts
for 50% of the global art market today and 70% in 2015. France accounts for 3%.
We are not talking about relocation, but a carefully planned act of management,
both for the company, its customers and its shareholders. The database activity
will remain in France.

Thierry Folcher: Speaking of shareholders, there are rumors of a second stock
market listing outside of France?

Thierry Ehrmann: In our capacity as the global leader in art market information,
we have been penalized by ICE's successful takeover in the Unites States of the
famous NYSE Euronext which has now been dismembered, leaving Euronext somewhat
stranded with much reduced trading volumes and unable to find a buyer. Not even
Deutsche Boerse is interested.
So, yes, we are seeking to optimize Artprice's capitalization on a financial
market that meets our requirements and those of our shareholders. I invite you
to consult a Reuters dispatch in which the CEO of Maurel & Prom, Mr Jean-
Francois Henin, said "being listed in Paris is a handicap, especially when we
are the only company in our industry. In London, everyone knows what we are
talking about".
I fully appreciate his point of view, which perfectly describes the exact
problems we have with Artprice's listing in Paris.

Thierry Folcher: Many people were surprised to see Amazon launch an art sales
activity. What is your position?

Thierry Ehrmann: First, you need to understand that Jeff Bezos, Amazon's
founder, only approaches mature markets to dematerialize them. In order to do
this, Amazon needs to standardize its marketplace and provide the necessary
information to buyers and sellers to promote the trust and confidence that is
indispensable for the functioning of Amazon's digital economy.
For Artprice this represents a superb opportunity that we are developing with
Amazon's APIs (application programming interface, open to software developers)
in the form of products and services that will enhance the level of
standardization, and the inclusion of Artprice data, which is unique in the
world, will provide a high level of confidence for Amazon's commercial activity.
Lastly, I would add that Amazon's initiative proves that we were right in
believing that the art market was ready for dematerialization.
The Artprice logo will feature on Amazon APIs.

Thierry Folcher: What do you think then is the future for physical auction
houses?

Thierry Ehrmann: Once again, it is clear we were on the right track long before
anyone else: all the auction houses who hated or ignored Internet in the early
2000s are now the first to seek our assistance as they see the Internet becoming
essential for their survival. Christie's CEO said recently that the middle
market (i.e. artworks valued between €800 and €12,000) is migrating rapidly to
the Internet.
According to our Statistics & Econometrics Department, this price segment (€800
to €12,000) represents 81% of the global art market and therefore a colossal
potential for Artprice's Standardized Marketplace (the average price of artworks
on Artprice is around €11,000).

Thierry Folcher: So, if I understand you correctly, the auction firms could
finally see you as a partner rather than a competitor?

Thierry Ehrmann: Exactly. We are currently setting up colossal IT
infrastructures that will enable the auction houses to conduct their entire
sales process, from the catalogue to final adjudication, via a secure intranet.
In addition, we are offering them lists of people who are looking for precisely
the artist and/or the works that they are offering for sale, based on our
behavioral analysis of our 2.3 million members.

Thierry Folcher: Where are you with your Artprice Insider social network? Has it
been dropped?

Thierry Ehrmann: No, but we changed its development model by launching a
Facebook-type open social network that allows us to capitalize on new customers
in different languages, in countries with very strict internet communication
barriers.
Subsequently, these new customers can access Artprice Insider with their true
identity and a confidence rating and, between members, exchange ultra-sensitive
information on the art market that cannot be communicated on a public network.
The delay in the development of this network has in fact been beneficial to us
because we were able to include Twitter, which, for us, is mainly a tool
intended for issuers of "primary news" such as news agencies, and Artprice is
indeed an art market news agency.
Once again, patience must prevail over the temptation to generate publicity
through bold but ultimately empty media announcements. And this is something our
historical shareholders perfectly appreciate.

Thierry Folcher: At the beginning of this interview, you mentioned a radical
change in the buying behavior of art collectors. Could you be more specific?

Thierry Ehrmann: It is clear that the purchasing behavior of collectors, both
for amateurs and art market professional, is undergoing a historic
transformation. The change began in the 1980s when buy orders at public auctions
started arriving over the phone. Since then, auction room populations have
gradually thinned out and phone orders became much more common.
By the 2000s, the major auctioneers were operating with an army of operators
behind them taking telephone bids. Today, the Internet has supplanted the
telephone and provides buyers with perfect reproductions of the works they are
interested in, far superior in terms of views and picture quality than the
picture in a paper catalogue. In addition, with Artprice, the buyer has all the
necessary information in real time to form an objective opinion, similar to a
qualified expert's, to determine the work's purchase or sale value and view its
history in the sales room.

Thierry Folcher: So basically you are saying that physical sales facilities and
then art galleries will gradually disappear, having migrated to the Internet?

Thierry Ehrmann: That's right. The major auctioneers are trying to sell or
convert their massive physical sales rooms in the framework of the transfer
their business to the Internet.
Likewise, galleries are reducing their leases investing large sums to reach a
wider customer base via internet and they can also display their entire stock
online thereby expanding their offer. I am very surprised when I hear art market
operators aged over 60 who tell us that their only solution is to migrate to the
Internet, which for Artprice is excellent news, because a few years ago, the use
of Internet-related information technology was very rare in the art world. Once
again... patience is a virtue when the history of the art market is moving in
your direction.

Thierry Folcher: Listening to you, I get the impression that there is no
obstacle to Artprice. Is this really the case?

Thierry Ehrmann: If you want to talk about potential risks... over the last
decade Artprice has overcome risks one by one. The worst of all was in the early
2000s when there was a very low rate of Internet connection among art market
operators compared with other economic sectors.
I remember that a number of financial analysts and fund managers tried to tell
me that less than 10% of global art market operators were connected to the
Internet and that, at that rate, it would take at least 30 years to have get to
a 90% connection rate.
History has decided otherwise, thanks to the mobile internet, tablets and
smartphones, the penetration rate is already over 80% in 2013, a fact that
completely changes the fundamentals of the global art market.

Thierry Folcher: In analyzing Artprice, the principal strength that makes it an
unavoidable player in the art market is standardization. In this respect, how
will the growth of the Internet impact standardization going forward? In other
words... how can you be sure that your standard will prevail?

Thierry Ehrmann : Once again, its all a question of time. In 2003, we signed a
partnership with Google and gradually released standardised data free of charge.
This year, we are taking a huge leap forward by injecting 540 million
standardized data in free access mode onto the Internet with Google and Baïdu
(China's leading search engine). We decided to offer freeware which consists of
a proprietary software license distributed freely, but with certain usage
limitations.

Thierry Folcher: So you have lost much of your pay data?

Thierry Ehrmann: Many people think that, and they take as an example the press,
which has in fact never been good at knowing where to draw line between free
information and paid information.
Artprice is very lucky in that auction results, indices and econometric
statistics represent 20% of the total data; but without this information the
other 80% of free data that standardizes the market loses its value.
Artprice's approach, which is to not lose revenue whilst distributing 80% of its
data free, is a rare case among the different business models that can be found
on Internet, including in the Press, which is still trying to achieve the right
balance between free and paid data.

Thierry Folcher: Why not impose a tariff, even a very low one on your various
products and services?

Thierry Ehrmann: This question keeps coming back; but, once again we must think
in terms of a 21st century economy in which Artprice's proprietary data on its
customer\'s behavior is undoubtedly its main asset and source of revenue.
Thus by distributing 80% of our products and services free, we record every day
hundreds and sometimes thousands of new customers with their behavior, their
favorite artists, their research logs and their collections. In fact, we
consider that this information represents a daily creation of wealth; but for
the accounting reasons mentioned earlier, these assets are not present in our
balance sheets.

Thierry Folcher: Do you have an example of standardization on a specific
economic sector, such as that practiced by Artprice on the art market?

Thierry Ehrmann: Two examples come to mind. First, British Railways which, by
imposing the standard distance between the rails (track gauge) in England
managed to impose the narrower gauge in Europe. Likewise, Thomas Edison, with
his General Electric Company, imposed a number of major electricity standards.
On the automotive market, the arrival of the Argus-type newspapers (paper and
online) has literally transformed the market for used vehicles. The Argus
operates with exactly the same logic as Artprice in its field. Before its
arrival, garages were charging phenomenal margins on used vehicles.

Thierry Folcher: Would it be appropriate to imagine an alliance or a friendly
takeover of Artprice?

Thierry Ehrmann: We have talked a lot with the major Anglo-Saxon auction
companies who realize that, despite their hundreds of years of existence and
their financial resources, they are unable to acquire the culture and the
understanding of the Internet to a satisfactory level. Indeed, if you look at
the largest sectors of the economy, you will find that the majors of the old
economy are all trying to acquire the global leaders in the digital economy.
That said, we have concrete offers from Asian partners which could be very
interesting both for us and our shareholders. Again, coherent and sustainable
offers take time to construct...
We should not forget that the Internet is still in its infancy, especially in
terms of speed. In less than two years, very high speed internet for
smartphones, tablets, televisions and video conferencing will be the basic
package and will allow the delivery of new services that the general public has
not even dreamt of. In this context, we have fixed ourselves a target of 10
million customers.

Thierry Folcher: In your opinion, how much of the global economy will pass
through the Internet in 2015?

Thierry Ehrmann: Unquestionably, more than 50%. Do not forget that Pythagoras -
one of the greatest philosophers - stated that everything can be translated into
numbers, except the emotions and the soul. Virtually all parts of the global
economy are "dematerializable"; hence it is vital for Artprice to impose its
standardization of the art market now. Those who imagine that Artprice's
quarterly financial statements are the only thing to watch are seriously
mistaken.
Contrary to popular belief, stock market investment is a calculated bet on the
future with an in-depth analysis of the industrial vision of the targeted
company. When the market becomes aware of the wealth of Artprice, which is based
on the history and the future of the art market - especially if we change
continent - some will regret have jumped ship too early.

Thierry Folcher: I want to return to a recurring criticism of Artprice, namely
its overall design; the website presentation seems to have evolved little.

Thierry Ehrmann: We are well aware of this criticism. The good news is that we
have redesigned the entire fixed-price and auction-brokerage sections of our
Standardized Marketplace as well various databases, with a very attractive
design. The real reason for having waited so long is in fact revolutionary.

Thierry Folcher: What do you mean by "revolutionary"?

Thierry Ehrmann: For the latest version, we have made sure that, regardless of
the which smartphone, tablet, operating system, including Android, iOS and
Windows Phone - in fact nearly 3,000 versions altogether - Artprice users will
have absolutely no need to download applications, as is currently the case.
Everything is written so that the Artprice user, whatever mobile Internet system
he/she is using worldwide, will be able to connect to an optimized version of
Artprice with very intuitive ergonomics. The future site is superb; but again,
we needed time, especially to include the new payment methods such as the kiosk
system of course, with the possibility of placing our databases at the heart of
the 4G operator, without any hacking risk.

Thierry Folcher: With all these developments, can we hope to see Artprice in
video format?

Thierry Ehrmann: Indeed, the explosion of bandwidth will allow us a real change
with respect to video streaming in real time.
Artprice is fortunate to have a parent company that has two video production and
editing studios that can make "ready-to-play" videos for television channels.

Thierry Folcher: will your customers and shareholders have to wait long to find
out?

Thierry Ehrmann: Not at all! We will be introducing video as of the fourth
quarter of 2013 and it will have additional functions that will radically change
the art market.

Thierry Folcher: Speaking of the art market, a lot of people are surprised by
its good health compared with that of the global economy. What is your view on
this?

Thierry Ehrmann: The art market, which has tracked the S&P 500 (the main U.S.
stock index) for years now, is experiencing continued growth with a very strong
growth driver in Asia. There have never been so many international Contemporary
art fairs, biennials and openings of large museum structures in the world. In
fact, it is no exaggeration that every day of the year sees some major event in
the global Art world.
Indeed there is no doubt in terms of the figures produced by our Statistics &
Econometrics Department that markets and investors now see the art market as a
real safe haven and, moreover, a market that is today sufficient liquid to allow
rapid entry and exit.

Thierry Folcher: Is not the growth of the art market essentially driven by
Contemporary art, which is inherently volatile?

Thierry Ehrmann: You are right about Contemporary art being the driver, but you
are wrong about its volatility. That was true in the 1990s. But today, for the
first time in the history of the art market, the Contemporary segment has
overtaken the Modern and Old Masters segments in terms of turnover volumes and
the number of works arriving on the market is staggering.

Thierry Folcher: Why do you think Contemporary art has taken off in such a big
way?

Thierry Ehrmann: The most important factor is that from a macro-economic
perspective, Contemporary art was previously considered volatile because the
artist was alive and therefore capable of saturating the market.
Nowadays, art market operators and living artists have learned how to adapt very
quickly supply to global demand. In effect, this rapid adaptation represents
concrete proof that the art market, and all of its players, has become very
mature in economic terms.
We process millions of artist's biographies covering four centuries of artistic
creations, all bought and sold in auctions throughout the world or, in some
cases, waiting to be sold on the basis of original documents or documents
certified by the artists themselves, and we are regularly surprised by the
biographies of young Contemporary artists with faultless CVs. In fact, the myth
of the "cursed artist" is a thing of the past.

Thierry Folcher: Speaking of the art market boom, are you planning to introduce
low cost access to your databases for amateurs?

Thierry Ehrmann: Yes, in addition to the 70 million "millionaire" collectors I
mentioned earlier, there are now more than 250 million young art amateurs. In
the United States, they are referred to as "beginners" or "art consumers".
Obviously they need a very low cost access to our databases.
We are therefore planning a subscription for less than €5 deducted directly by
the mobile operator on a monthly basis. Once again, European banks have been
unable to offer us this very simple product although it concerns purely
electronic data flows. Frankly, in the twenty-first century economy, I find that
quite pathetic.

Thierry Folcher: You seem to consider the banks, and particularly the French
banks, as the "laggards" of the digital economy.

Thierry Ehrmann: To illustrate what I mean, consider the announcement at the end
of September 2013 by three major French banks, with tremendous fanfare, that
they are going to release an electronic payment system equivalent to PayPal.
The problem is PayPal was founded in 1995, eighteen years before the French
project, and has nearly 300 million customers, and Artprice has been a World
Seller with Paypal for several years.

Thierry Folcher: To return to your auction-brokerage activity, how do you
explain the fact that the major Auction Houses are raising their prices when
Artprice charges almost a third of what they charge?

Thierry Ehrmann: Once again, this price differential needs a certain degree of
interpretation. To start with, the major auction firms are laying off staff,
selling off their physical sales rooms, investing heavily in the migration to
the Internet and suffering from a high level of unpaid bids.
I think that in the long run they are wrong to raise their tariffs because their
intermediation margin with respect to buyer and seller fees is around 37% when
we are at between 5 and 9%. Moreover, our auction brokerage service provides a
guarantee that the seller will be paid via our trusted third party
(escrow/release) system. So, in my view, these rising costs at auction firms
represent an additional handicap in the digital economy.

Thierry Folcher: From what you are saying, the auction firms are heading for the
wall. Are there studies that support this view?

Thierry Ehrmann: Yes, there are several. I recommend "The Death of Auction
Houses" by Artemundi Global Fund with commentary by Art Media Agency. The title
summarizes the situation quite succinctly...

Thierry Folcher: Speaking of margins, you often indicate that Artprice, with
annual costs of roughly €5 million, is capable of generating up to €90 million
in turnover. How is this possible without increasing your fixed costs?

Thierry Ehrmann: Artprice and its parent company Server Group have been in the
economy of databases since 1985. The basic economic and industrial logic of the
database industry is massive investment in the early years, both in terms of
human cost and IT infrastructure.
As regards Artprice, for the same annual turnover, we have divided our workforce
by three. We have also exceeded the threshold of one million hours of work by
art historians, editors and IT specialists, and all of that has been now been
fully absorbed as an expense item.
In fact, our industry can be summed up very simply: when costs take the
staircase, turnover takes the elevator.
The millions of additional subscribers that we hope to acquire will be extremely
marginal in terms of additional costs, which essentially represent additional
bandwidth and data storage. These requirements will probably add no more than
5-7% to our costs.

Thierry Folcher: I have heard it rumored that Artprice is thinking of setting up
an online advertising sales agency. Is that true?

Thierry Ehrmann: Indeed, Artprice has traditionally built its business model
around the notion of no online advertising as the group's culture is not
primarily to sell advertising space. That said, now that we are injecting
hundreds of millions of critical data onto the Internet, Artprice has become
completely unavoidable on the market. As a result numerous art market operators,
mainly galleries and auction houses, have spontaneously asked us to create
tailored campaigns for them.
So in 2014 we will create of an agency that will also offer short format videos.
This change in our corporate culture is not a regression but rather a response
to a natural demand without having to canvass our customers.

Thierry Folcher: Since the creation of Artprice, you have experienced difficult
periods and other extremely buoyant periods like very few companies in Europe
have experienced. Today, what assessment would you make of the past, and what do
you expect in the future?

Thierry Ehrmann Before answering your question, I would like to tell you a very
telling anecdote.
A few years ago, we received about ten requests per month to withdraw works of
art sold at public auctions (and their corresponding hammer prices) from
Artprice listings.
Today we have a full-time department managing dozens of permanent applications
for withdrawals of artworks with their auction price results (or their unsold
status) every day. Our answer is always the same: a categorical refusal because
an auction sale conducted by an auction house, with its hammer price or unsold
status (reserve price not reached), cannot be censored.
But the most interesting part is when we ask the applicant (usually one of the
top global auction companies) why they leave the result visible on their
website.
It transpires, and it is logical, that what bothers them is that Artprice keeps
a record of the full traceability of artworks in the world, and they know that
this sensitive information concerning their works will eventually come to light.

Thierry Folcher: I see... I detect a contradiction. Can you explain this?

Thierry Ehrmann: This is where the anecdote becomes very interesting. The
applicant's response is always that the auction house, however well known it may
be, is a minor problem whereas Artprice's notoriety is such that their future
transactions on the "offending" work will be permanently affected by Artprice.
This illustrates what some call the "price of success". Here again, some people
are very bitter about the fact that the permanent economic reality of their
works sold or purchased at public auctions is tracked by Artprice. This point
clearly explains the rage of some operators against Artprice, which constantly
receives threats of all kinds. That said, it does not change our position.
Our position is admittedly legalistic and strict, but it is our business
integrity that is at stake and that we wish to defend. In any case, the
individual applicants can always take their works into the opaque market of
private transactions conducted by galleries and art dealers.

Thierry Folcher: Returning now to the question of Artprice's share price. What
advice would you give to Artprice shareholder today? What attitude should they
adopt?

Thierry Ehrmann: First, I would take the time to analyze the IPO prospectus of
1999 and I would check to see if all the promises of development leading to a
position of global leader in art market information have been fulfilled. How can
you trust a listed company if it has not kept its promises for 14 years? It is
the past which validates the future and we have far exceeded all our ambitious
of 1999.

Thierry Folcher: Yes, it is true that you have gone beyond the promises outlined
in that prospectus. But now you have adopted new challenges. What should an
Artprice shareholder do?

Thierry Ehrmann: After checking the promises made in 1999, the current
shareholder should perform an analysis to ensure that there is no real
competitor on the heels of Artprice, which is the case, and which is supported
by our software patents and other rights protecting the standardization of the
art market and our databases. Next he should reflect upon the exponential growth
of the art market in five continents of the globe.
In addition, he should take stock of the new art market reality, i.e. that its
survival necessarily involves migration to the Internet. At the same time, he
should look at the continual growth of the Internet, including the mobile
Internet, to ensure that there is no technological barrier to Artprice, which is
also the case.
Lastly - and this is a fundamental starting point - he should consult our
official documentation registered with the French Financial Market Authority
(AMF) and our regulated communications, which includes all our accounts and the
legal structure of the company, to confirm that Artprice has no debt of any kind
whatsoever and has never used capital increases.

Thierry Folcher: OK, but right now, today, should he buy or sell?

Thierry Ehrmann: I have always been motivated by the idea of making my loyal
shareholders as rich as possible. For them, and for my own personal
satisfaction, I still work 70 hours a week with tremendous passion. Shareholders
with a genuine stock market culture know that investment is not a game or a
casino bet; it is a partnership over several years in which the shareholder,
with access to our abundant regulated documentation, possesses a similar level
of information to the members of our board of directors.
In this perspective, I believe Artprice will eventually make its loyal
shareholders wealthy, as we have already done on two occasions by posting the
best French stock market progression in all sectors of activity.

Thierry Folcher: Would you be willing to advance a price target for your
shareholders?

Thierry Ehrmann: As I have already said, the majority of our intangible assets
are perfectly real and have real market value. These assets are not included in
Artprice's balance sheet.
In my view, shareholders can independently fix a target that corresponds to the
reality of these assets and, most importantly, that corresponds to the very
thorough and regulated information we disclose. Shareholders must understand
that Artprice is unique in the world and indispensable even to its worst enemies
who do not support art market transparency.
Considering that the art market is one of the oldest markets in the world,
shareholders must be aware that Artprice - which was way ahead of the game by
understanding the importance of the Internet for the art market - is today
considered one of the pioneers of the Internet.
Lastly, in thousands of different printed and broadcast media around the world,
Artprice is consistently cited as the source in 99% of the cases when figures
concerning the art market, artists and their works are advanced.

Thierry Folcher: So despite the fall in value, shareholders should remain
optimistic?

Thierry Ehrmann: As you know, the intervention of certain persons mentioned in
this interview has consciously impacted Artprice's share price; but they will
not have the last word because the direction of history is on our side, and the
market, which operates without qualms or remorse, will crush them ruthlessly. A
genuine stock market investor must be able to understand and verify the
reasoning of a management team and disconnect from that element of the market
seeking profits in a week or a day.
The shareholder must be proud to contribute to the development of Artprice,
which let us not forget, is a veritable and undisputed global leader.

Thierry Folcher: Being a shareholder in a world leader is fine; but when will
the share price truly reflect this world leader position?

Thierry Ehrmann: Few people are aware of exactly how much Artprice has
definitively changed the art market, one of the oldest markets in the world.
As an Artprice shareholder, all you have to do is imagine 5 billion mobile
Internet users connected by broadband in 2015, and then tell yourself that
patience is the best quality for stock market success.

Thierry Folcher: What do you think is Artprice's "fair value" in terms of
capitalization?

Thierry Ehrmann: One day, Artprice's market cap will approach €1 billion. In
early 2012, before the intervention of the CVV, it was around €450 million. This
estimate is not mine; it has been communicated to me on numerous occasions by
major players in the art market who, more than anyone, are familiar with the
real underbelly of this historic market.
One anecdote among many others summarizes the positions of these players. One
day I was in in Switzerland, at Art Basel, and one of the art market's biggest
"market makers" took me to task. At the end of a heated discussion (to say the
least), he abruptly told me that he is one of my major shareholders. His
predator's logic is simple: what he loses on the erosion of art market margins
will be very largely offset by what he gains on Artprice's share!

About Artprice :

Artprice is the global Leader in databank on Artprices and indices with more
than 27 million indices and auction results covering more than 500,000 artists.
Artprice Images® offers unlimited access to the largest Art Market resource in
the world, a library of 108 million images or engravings of artworks from 1700
to the present day along with comments by Artprice's art historians. Artprice
permanently enriches its databanks with information from 4,500 international
auction houses and auctioneers and publishes a constant flow of art market
trends for the main news agencies and 6,300 international written media. For its
2.3 million members (member log in), Artprice posts standardized adverts in what
is today the world's leading Standardised Marketplace® for buying and selling
works of art by private contract or at auctions -regulated by French law alinéas
2 et 3 de l'article L 321.3 du code du commerce.

Artprice is listed on Eurolist B SBF 120 by Euronext Paris (SRD long only):
Euroclear: 7478 - Bloomberg: PRC - Reuters: ARTF

http://twitter.com/artpricedotcom
https://www.facebook.com/artpricedotcom

Discover the Alchemy and the universe of Artprice http://web.artprice.com/video,
which headquarters are the famous Museum of Contemporary Art, the Abode of Chaos
http://goo.gl/mwsqp

Contact : Josette Mey : e-mail : ir@artprice.com

Artprice: Exclusive Interview with Thierry Ehrmann by Trading and IPO: http://hugin.info/155852/R/1733846/580607.pdf

[HUG#1733846]

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