Courtesy Sotheby's

Roy Lichtenstein’s "Half Face with Collar" from 1963 (est. $15–20 million) failed to sell at a Sotheby's contemporary art auction in November. The painting was the sale's cover lot.

Damien Hirst Mark Rothko Francis Bacon Kasimir Malevich Edvard Munch The Appendix: Portraits of a Marriage, a Man in a Speedo, and Jesse Helms The Appendix: Tracey Emin, Damien Hirst, Pipilotti Rist, and Paul H-O Thieves Steal Munch in Norway

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1. The Boom Is Over
But what a boom it was! As much as the past year or so will be remembered as the beginning of the end, let us not forget that it also saw the peak of one of the longest art market upturns in history. The thing swelled to epic proportions. New buyers came in from all over the world: A soccer club–owning Russian bought a Francis Bacon triptych for £46 mllion ($86.3 million) at Sotheby’s London in February. The Qatari royal family was revealed as the buyers of a $72.8 million Mark Rothko at Sotheby’s London in May 2007. And, finally, Damien Hirst sold $200 million worth of his own work at Sotheby’s London in September of this year. That, really, was the apex. For on that same day, Lehman Brothers failed, and it wasn’t long before the art market began, finally, to feel the reverberations of the global economic crisis. A few months later, even Hirst laid off some employees.

2. Blood on the Block
The bloodbath began in London, when the annual London contemporary art sales timed to follow the Frieze fair resulted in unusually high buy-in rates. A few weeks later, there were the New York sales, where, yes, a Malevich sold for $60 million and a Munch for $38 million at Sotheby’s. But many lots were bought in, and many prices sank to 2006 levels. In both London and New York, what saved the sales was, in several cases, the houses’ ability to lower reserves; still, Sotheby’s lost big on guarantees, and the recession is sure to put a damper on the practice of giving them. Inevitably, Sotheby’s announced salary reductions and layoffs this month, and Christie’s looks to be following suit, with a reorganization in the works. Phillips’ contemporary sale in New York was particularly dreary — the results couldn’t have been pleasing to the Russian luxury goods concern, Mercury, that had just purchased controlling interest in the auction house — but at least Phillips hadn’t given very many guarantees. The interesting thing was the reaction to those figures, as members of the trade tended to split into roughly two groups: those who thought these sales spelled impending doom, and those who saw them as a return to sanity. The speculators were out; the seasoned collectors — Eli Broad, Donald Fisher — were in. Bargain hunters began to appear. The auction landscape has changed dramatically.

3. Kinder, Gentler (Less Profitable) Art Fairs
The boom spawned a bevy of fairs, which were increasingly seen as the dealer’s last bastion against the auction houses. Jitters had already begun last March, when the Armory Show opened in New York to the lowest U.S. consumer confidence in 30 years, yet things pretty much proceeded as usual. In June, Art Basel may have been quieter, but there was still action. By October, when Frieze opened, things were looking grim on the global economic front — and yet the mood, overall, was one of cautious optimism: Art sold, and dealers talked about a “soft landing.” At Miami in December, though, things started to look shakier. Collectors bought, but much more slowly. Their stampede down the aisles at the starting gun was a thing of the past. There were bargains to be had, with some prices rolling back to where they were two years ago. And second-tier fairs in particular have started to show signs of weakness this year. The Art Newspaper reported that 19 galleries had attempted to pull out of Art Miami, an Art Basel Miami Beach satellite fair, and several non-Miami fairs bowed out altogether this year. Frankfurt bit the dust, Bridge and Pulse canceled their London editions, and most recently, the Asian Art Fair, run by venerable organizers Brian and Anna Haughton, was put on hold.

4. Tough Times for Galleries
And what about all the galleries packing the booths in those fairs? Recessions are, it goes without saying, bad news for galleries. The downturn in the early ’90s saw dealers like John Good and Perry Rubenstein close up shop. (The former went to work for Gagosian, the latter became active in the secondary market and went on, in 2004, to open a successful two-space gallery in Chelsea.) In 2008, changes are again afoot. A few galleries, such as New York’s Clementine, shuttered earlier in the year, citing the new economic realities; Rivington Arms and 31Grand are soon to follow. The bad news also spread to the top tier. The news just recently broke that Galerie Emmanuel Perrotin Miami will be closed all next year — going on "sabbatical," as the director calls it — with plans only to reopen temporarily around the time of Art Basel Miami Beach. Several publications have reported slashed event budgets and new scrutiny over production costs. The future of galleries has become so uncertain that a blog has popped up to chart the various rumors.