August 29, 2012
There was a time, not so long ago, that Klaus Heymann was accused of trying to destroy the classical music industry. That was around the same time that the world realized that Naxos, Heymann’s budget-record label, was not just another series of CDs in the bargain bin. At first, nobody really knew what to make of the plain white CD-booklets with stock artwork and only a minimum of information. The packaging had a truly “discount” feel to it, but the recordings — mostly by unknown Eastern European orchestras, conductors, and soloists — were actually pretty good.
Meanwhile, the major record labels were marketing their classical superstars with glossy pictures and charging full price for their CDs — even for the remastered vintage recordings from their back catalogs, on discs that were sometimes only half full.
Naxos has since grown from an odd-duck budget label to the largest independent classical label in the world, with a catalog of over 7,000 titles. It is one of the two largest-selling classical labels and distributes hundreds of other independents through its physical and digital distribution networks. Meanwhile, Naxos has branched out into jazz, world music, DVDs, books, and audio books, but also into music education, an online music library, and music streaming services.
Heymann, who was born in Germany (Frankfurt, 1937), moved to Hong Kong in 1967 to open the office for an American newspaper, but only two years later he went into business for himself. When he started Naxos in 1987, he was already managing several other successful businesses, importing sound equipment, and building recording studios all over Southeast Asia.
SFCV talked to Klaus Heymann, who lives in Hong Kong, while he was on what he referred to as a “working holiday” in Auckland, New Zealand.
What is a “working holiday”?
I play more golf, go for my beach walk, and do all kinds of things, but it is actually work as usual. I just work different hours and at a different pace, due to the time difference. We have a second home here, an apartment on the north shore of Auckland, on a cliff overlooking the ocean. It’s magic. At night you hear the ocean hit the cliff, and just across the bay from us is an extinct volcano. In the morning, when the sun rises behind the volcano, it’s fantastic. For the quality of life, New Zealand is probably the best country in the world. But San Francisco is not so bad, either.
How does someone start their own record label, and why?
First of all, Naxos was not my first record label; I started a company called HK Records in 1978. We focused on Chinese composers who wrote in a Western classical style. I was married to a world-class [Japanese] violinist [Takako Nishizaki, the first student to complete the Suzuki course, cofounded by her father], but she didn’t have any work in Hong Kong.
When I asked her father’s permission to marry her — and this is a true story — he made me promise that I would keep her busy and practicing, so I thought I would make a recording with her. I was already importing records — Hungaroton, Supraphon, Melodiya; all the Eastern European labels in the Vox Turnabout catalog — but I hadn’t actually produced any recordings myself.
We decided to record The Butterfly Lovers, a very famous Chinese violin concerto [by Chen Gang and He Zhanhao, 1958] and some other Chinese orchestral works with the Nagoya Philharmonic. It became a big hit and I realized that there was actually money to be made in this business. First, we did a series of Chinese orchestral music with the Hong Kong Philharmonic and the Singapore Symphony, but the conductors also wanted to do Western music. I said, “We cannot do Beethoven, Brahms, and Schubert and expect people to buy these recordings, but we could choose music that has never been recorded before.” That’s how Marco Polo was born, my first real label. Naxos was just another departure.
Naxos became your flagship label. Was that intentional?
When we started Naxos, we used recordings from Slovakia; obviously, those artists, orchestras, conductors, and soloists were not famous, so I could not possibly hope to sell any reasonable quantities at the same price as labels like Deutsche Grammophon, Decca, or EMI. So I decided to sell them at a budget price; the concept was originally to sell CDs at the price of an LP. That was the revolutionary concept; the other stuff was secondary.
How did you manage to make money on budget CDs?
Well, it was very difficult. I had to sell huge numbers, which I did, in the early days, when there was really not much competition in the budget sector. We easily sold 50,000 or 100,000. I did not expect to sell as many as I did; my wife has several recordings that sold more than 500,000 copies. That is when you can make really good money at a low price.
Is it true that you could make money, only because you “bought out” Eastern European orchestras, so you didn’t have to pay royalties?
In the West, most orchestras are bought out, even to this day. Orchestras usually only get royalties when they work for labels that can’t afford an upfront payment. Royalties were invented by the majors, who signed big stars and promoted them heavily — which, frankly, I think is a stupid idea: You promote someone, make them famous, and then pay them royalties, too? The Eastern European orchestras were keen on the business, and the fees we paid at the time were a lot of money to them. The orchestra members lived much, much better lives than their fellow countrymen. And in the West, no orchestra was willing to record for us, anyway. Of course, today they are lining up around the block.
Does that feel a bit like revenge?
Not revenge, but it gives me great satisfaction.
Even though people didn’t know what to think of Naxos, the quality of your recordings and musical interpretations were never really an issue. You have had a good ear, so to speak, from the start.
Well, I have my wife’s ears. She listens to everything and decides who gets recorded; I decide what gets recorded. She has very good ears and has been my trusted advisor from the beginning. But you are right: Even the early recordings with the Slovak and Hungarian orchestras were pretty good. My wife’s Mozart Concertos today still rank among the best things we did with the Slovak Philharmonic; and their Dvořák symphonies were great. There were a few dodgy orchestras like the Bratislava Radio Symphony; we basically had to record them note by note, because they had never played the repertoire. But gradually, once we started recording in the UK and elsewhere, orchestra quality was not a problem anymore.
Well, I have my wife’s ears. She listens to everything and decides who gets recorded; I decide what gets recorded.
Could you have started record companies like Marco Polo and Naxos anywhere else than in the ’80s in Hong Kong?
It would have been very difficult. But one of the secrets of the success of Naxos is that I ran other successful businesses before I went into the record business. I had made a lot of money from distributing Bose equipment and building recording studios and sound reinforcement systems in Hong Kong, China, and elsewhere in the Eastern Asia. I made a lot of money and sank it all into the record business.
Are you willing to say how much money thus far?
So far, I think I have invested [the equivalent of] about 100 million US dollars in recording, including books, texts, pictures, and the whole thing. I didn’t really have starting capital because I ran these other businesses alongside and just kept putting the money I made into the record business. It was my own money.
But you must have made a profit too. It was not just a hobby?
As for return on investment, until about four, five years ago, it was ridiculous. I remember my bank manager saying, “Mr. Heymann, why don’t you invest your money in something that is actually profitable and will give you a decent return on investment?” But that only came with the advent of the Internet: the music library, the downloads, and the other sources of revenue. And even today the percentage is still lower than anything else I have ever invested in. But I have a lot of fun, so I am not complaining.
We are working on an online music encyclopedia that is totally interactive, a musical works database for the classical music industry, music education apps, an online music appreciation course.
Is downloadable music the future?
Downloads will be part of it, together with streaming on a subscription basis, the “all-you-can-eat” business model. Physical sales will still be around for a while, maybe for another 20 or 25 years — until the people who are now in their 50s reach their 70s. There are kids out there, 20 to 25 years old, who have never bought a CD. We will release fewer and fewer recordings physically as time goes by, and more and more just digitally. And there are other ways to make money: from digital broadcasters, like Sirius FM, and from licensing. TV series like The Sopranos, Six Feet Under, and Sex in the City all licensed music from us. It is not big money but it all adds up.
Why would they license from you and not from others?
We own all rights to our recordings, so we don’t have to consult the artists and their lawyers. We can make deals on the spot. Big labels have to contact their superstar conductors and their superstar instrumentalist … it would take months to get clearance. People come to us and they get clearance within 24 hours.
In what direction is the recording industry heading?
The business will basically move online. If, five years from now, there is 25 percent physical business left, we will be lucky. The other 75 percent will be some blend of download, streaming, and online broadcasting. It will basically go nonphysical. Look at our Naxos Music Library. It was the first successful streaming business, launched in 2002 — eight years before Spotify. It is a really nice successful and profitable business. We have subscribers all over the world, at least one in every country.
When it comes to marketing and distributing classical music, we are probably number one in the world.
I talk to conductors and soloists and they say, “We cannot live without the Naxos Music Library anymore.” They use it as a database. I had a meeting with the New Zealand String Quartet in Wellington, and they told me that when they start a new work, the first thing they do is go to the Naxos Music Library and listen to 15 different interpretations.
We are working on an online music encyclopedia that is totally interactive, a musical works database for the classical music industry, music education apps, an online music appreciation course; we are investing money in education. Our focus is on creating new digital products without neglecting the recording side.
Naxos is an independent record label, but you also distribute other independents …
When it comes to marketing and distributing classical music, we are probably number one in the world. We distribute all independents somewhere in the world, and even Warner Classics and Sony Classics in North America to a substantial number of outlets. I think we have the best marketing and sales organization, and online we are really without competition; we distribute, I think, 400 labels digitally. Naxos is now the service provider to the classical music industry. I cannot envisage the classical music industry without our physical and digital distribution infrastructure. Very few people are aware of that.
So you have made yourself indispensable, basically?
More or less, yes.
Was that the plan from the start?
No, that was never intended. We had to build our own marketing and distribution network, and found out that was very hard to do with only one label. So we started offering our services to other labels — and we grew.
Did some of those other labels have to swallow their pride?
Some of them, maybe; for instance, when the owners had said very bad things about me in the past. To come to us for distribution and marketing was perhaps difficult for them, but I didn’t make it difficult. I just welcomed them into the Naxos fold; business is business.