Interview with Klaus Heymann
An interview with Klaus Heymann
by George Adams
You've been travelling around America and the rest of the world celebrating fifteen years of Naxos. What's the mood like?
The picture varies from country to country. In Germany, for instance, more people are going out to listen to concerts of live classical music. In the USA, opera performances are better attended than before. I think in the end the attractiveness of music to the consumer depends on how creative marketing and management are. Let's take some examples. In Spain right now there's a veritable boom in classical music, new orchestras are being founded everywhere and there has been a great increase in funding. Japan on the other hand is having a problem with the saturation of the market. Another problem is that the audiences there are younger on the whole than in Europe and can't afford such high admission prices. China on the other hand is experiencing something of a boom in interest in classical music at the moment. Classical music has become a middle-class phenomenon there, a kind of status symbol perhaps too.
Looking back over the past fifteen years, do you think Naxos has truly arrived?
Naxos is the acknowledged market leader in terms of the number of releases, the variety of music and the breadth of works its has on offer in its catalogue. We now routinely announce ourselves to be the world's leading classical label and nobody has complained so far. Moreover, no one in the industry has seriously challenged our claim to be market leader. So yes, in terms of the respect we command, especially from the consumer, and increasingly also from critics, I would say Naxos as a serious classical record company certainly has "arrived". For one thing, we don't really hear anything negative about the actual recordings any more, not even from the more snobbish critics who used to think that products which were three times more expensive were necessarily three times better.
How do you balance the demands of business with this obvious enthusiasm you have for music?
The average person interested in classical music may not have a very good head for business. He may have the passion and interest certainly, but he will probably lack the business experience I've had. I had the good fortune to run other businesses successfully before I concentrated on music. I think from that experience I managed to bring business sense to what can be a very unfocussed enterprise. People in general are in classical music with an interest in its overall lifestyle above all, not necessarily with a view to making a lot of money, although some do want to make money too. They very much like to produce classical music and if they had the time they would even produce the record covers and write the sleeve notes. Obviously just following your own inklings and preferences all the time is no way to run a business. I looked at what people were doing in the classical recording industry before I came along and saw that it did not always conform to good business practice as I understood it. I was lucky, in other words, to have been through the experience of surviving in business in general before I attempted to make a business out of music.
But is must be a dilemma sometimes to want to do some things which are just not good business.
Part of a successful business strategy is to do things you like to do even if occasionally they are not immediately profitable. Following your own instincts may add spice to the catalogue mix or bring prestige to the company. For example, Naxos took upon itself the task of doing a complete edition of Lutoslawski's orchestral works. You get tremendous respect from the consumers, critics and from the industry for doing that and ultimately that feeds back into the overall value of your enterprise. At present we're also engaged on a complete Penderecki edition and that sort of commitment creates a lot of positive feedback in the music industry. You have to take the long-term view as well. For example, ninety per cent of what we do will recoup its investment in the first two or three years. The remaining ten per cent we produce because we simply, perhaps unreasonably, want to produce that repertoire. The profit may be slow in coming or may not even come at all. But that doesn't mean to say that doing that ten per cent is not useful. It certainly is.
You've been compared to Philipp Reclam, Livre de Poche and Penguin Books. Are you part of that democratic spirit?
I think at the very least we've made classical music accessible and affordable. We've put interesting repertoire within the reach of every lover of music. People are willing to experiment at the Naxos price. They would be less inclined or totally unwilling to experiment at full price. So people everywhere are able to listen to more music and also to a broader range of music than they were able to listen to before. Obviously, I'm proud that has happened.
What are the challenges ahead and the future for Naxos?
The main challenge ahead to my mind is to adapt to the changing market place and to the ever more difficult retail scene. Retailers everywhere are increasingly under pressure to squeeze the maximum profit out of their limited shop floor space. The shops may still put Naxos products in our special racks but the problem is that shops which are under pressure to create more sales of discs tend to reduce their classical music departments first. The result is that Naxos in many cases is the only classical record label still left on sale in certain shops. Yet that is not really good for us either because we too need more traffic and exposure than that. Another important development has been the fact that the established record producers don't produce many new recordings these days and that means that they also don't find it necessary to lure customers into the shops with big marketing campaigns. I believe the customers are still out there but it may well be that we have to get our products to them in different ways - for example, by offering records for sale in "cultural" locations like book shops or art galleries. Then, as is the case for so many branches of business, we have to discover, or invent, a way to make money from the Internet. Perhaps for example we can make it attractive for people to subscribe to our forthcoming forty-channel radio network or to pay for downloads from our web site. But then of course we are faced with the issue of how to protect ourselves against piracy of our products.
Is piracy a big problem in the classical music industry?
Not really at present. The files in question are still quite large and are not easy to transfer over the Internet. Moreover, consumers want the sleeve notes, the record cover or the libretto - in the case of an opera - for example so there are quite a few hurdles to overcome for both would-be pirates and, incidentally, also for us in the industry, who want to offer our products to the consumer via the Internet. We will also have to find a way to satisfy the demands of people living in the sticks in the USA or Australia for example, far from broadband Internet or from record stores.
You are very buoyant about classical music and the industry. But what about your competitors. Have they given up? It seems to be doom and gloom at every turn.
They haven't exactly given up. I think you have to distinguish between the independent labels and the so-called majors. Like us, BIS, Harmonia Mundi, CPO and so on have long-term plans and projects. The major record labels are still to some extent pursuing big marketing ventures and crossover music projects as if they were in the movie business. EMI and DG still in a small way follow the tradition of signing important artists and doing standard repertoire with them but to all intents and purposes they have abandoned extensive, long-term projects. No "major" company has any great project out there at present, for example recording a new complete cycle of the Mozart piano concertos.
Where did the majors go wrong? And when?
Up until the 1980s, the major record labels worked like the independents do today. They undertook well-thought-out, large-scale projects and were happy to recoup their investment slowly over a period of say ten years. Then suddenly, at the height of the CD boom, the whole industry became like the movie industry, with huge budgets for promotion and marketing but without the potential profits of films and certainly also without the multiple exploitation possible in the movie industry. The companies all paid too much for their artists and made long-term contracts with them. Sony for example entered the market and declared its intention to become the leading classical record label by the year 2000. Everyone believed that they had to sign everyone up or else Sony would steal their artists. Thus they signed long-term contracts with everyone they thought it necessary to do so. Then the Three Tenors came along and the whole industry suddenly had different expectations. Overnight, they had a recording which sold like a rock record. Immediately they all went around trying to create the next phenomenon akin to the Three Tenors and that search led to the prominence of the Nigel Kennedys and the Vanessa Maes in the industry. Along with these false expectations, the overheads of the major record companies grew enormously, the whole supporting apparatus grew in size and eventually overall costs became so high that their whole enterprise was unsustainable. It was obvious to everyone, in the end, that the major companies - or anyone else - could not invent or discover something as lucrative as the Three Tenors every year. The second Three Tenors venture did not do nearly as well as the first and cost the relevant company forty times as much as the first one.
What's the situation like now?
Well, the independent labels are surviving, profitable or marginally profitable. Some of the majors are losing money. Some still make money from pop classics. The collectors now buy almost exclusively independent products. Obviously, we figure quite highly in the trend for independent labels. For example, 43% of the participants in a recent reader survey for BBC Music Magazine said that Naxos is the label they buy most frequently.
Is there anything that the industry could do to save itself? Form a cooperative?
I don't think the situation is as dire as all that. The average market share of classical music hasn't really dropped so much. It was higher during the boom years of CD but now classical music is back in its niche again. In the States, the share of classical records in the market was never more than 4%, now it's 3 or 3.5%. That does not constitute a dramatic drop. In Germany, at the beginning of the CD boom the market share of classical records was 20% but now it's 6-8% and during the LP age it was around 8%. The perceived drop has arisen from a stark comparison with the boom years, when the new technology drove the market. Occasionally too you get distortions in the statistics such as when the Titanic soundtrack was added to the classical music list. That single record amounted to 12% of total business in the classical sector that particular year.
What about the classical world in general. Norman Lebrecht says that all people are hearing these days of classical music is in television ads and movie scores.
I think that is not quite correct. A lot more people are hearing classical music than ever before, in feature films, TV commercials and in TV serials. Of course, the fact that classical material people hear on TV and in advertisements is not necessarily going to make people go to record stores and buy our CDs or make them go to concerts. It's not that easy or simple. I agree that we do indeed need more people to go to concerts but the occasional apparent decline in ticket sales figures is not a symptom of the classical music industry dying, it's a result of the fact that the concert organisers haven't come up with the attractive programmes and formats which might lure new and younger audiences back into the concert hall.
Are CDs killing concerts?
I don't believe so. The people who buy CDs are different from the ones who go to concerts. Music lovers tend to go to concerts up to the age of 40 or 45. Once they are over 45 they tend to go out less and they buy more CDs. That's only to be expected.
Isn't it true that certain orchestras are dying?
They're not dying. Some are not offered a new recording contract because their costs are too high. Just like the record industry, a lot of the orchestras let their costs balloon. If you pay every musician $ 100,000 a year, it's hard to break even, let alone make a modest profit. The prices of tickets keep rising and people are less likely to be able to afford to go to a concert. It's not just the actual cost of the ticket, it's the car park, it's the drinks afterwards and so on. The whole evening becomes unaffordable in the end for most people and the price of the ticket plays a large part in that.
Isn't the future trend for orchestras to issue their own recordings?
Certain orchestras are doing that but so far the idea hasn't been a success. The orchestras concerned don't have the distribution network necessary for success. The LSO for instance has earned very little money from their records because, for one thing, the label sells at budget price, and unless you have a decent distribution network, budget recordings can't become profitable and they are not successes. It takes more than just a cheap product to be successful. All in all, the orchestra members would be much better off financially if they accepted more modest recording fees.
What's the future of the music industry in your view?
The future of live performance depends on whether the organisations putting them on can keep their costs under control and whether they can put on interesting programmes to attract audiences. They may have to change the format of concerts, to make them less formal for example. The classical record industry I believe will continue more or less the way it is now. I don't see a big upturn unless someone has a grand new idea. There will be some growth in the area of DVD. DVD-Audio also has a future - be it surround sound or ten hours of music on one DVD - so any new technologies will have to prove they have that kind of potential for generating sales. We also, as I said, have to figure out a way of making a profit from the Internet.
Is CD going to continue? It's been around some time now.
For the next five or ten years I can't see anything challenging the pre-dominance of CD. The other formats may reach ten, twenty per cent of the sales CDs presently generate but that is really as high as it will go. SACD has not been a great success overall. DVD-Audio has a certain market but I think the CD will be largely unchallenged as the medium of choice. There are however some people who say digital distribution might be able to challenge the CD more than all the other formats. If you could listen on demand to anything you want to, any time you want, that facility would be attractive to a lot of people. For example, you feel like listening to Lohengrin one evening. You go to the Naxos site and you click on Wagner, find the opera you want, sit back and listen for the rest of the evening. I think people might like to download whole works too. Consumers really will need broadband in order to do that however. On an average broadband network you can download an hour of music encoded to a high audio quality in about six minutes. So overall I'm very buoyant and optimistic. I think it's unreasonable to think any other way. We shouldn't underestimate the staying power of music. It will certainly live longer than any one of us. We should think long and hard before we knock it.