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HNH International Limited

Business as an act of creation
by Martin Morse Wooster, The American Enterprise Jan/Feb 2002

Most classical music recording companies these days suffer from falling sales and rising costs. Many of the once-great labels, such as RCA Red Seal, Deutsche Grammophon, and Decca, have dramatically cut back or even eliminated new record releases.

But one skyrocketing upstart shows that it's still possible to produce great classical records and make money. Naxos, a budget-priced line, produces nearly 200 new recordings every year. And while classical music lovers are ignoring highly promoted $20 discs from the major labels, they eagerly purchase Naxos's $6 albums, knowing that Naxos products are just as good as their higher-priced competitors-for a lot less money.

"The increasing success of Naxos," Britain's Guardian recently observed, "has given the big record companies plenty to think about. It has shown that the demand for budget-priced works is by no means confined to the most popular works, and that CD buyers are willing to explore the byways of the repertory when the cost of a disc is so low."

Naxos is a transnational company. It is based in Hong Kong, was founded by a German, and much of its staff is British.

The visionary who created Naxos is Klaus Heymann. Now 67, Heymann got into the recording business relatively late in his career. He began doing publicity for Max Braun AG, the appliance and electric-shaver manufacturer. During the Vietnam War, he moved to Hong Kong to head the branch office of an American weekly newspaper. After the war, Heymann became the Chinese and Hong Kong distributor for Revox tape recorders and Bose loudspeakers.

To promote his clients, Heymann began to organize concerts in Hong Kong sponsored by Revox and Bose in the 1970s. This led him into the world of classical music. He began to import records, and also joined the board of the Hong Kong Philharmonic, where he met--and married--solo violinist Takako Nishizaki.

Heymann then started a small record company, Marco Polo, to record esoteric compositions. But it was the introduction of the compact disc in the mid 1980s that made Heymann a major player in the classical music world. He saw that the big music companies were charging $20 for compact discs, while comparable LPs were sold for $6. If he could sell good compact discs for $6, he could make money.

So in 1987 Heymann launched Naxos. The name comes from Greek mythology; it is the island where Ariadne was abandoned by her lover Theseus after being seduced with music. Richard Strauss later made this legend into an opera.

From the start, Heymann made several strategic decisions which ensured that Naxos would succeed. Instead of hiring high-priced orchestras, he would use talented regional orchestras and rising young stars. (Initially, he relied heavily on high-quality but low-profile Eastern European orchestras.) And while the major companies were locked into expensive, long-term royalty agreements with major orchestras, Naxos paid its orchestras only for specific recordings, helping to keep costs down.

And because Naxos does not hire stars, it doesn't have to shell out money for advertising, hype, or perks needed to avoid temper tantrums from prima donnas. "No money is wasted on unnecessary expenses such as large delegations of hangers-on at recording sessions and expensive artist promotions," says a statement on the naxos.com Web site. "Naxos artists do not get famous through glossy brochures and full-color advertisements in the international press, but by producing first-class recordings which sell in large quantities throughout the world."

Naxos's thrift extends to its American offices. Instead of buying high-priced space in Manhattan or Hollywood, Naxos of America is located in Nashville, where the company found reasonable rent with an abundance of skilled freelance recording engineers and other technical people who normally work on country and contemporary Christian albums. Naxos has also contracted with the Nashville Symphony to record several albums.

Another Naxos policy is that, with rare exceptions, it only records a composition once. This enables the company to continually extend its catalog and avoid duplication. Thus, instead of having several versions of Beethoven's symphonies competing against each other in the market, Naxos uses its time and energy to record fine but obscure compositions by Beethoven's contemporaries that don't currently have good modern recordings. (For very obscure recordings, Naxos retains its full-priced Marco Polo line.)

Thus the Naxos catalogue is a treasure trove for fans of particular styles willing to take a $6 gamble on an unfamiliar composer. Say you like late-romantic British composers. A big music company might only stock the symphonies of Ralph Vaughan Williams. Naxos is happy to sell you the six symphonies of Vaughan Williams's neglected contemporary, Sir Arnold Bax. Then it can sell you the nine symphonies of Sir Malcolm Arnold, a contemporary composer who is the best modern successor to Vaughn Williams, Bax, and Sir William Walton.

In the past two years, Naxos has begun extensive recordings of American music. For example, Meredith Willson is best known as the composer of The Music Man, but he also wrote two symphonies, available on one Naxos disc. Naxos has even unearthed the work of William Henry Fry, best known in music history as the composer who, in the 1850s, was the first to denounce the New York Philharmonic for playing music by foreigners rather than good old Americans such as himself. According to New York Times music critic Joseph Horovitz, Fry's "Santa Claus Symphony," recorded by Naxos, was "too bizarre" for the Philharmonic, but a great success at a more popular venue known as "Monster Concerts for the Masses," where the people enjoyed Fry's "programmatic cues...blatantly signaling a snowstorm, a perishing traveller, Santa's sleigh and the like."

At the other end of the spectrum, Naxos also finds a market for difficult avant-garde composers. The company is committed to releasing all the compositions of Sir Peter Maxwell Davies, Britain's most eminent contemporary composer, and has even commissioned him to write ten string quartets. The company has sold 20,000 copies of a disc of the piano sonatas of Pierre Boulez, the well-known French conductor also known for his radical compositions.

Klaus Heymann told orgalt.com (a website for enthusiasts of organ music) that Boulez probably doesn't have tens of thousands of fans of his compositions, but buyers "may have recognized his name as a conductor, and thought, `Well, that looks interesting,' and taken it. And they bring it home and play it and many will say, `Oh my God! What is this!' and then it goes onto the shelf. But then, some will play it and think it sounds a bit strange, but they will try it again, and maybe get into it."

The Boulez story shows the secret of Naxos's success. Because buyers can get three Naxos discs for every one they purchase from a larger company, they don't feel cheated if one of the three discs contains music that is unappealing to them. And because Naxos discs are high-quality recordings that routinely win commendations from critics and music magazines around the world, buyers know they won't get junk.

Since Naxos is a privately held company, it's hard to gauge its success financially. But it seems to have between 15 and 20 percent of the classical music market in Britain and Germany, more in Scandinavia, and somewhat smaller shares in other European countries and in the US. Another sign of Naxos's financial health is that it has 200-300 projects in production at any one time.

Naxos's larger rivals have tried to compete with its mold-- breaking formula. But these companies, burdened with overhead and expensive royalty agreements, can only offer comparable-priced discs from their limited backlists. Some orchestras have decided to produce their own discs at Naxos-style prices. In December 2000, for example, the London Symphony Orchestra began issuing its own recordings at 5 pounds a disc. Other orchestras are likely to follow, particularly if broadband technology becomes common enough that orchestras can easily download music directly onto the computer terminals of consumers.

But until that happens, Naxos has ambitious plans. They're continuing their efforts to record the complete works of most great composers, such as a 75-disc compilation of the piano compositions of Franz Liszt. They are expanding into operas, including producing some on DVDs. Naxos is also edging into audiobooks. And they still have plenty of obscure music to record. Coming up on the American Classics line, for example, is at least one composition by actor Lionel Barrymore.

Klaus Heymann's entrepreneurial vision has boldly demonstrated that it's quite possible for a company to greatly enrich our cultural life, while at the same time serving myriad consumers-and making a handsome profit.

TAE associate editor Martin Wooster owns many of the discs discussed in this article.

Related link:
http://www.theamericanenterprise.org/










 
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