It was not only the advent of the CD that laid the ground for a new enterprise such as Naxos: there were other considerable changes to the classical record industry in the late 1980s. Some of the majors had new owners who began to question the traditional, comfortable ways of operating. Large multinational companies became interested in the potential profits of classical music as consumers replaced their LPs with CDs. In 1986 Bertelsmann, the German publishing and magazine group, bought RCA so that it could have music alongside print. In 1987 Sony bought CBS Records and created Sony Classics as part of its drive to acquire content: it didn’t want purely to make the CDs. In 1988 the Time Warner group decided to get deeper into classics and bought the German company Teldec; four years later the group was joined by former EMI president Peter Andry, who brought Erato into the fold and founded a separate label, Warner Classics. Thus there was created a new ‘major’ with three arrows in its quiver, plus Elektra Nonesuch as a kind of ‘independent’ within. All these classical companies, though they didn’t know it, were soon to be subject to tougher business-accounting policies: a target return on investment of less than two years rather than the hitherto relaxed return that had predominated.
Along with these changes on the label side of the business, equally important changes were happening in the retail world. For years, classical record sales had been driven by the classical departments of chain record stores and a network of independent classical music shops run by highly knowledgeable enthusiasts. Both these channels had gained a reputation for being, at times, somewhat forbidding. Those who were less than confident in their classical knowledge could find the experience of buying a recording a daunting one.
These stores had previously concentrated their efforts on full-price product and mid-price reissues. The advent of the CD changed that. By 1987 there were already mid-price and even budget CD lines on the market. In October 1987, in the UK, EMI introduced the CD equivalent of its popular ‘Music for Pleasure’ line of LPs, retailing at £6.99. British multi-chain stores with record sections, such as WH Smith and Boots, began sourcing cheap CDs to retail at £4.99 and even £3.99. Enterprising independent distributors were scouring the world to meet this demand. Recordings were acquired from Yugoslavia and Slovakia, though rumours rapidly began to spread about their dubious provenance and sometimes questionable quality.
It was at this moment that Naxos appeared, started almost by accident by Klaus Heymann, the Hong Kong-based entrepreneur who loved classical music as much as he loved grasping a business opportunity. If his Marco Polo was a result of the former, Naxos was a product – at the start – of the latter. It entered the record retail channels in a variety of ways, starting with supermarkets and general-store chains, and only gradually found its way into the classical mainstream. For example, in the UK Naxos became the exclusive classical label for Woolworths in 1988, at the time one of the leading record retailers in the country with 10 per cent of the market and a need for a budget classical line. It was the first key step to breaking into the UK market on a national basis. It wasn’t particularly auspicious because it restricted a label that had aspirations for a serious international classical presence, and Naxos was initially in danger of being lumped with the other fly-by-night labels that featured Eastern European orchestras. The fact that it presented new digital recordings (‘DIGITAL/DDD’ was prominently displayed on all the covers) of reliable performances was not often noted by rivals, journalists or even retailers in those early days. It could have sunk into obscurity and the nondescript bargain bins with the others. That fact that it didn’t remains one of the remarkable stories of classical recording.
The reason for its survival was due partly to its being in the right place at the right time and partly to the immense energy and true dedication to classical music that went into its development and expansion. It was certainly the right moment for a budget CD label to come through. Music Week, the UK trade magazine, noted in the summer of 1988: ‘Established classical consumers will be looking to change their home library over the next five years to a new hi-tech medium, providing steady income for retailers with a basic stock of classical repertoire.’ And so they did. Sales of CD recordings were growing by 20 per cent per year. By 1988 CD sales were equalling LP sales. It was boom time – clearly helped by cheaper CDs.
Even the majors recognised this. Late in 1988 PolyGram announced budget lines of CDs using back-catalogue analogue recordings, retailing at £5.99. There were known names in these lists – at least known to classical aficionados – but that was not of interest to the new buyers of classical CDs in Woolworths. They wanted to see the words ‘DIGITAL/DDD’ stamped on the CD covers. The majors thought that ‘star’ names on CDs, albeit in remastered analogue recordings (AAD), would brush aside these upstart versions from Eastern Europe. They were wrong.
In fact, it would have been extraordinarily prescient for anyone in PolyGram HQ to think that this little label from Hong Kong would pose a threat to the established order of things. DG had much more important things to think about. In 1989 Herbert von Karajan died. It was truly the end of an era, and DG executives despaired at the thought of finding a replacement. They hoped it would be Claudio Abbado, who succeeded Karajan at the Berlin Philharmonic and was on their books; but in their hearts they knew that he would never match the old master for sheer presence.
They must have felt doubly threatened because, over at EMI, a scruffy but brilliant violinist by the name of Nigel Kennedy was racking up two million sales with a patchy recording of The Four Seasons (which had been recorded at different times and edited together) through force of personality and pop-style marketing. It was still a celebrity event, but with a totally different character and a new popular reach. Karajan never attempted to be popular – though he became so, in a way – just grand.
In 1990 the Kennedy campaign was put into the shadows by the success of The Three Tenors and their tour de force at the World Cup in Rome, in the ruins of the Baths of Caracalla. Luciano Pavarotti (Decca), Placido Domingo (DG) and José Carreras (Philips) each represented one leg of the PolyGram stool; superbly marketed, they sold millions, creating a wave that all three were able to ride for years. They were given a superb start by the clever idea to use Pavarotti’s recording of ‘Nessun dorma’ as the theme music for all the UK television broadcasts of World Cup matches. Decca had a hit on its hands before The Three Tenors CD was even pressed.
However, it also put the spotlight of investment finance on the majors. Suddenly classical music was not only prestigious but a commercial commodity. The spectre of financial expectations slid into the classical boardrooms: the money men wanted a part of the cake. The majors, within multinational companies, now found themselves in a darker environment, where financial targets needed to be met and awareness of the bottom line was about profit, not a good bass section. Many expectations were simply unrealistic for regular classical sales. Meanwhile, Naxos’s fast-growing catalogue, efficiently marketed and distributed, and sold at a price anyone could afford, began eating into the core classical sales as well as appealing to a wider, non-specialist classical audience. Its slimline operation was fashioned for the times.
Unable to produce a ‘Three Tenors’ success year after year to meet the financial targets expected of them, the classical managers at the majors were forced to change their ways. Through the 1990s it became clear that the old, gentlemanly methods of running a major classical record company could no longer apply. A large roster of star artists on generous contracts could not be maintained; horror on horror, many who had been with the labels for a considerable number of years had to be ‘let go’. Cuts undreamed of a decade earlier had to be made. The demands of the new accountants were unrealistic and unsustainable in the classical music world, but the damage was done. No longer could core repertoire be repeated for the benefit of new artists wanting to give the world their Beethoven, their Brahms. No longer could these majors nurture young artists. Instead, stars with popular appeal had to be found
, propelled into the public eye, and ditched if they didn’t make an instant mark. Promotional budgets, for advertising and for journalistic trips, were cut. Recording budgets were cut. No longer were the majors able to carry the torch for new interpretations: only successful crossover projects could meet the requirements of the bottom line.
These new pressures had a knock-on effect throughout the classical music industry and resulted in a further development: artist labels. When Colin Davis’s association with Philips was ended, he, the London Symphony Orchestra and the LSO’s manager Clive Gillinson decided to form their own label, LSO Live. Other orchestras followed suit, including the London Philharmonic Orchestra. Independents, which had traditionally kept away from core repertoire, began moving into the central classical road. Artists who found themselves adrift without a record company began looking for other possibilities.
Meanwhile there was the continuing pressure exerted by the small, seemingly insignificant label based in Hong Kong, which was selling its CDs for less than the value of the smallest banknote in each country. The main nineteenth-century symphonies played by Eastern European orchestras under the baton of unknown conductors could not really be of any significance, could they? Surely the main violin concertos played by an unknown Japanese violinist and the piano concertos by a quiet Hungarian could not compete in the main classical marketplace?
They could. From being an exclusive line at Woolworths in 1988, the company moved to the mainstream UK record shops, and within a short time the famous ‘Naxos White Wall’ began appearing all over the country. It was a pattern that was repeated all over the world – at different speeds, in different ways, yet always describing an upward graph. The white cover with its simple, basic graphics had created a standard look that made the label instantly identifiable. It stood out from all others. In a remarkably short time Naxos became perceived as a brand, the only brand of its kind in mainstream classical music. People started to home in on it; and because the repertoire was expanding rapidly, Naxos became a brand that they wanted to revisit. It began to change the face of the classical record departments. As the concept of ‘own branding’ took hold, it also began to appear in other, non-traditional outlets, such as bookshops. By the early 1990s it had established a ubiquitous presence in many markets.
There was continued development in the last two decades of the twentieth century and an exciting volatility in classical recording. There were opportunities everywhere, and those who emerged and still survive demonstrated not only a deep classical commitment but also the ability to move with the changes and even see them coming. The majors had a swansong with the celebrity culture; the new independents showed themselves to be truly inventive in terms of repertoire, bringing lost or forgotten music to consumers of recorded music. Both majors and independents recognised the rise of period performance.
Equally significant was the provision of classical music to a vast popular audience at a desirable price. This was achieved more by Naxos than by any other company, and through curiously plain, traditional values: providing reliable performances of central repertoire in new digital recordings on CD, even with basic but dependable liner notes. Classical recording would never be the same again.
By the middle of the 1990s it was clear, to those who could see the signs, that a new order was emerging. The dominant hold maintained for so long by the majors over the classical record industry was being undermined from both inside and out. The digital international world was a different one. A new customer base was going into record shops willing to walk out with bundles of white-liveried budget CDs, knowing that reliability was assured and a real gem might be discovered. These recordings were not coming from grand offices in the capital cities with long classical traditions (which was, ironically, one reason for the company’s success – for many years, the majors simply didn’t take it seriously as a threat): Naxos had its headquarters in Hong Kong. In the UK, for the first key years of its growth, there was an office in Sheffield and then in Redhill, Surrey. In the US it was based in Cherry Hill, New Jersey and then in Nashville, Tennessee. In Sweden it was in the country town of Örebro; in Germany it was in Münster.
Increasingly, as the 1990s progressed, these Naxos offices became distribution points for other classical labels, in some cases becoming the main classical distributor in the country. It was not a plot that the grand men who ran PolyGram or EMI or Sony could have imagined would happen. By the first decade of the twenty-first century, however, it was very clear where their main opposition was coming from.
Two
Klaus Heymann: A Profile
Klaus Heymann is tall: 1.93m (6’3”). Now in his mid-seventies, he is white-haired, slim and walks with a slight stoop, perhaps the result of spending so many years in the Far East where he towers over most, or maybe an inevitable consequence of all those years hunched over a keyboard – typewriter or computer. His principal home has been in Hong Kong for more than forty years, and although he now spends a few months each year in his second home in Auckland, New Zealand there is little suggestion that he will leave China in the near future.
He has always found it particularly satisfying that the revolution caused by Naxos in the classical record industry came not from Europe, the established centre of classical music, or from the United States, but from Hong Kong. He often says that had he been based in Europe he would not have been able to do what he did. It was precisely because Hong Kong was not a classical music centre that Naxos was able to grow in size and strength, and expand worldwide. None of the major classical companies was looking to see what was coming out of the East. By the time they did, it was too late.
He has never been tempted to move. The headquarters of Naxos remain there – in the hi-tech quarter of Cyberport. His wife, the Japanese violinist Takako Nishizaki, has a growing violin-teaching practice (Suzuki Method); and his son Rick, now in his mid-thirties, runs Naxos Far East from Hong Kong.
Heymann’s roots in Hong Kong go deep. The entrepreneurial, risky, high-octane atmosphere, flavoured by the Chinese ability for commerce, has always suited Heymann. He scored his first commercial successes there, and built a comfortable fortune well before Naxos. He has made the most of his position as a businessman comfortable within Chinese circles in particular and Far Eastern circles in general, though he started his business life in Europe. German by birth but European by education (Portugal, Paris and London as well as Frankfurt; fluent in four languages and conversational in more), he is international in outlook.
This even applies to his name. He generally introduces himself as Klaus ‘Hay-man’ rather than rigidly insisting on the correct German pronunciation of ‘Hei-mann’. When he goes into his offices in Cyberport most of the staff address him as ‘Mr Hayman’. He studied linguistics and his English is impeccable; but he speaks, curiously for a European, with a noticeable American colour. This was probably a legacy of his early years in Hong Kong and Southeast Asia, the time of the Vietnam War, when he was dealing mostly with Americans. He absorbed the tones, and in any case it was more appropriate for business.
For Klaus Heymann is, at heart, a businessman. He has an arts and humanities background. Mention Seneca or Don Quixote and it transpires that he read them in the original language. Literature, history, politics and political theory were the stuff of his student years and he has not lost them. Yet he is the first to admit that now he does not read books. He gets on the plane (first class) and reads business or classical music magazines, or The Economist or the Financial Times, or business analyses. He absorbs the current concepts of ‘the long tail’ or ‘the global market’ or ‘the tipping point’ or ‘the black swan’; he keeps up with world politics, mainly insofar as it touches his business, and technological developments.
For a septuagenarian, he is exceptionally well informed concerning digital directions and developments. When fax technology came in he was one of the first to leap at it, and he insisted that all his business colleagues kept up. It is similar with email: he
receives hundreds of messages a day, but any of his vast number of regular correspondents around the world will say that he almost always responds within a day – more often than not within hours, even minutes. It seems effortless. He was a very early adopter of Skype: Naxos offices around the world were required to get on to it. He drew the line at Skype video, however – because he says it uses too much bandwidth. In his late sixties he began to suffer from repetitive strain injury due to the hours he spent using his mouse. He switched to a pen mouse, and then adopted the early versions of speech recognition software. If you watch him at his computer now, you see him mainly speaking to it. He has top-of-the-range speech recognition software that allows him to answer all emails with barely any need to touch the keyboard. Nothing must stand in the way of fielding the torrent of communication that comes in from all time zones.
Mostly he works from the office in his home in Hong Kong, an ante room beside the main drawing room. The desk is impeccably tidy. The laptop computer sits in pride of place. In the background can be heard his wife practising or teaching. He may have the Naxos Music Library playing. If a document comes through that requires careful reading, he prints it out and reads it on paper rather than on the screen. Otherwise, donning his headphones with a microphone, looking for all the world like a call-centre person, he speaks to his machine, and to the world, and runs the Naxos empire.
And that is exactly what he does. All Naxos roads lead to this little office. Sometimes, the email or Skype line may lead to his more impressive steel-and-glass office – with a larger desk – in Cyberport, though he now goes there only a couple of times a week. Those lines could lead anywhere in the world of course – to Shanghai, Nashville, London, Munich – wherever he happens to be.
From his early days in post-war Germany he found he had a natural aptitude for business, for commercial opportunity. This was partly due to his facility for mental arithmetic. He is extremely quick at weighing up costs and profit margins, and he has an instinct for what the market will take. At first it was just trade. He preferred it to be something technological – cameras, the latest hi-fi equipment, cutting-edge studio equipment – because he read about them anyway. He loved a challenge, particularly when circumstances forced him to think sideways to resolve a situation. Not for him were the formal avenues to trade. If it could be done faster, more profitably – be it in a somewhat unorthodox manner – it was all the better. He picked up the nuts and bolts of advertising and marketing while working for Braun; and he learned how to start a business from scratch when he went to Hong Kong to open the office of an American newspaper.
The Story of Naxos Page 3