Although Naxos Sweden started with a strong Naxos focus, the label now accounts for only 25 per cent of its overall business. The company is crucial for Naxos itself because it is the distributor for the region, but Naxos Sweden has extended its activities beyond distribution. It has had to do this because it is apparent that it will take some years for the decline in CD sales to be matched by digital growth. The Naxos Music Library has secured a good foothold in academic institutions and public libraries – Sweden has perhaps the highest number of subscribers per capita – but, as yet, download sales are far from achieving a serious level.
Naxos Japan
It was ironic that although Japan was so much a part of Naxos right from the start – through the playing of Takako Nishizaki – it proved extremely difficult for the label to find a foothold in the country itself. This was partly because Japan was very traditional in its attitude to classical music, and put its trust mainly in the big stars marketed by the majors, such as Karajan or Solti, or figures of the past, such as Furtwängler or Toscanini. The very concept of a budget classical CD label was something of an anathema for Japanese collectors. So for the first years of Naxos, Heymann found no distributor willing to take it on.
Finally, in 1991, it was Heymann’s brother-in-law Atsushi Nishizaki who stepped into the breach. He left his job in television and started Ivy, a distribution company based in the family’s home town of Nagoya. It was not an easy job. Of course there was significant consumer prejudice to combat, but first of all he had to face the cartel that existed in classical distribution: even now there is one main organisation that dominates the distribution of classical recordings to record shops. In the end Nishizaki had to circumvent this standard route and distribute Naxos to the shops directly from his warehouse in Nagoya.
The next hurdle was gaining acceptance from the classical magazines, where again the label faced prejudice. The leading review magazine, Record Geijutsu, declined to carry reviews for some years, even when Naxos CDs were stocked in the main record stores, including both the HMV and Tower chains, and most of the Japanese chains and specialist stores. Nevertheless the prejudice of consumers began to dissipate: the public voted with its purse, and, as the decade rolled by, Naxos gained greater prominence in the stores. It didn’t attain ‘white wall’ status as in other countries, but this was largely because most CD racking in Japan caused the CDs to be displayed side-on rather than face-out. Throughout the 1990s the Naxos presence in most record shops grew significantly. Most magazines could eventually no longer ignore the trend, and they started reviewing the label.
Sales were not bad as the new millennium approached, but Heymann realised that they were not heading for the level that he felt should be attained, despite the diligent work by Nishizaki (who had now been joined in the business by his son Hiroshi). Having seen the success of Naxos’s special ‘national’ recording programmes, Heymann decided it was time to start ‘Japanese Classics’. The ancient Japanese music traditions of gagaku (the court music) and performance of music for instruments such as the shakuhachi or koto still continued; but the Westernisation of Japan from the start of the twentieth century had extended to music, and there were several Japanese composers who chose to write in a Western symphonic style. Most of them were known only by name and their works were rarely heard in concert. With the help of one of the leading experts in this field, Morihide Katayama, a series of key orchestral works were chosen to be recorded. In 2002 ‘Japanese Classics’ was born with the release of Japanese Orchestral Favourites (composers included Yuzo Toyama and Akira Ifukube) and it was to change the perception of Naxos in Japan. The CD was praised by reviewers in Japanese magazines. Mamoru Shima of Stereo Sound wrote, ‘This ambitious project will introduce our cultural heritage to the world. To be honest, it’s a shame that this is produced by an overseas company, but I assure you that it achieves a perfect ten in music, performance and sound. I hope that many people will enjoy this special gift.’ Yuji Ito from CD Journal wrote along the same lines, adding, ‘We can do no more than bow our heads to Naxos.’
It was followed in 2003 by the Violin Concerto and other works of Hiroshi Ohguri, played by the violinist Kazuhiro Takagi and the Osaka Philharmonic Orchestra conducted by Tatsuya Shimono. This was recorded in the Osaka Philharmonic Hall and produced by Andrew Walton. At the beginning of 2004 a CD was released of orchestral works by Kôsçak Yamada, who was the first Japanese composer to write in a symphonic style (his Overture, which was a world-premiere recording on the CD, was written in 1912). By this time, the coverage given to ‘Japanese Classics’ had attracted such a broad public that in the same year a poll by a magazine found that Naxos was suddenly the second most respected classical label in Japan – second only to Deutsche Grammophon! It was a remarkable accolade.
The ‘Japanese Classics’ series has never sold in any real quantities internationally, but the sales in Japan alone were more than sufficient to recoup the investment. Japanese Orchestral Favourites has sold nearly 50,000 units, Toru Takemitsu’s Toward the Sea and other works has sold over 40,000, and many more have achieved figures in the region of 15,000. Even though a few of the twenty-five titles have only reached 10,000, the series established the whole catalogue in Japan. This meant, too, that Record Geijutsu took notice of the label, though after all these years the monthly magazine has never given Naxos a cover feature.
By 2007, having established Naxos firmly in the Japanese classical market, the Nishizaki family was ready to retire and to close Ivy. Since 2005 the Naxos digital and licensing business had been handled by Naxos Digital Japan, which was a Tokyo-based joint venture started by Klaus Heymann and Ryuichi Sasaki (an executive with an IT background). This company now took over the physical distribution of the Naxos label and became Naxos Japan. It had already been successful in the digital arena: the Naxos Music Library had found favour with an amazing number of individual subscribers in addition to educational institutions. To date, there are more individual subscribers to the NML in Japan than in the rest of the world put together. Already in the habit of listening to and downloading music on their phones, the Japanese subscribers particularly welcomed the NML iPhone and Android applications.
Income from Naxos Japan is now divided into three equal areas: NML subscriptions, licensing (for games, publishing and other ventures), and physical sales. The CD is still very much alive in Japan; and with the initial plans for ‘Japanese Classics’ largely complete, Naxos is looking to a collaboration on new recordings with the Tokyo University of Fine Arts and Music.
Australia: Select Audio-Visual Distribution
For the first fifteen years, Naxos was distributed in Australia by independent companies – notably Sonart, which was managed by Les Hodge. Over a decade and more, he was responsible for establishing Naxos in Australia. In 2003 the sales, marketing and distribution operation was taken over by Heymann: a new company, Select Audio-Visual Distribution (SAVD), was formed, which was based in Sonart’s former premises in Sydney. Six months later, Andrew McKeich, a veteran of the Australian classical record scene, having run his own label and worked for other companies, joined as managing director.
There are circumstances unique to Australia that present their own challenges to a company importing and distributing classical labels, even when, as with SAVD, it is the largest of its kind in the country. In common with other Naxos-owned distribution companies it represents many of the top independent labels (especially from the European market) as well as the Naxos labels. However, Australia is a large country with a small population, distant from classical music centres in Europe and the US, which means that rather different conditions prevail: there remains a healthy classical music retail sector, more so than in most developed countries, with some fine specialist stores. At the same time, Australian-based mailorder firms are few and far between, and downloads have yet to become a significant area of the business.
As McKeich points out, it is a highly competitive market for a label such as Naxos,
with generally low retail prices for back-catalogue CDs, a growing list of other budget labels, and a state-run record label, ABC Classics, which releases and strongly supports Australian classical music on disc. There is also the increasing issue of importing through amazon.com (and even amazon.co.uk): when the Australian dollar is strong it can be economically beneficial, even factoring in postage, for consumers to order from the US.
When McKeich took over, the priority was to revive the distribution and general standing of Naxos in Australia, which had diminished in the last years of Sonart: retailers had lost faith in the efficient supply of Naxos CDs. The huge back catalogue was still in demand, especially for leading titles such as Peter and the Wolf (read by the Australian Barry Humphries) and Holst’s The Planets. In addition, there was always interest from classical collectors in the new releases. In order to reach a wider audience, and counterbalance the specialist nature of these new releases, McKeich and his team developed with considerable success a range of popular compilations. The Ultimate Opera Album was a two-CD set containing many of the most popular arias, choruses, overtures and orchestral interludes from 400 years of the genre; but the masterstroke was the cover. ‘We decided to go against the contemporary practice and we boldly put a large, traditional Wagnerian soprano on the front.’ He was appealing to a particularly Australian type of humour and he clearly understood it because the set sold in the thousands. Five years on it was still a bestseller in the shop of the Sydney Opera House. After several months it was joined by Extreme Classics: a two-CD set of the best loud and aggressive sounds in classical music, beginning with Tchaikovsky’s 1812 overture. This was another sales success.
McKeich brought these and other compilations together with a commercial television campaign called ‘Experience the Classics – all the classical music you will ever need’, which resulted in strong sales. Other labels decided to follow suit, which forced the SAVD marketing initiatives to move into other areas, including the more precise targeting of collectors. The mass market for low-price classical CDs is still there, believes McKeich, but online discounting, parity with the US dollar, and the ease of purchasing abroad have caused a decline, and no one in this business can rest on his laurels.
As did other Naxos distribution companies, SAVD benefitted from the rise of the classical DVD. McKeich comments, ‘As collectors found they have enough audio in their collections, they have been turning to visual material. The market seems more receptive now to opera and ballet DVD productions, even though they are usually higher priced than movie DVDs.’ As for the digital market, although classical downloads are not making a significant impact in Australia, the Naxos Music Library has been established in educational institutions.
The strength of the Naxos position, once again, is that it is the house label of its national distributor: at around 35 per cent of SAVD’s sales, Naxos is in pole position in the company. Even so, it is only part of the distributor’s infrastructure: the broad base of SAVD is its safety net.
Naxos Far East
The strong interest in Western classical music in the Far East can be seen by the number of fine musicians coming from China, Japan, South Korea and neighbouring countries, and this is reflected in classical CD sales: there is a healthy market on Naxos’s own doorstep. It has never been an easy market, however: Hong Kong is relatively small and the sale of CDs and DVDs into China has been bedevilled by piracy. Even a budget label such as Naxos can produce a profit for those determinedly engaged in illegal copying. On the other hand, limited quantities of regular CDs are imported by the China National Publications Import and Export Corporation. Naxos has also been able to license some of its books, together with the accompanying CDs, to publishing companies in China.
Rick Heymann, Klaus Heymann’s son, has run Naxos Far East since 2008. He specifically looks after Hong Kong, China, Taiwan, Singapore, Malaysia and Thailand; and, being able to speak the language, he regularly visits Japan, where he is on the board of Naxos Japan. Naxos Far East represents forty labels in addition to the Naxos group, including many of the main classical DVD labels (Arthaus Musik, Opus Arte, EuroArts and C Major). On DVD, concerts sell better than operas, perhaps because few DVDs offer Chinese subtitles; and Blu-ray is growing steadily. Among the CD labels distributed by Naxos Far East are Harmonia Mundi, BIS, Challenge Classics, OehmsClassics, Hänssler Classic and Audite.
‘The market for audiophile labels in Hong Kong and China is huge, which is why First Impression Music and Reference Recordings are our top labels in revenue terms,’ explains Rick Heymann. ‘We get some very good orders for audiophile recordings, usually from our China partners. The number of rich people is increasing rapidly in China, and they are looking for ways to spend their money. So, they buy hi-fi equipment worth US$20,000 to US$60,000 in some cases, and purchase these audiophile CDs from us. These are people who buy cables that cost US$1,000-plus for their hi-fi equipment!’
The CD market is quite stable in Hong Kong. ‘iTunes is not here yet, and there are no really successful download sites. Core classics, compilations and boxed sets sell well here and in Asia in general: boxed sets do especially well in Taiwan. As much as 99.9 per cent of our sales come from CD shops – we get very few mail-order requests. As in many countries, CD shops can no longer sustain their business by only selling CDs, and they are carrying other products: DVDs, video games, iPhone accessories, T-shirts and books. But we are also doing more with concert sales in Hong Kong and China.’
The bestselling titles in the Far East continue to be those of Rick Heymann’s mother, Takako Nishizaki, whose star status in Hong Kong ensures continued popularity for all her CD and DVD recordings, particularly the violin concerto by Chen and He, The Butterfly Lovers.
Naxos Korea
The Naxos presence in South Korea is rather unusual. The physical side of the business (CDs and DVDs) is handled by an independent distribution company, Aulos Media; but the major source of revenue comes from Naxos Korea (‘Naxos Global Distribution, Korea’), established in 2004 initially to sell Naxos’s range of digital services and subsequently also to license Naxos recordings to all kinds of media. The company was the idea of Kai Czepiczka, who was born and educated in Germany. He studied German literature but in his twenties he became deeply interested in classical music and started collecting CDs. He has lived in Seoul, South Korea since 1994, and he used to teach in universities – until he met Klaus Heymann, as he explains:
‘Around 1995 or 1996 I was looking for ten Marco Polo CDs at retail shops in Seoul but was told by the staff of the shop that they don’t have them on stock and I should come back next week. This continued for a couple of months but the CDs never arrived. So I sent an email to Naxos in Hong Kong asking why it was not possible to purchase Marco Polo CDs in Seoul. I wrote to an address such as [email protected] or customer service – I don’t remember – but it was not an address of a named individual. To my surprise I received an email from Klaus Heymann himself! He told me he was going to be on a business trip in Seoul a week later and I could tell him which CDs I wanted. I sent him the list and he told me to meet him at his hotel in Seoul. He gave me the CDs (for which I paid him in cash) and he invited me for a tea because he was curious about me as a customer and about the general retail situation in Seoul. So we talked for a while and later kept in contact. I told him that he was welcome to contact me whenever he had questions about the situation in Korea and he did this a couple of times. Many years later, in 2003, I was getting tired of my job at the university and I read that Naxos was looking for staff to hire in Hong Kong. So I sent an email to Klaus and asked him if he would be interested in setting up a Naxos branch in Seoul. After I sent him my business plan he agreed and I founded Naxos Korea in February 2004. Ironically, if I had had the chance to purchase the Marco Polo CDs from the shop eight years before, and if Klaus didn’t look after this individual customer in the way he did, Naxos Korea wouldn’t exist today.
‘In 2004 Naxos was already working with distributors
in Korea and had introduced the digital services, such as the Naxos Music Library, as well. As Korea has always been one of the countries with the best IT infrastructure [it has had perhaps the best broadband network in the world for quite some time and Wi-Fi is more widespread than in any other country], I focused on the digital business first. There was no reason to put the distributor out of business and they already had a distribution network for physical products. But the new, digital business promised a lot of opportunities. We started with selling NML, NSWL and later NML Jazz and finally the new NVL. We then also added licensing and the business with local DSPs [download service providers]. The business developed very well: in 2004 I started on my own from scratch and now we are four very busy people.’
Naxos Korea licenses Naxos recordings and texts to many different kinds of companies. Some of the more unusual deals have included: preloading tracks on mobile phones; preloading tracks on GPS systems; licensing video content to IP-TV operators; and setting up an educational music-streaming service with KBS (Korean Broadcasting System), the leading broadcaster in South Korea. The Naxos Music Library has also been sold very successfully: most Korean university libraries, and practically all those with music departments, now have subscriptions.
‘It’s an exciting business and often I feel that we are the only classical music company in Korea which is looking into the future with optimism,’ says Czepiczka. ‘The digital business moves forward very fast and we are lucky to have the content and (by now) the experience to run a successful business.’
The Story of Naxos Page 41