Klaus Heymann – The secret to successfully run music distribution

Klaus Heymann, the founder of Naxos Music, answered to our questions, about the analogue and digital eras of music recording and distribution

Music distribution, and therefore music consumption, was one of the fields which had to deal with changes; technology changed, consumption changed as well, and the new ages influenced the choices of both producers and musicians. Klaus Heymann went through all these changes keeping a successful trend no matter what technology or kind of market he had to face.  Mr Heymann accepted to answer some questions about past, present and future of music distribution, and here's what he told us:

Mr Heymann, in the 60s and 70s you were a distributor for specialised audio equipment. Now the times for technology have changed very much, and use of technology is available for the big majority of people. How is this affecting the overall musical culture, and how will it do so in the future?

In the 60s and 70s technology was mainly concerned with the faithful reproduction of music, i.e. with sound. Today, technology is mainly concerned with giving people access to the widest possible range of music and less with sound quality, unfortunately. Too many people are satisfied with the sound of little earphones as more and more music is accessed via mobile devices. Very few people are willing to pay for higher quality. Even the leading audio manufacturers increasingly focus on mid-fi devices such as Bluetooth speakers. At the same time, there is a small but growing market for high-resolution recordings. Most of our new recordings since about 2010 have been produced in 24-bit, 48 or 96 kHz sound.

In 1973 you were invited to join the amateur Hong Kong Philharmonic Orchestra, as the chairman,  and after one year only you transformed it into a full-time professional orchestra. Which was your winning strategy based on?

Actually, I was the Honorary General Manager (I did all the work without getting paid) and Chairman of the Fundraising Committee. I applied normal business sense to the project, something that is not generally done in an environment that is characterised by subsidies and sponsorship.

Music distribution Klaus Heymann

Klaus Heymann with his library in 1990

After founding Naxos and along the years, you started managing to record not only the standard repertoire but also focusing on rare and not often recorded compositions. Why did you do that? Was it for marketing prestige, or was it an operation being paying off by itself in your music distribution catalogue?

I always thought that recording different versions of the standard repertoire doesn't really make sense. And rare repertoire pays dividends by getting more airplay and therefore generating more airplay revenue.

Obviously, if we want to attract new talent to the label we also have to offer these artists some of the warhorses. Since most of our standard repertoire was recorded in the early years of the label, I don't have a problem with recording new versions of the warhorses and in higher resolution -- there is a limited but growing market for better than CD audio quality.

Naxos 30 years

Naxos 30 years

Some factories believe in the return of analogue technologies in music distribution, and some sound engineers claim the unrivalled quality of vinyl records and old stereo systems. What's your opinion?

I think this is a myth. Vinyl records sound warmer because of the equalisation applied to accommodate a full-frequency-range recording. I can easily make a CD sound like an LP by applying the same equalisation curve to a digital recording.

Streaming, live streaming downloads and CDs: what will be the future for classical music distribution?

Obviously, streaming will dominate the distribution and availability of classical music. Downloads will decline along with CD sales. However, the revenue model will have to change – non-mainstream labels cannot survive with streaming rates of 0.5 cents/track or five cents for a whole album. These rates might work for pop songs that are streamed millions of times but not for albums that might be streamed 5000 or even 10,000 times. Just do the math! If an album is streamed 10,000 times that will generate $500 or the equivalent of selling 30 CDs! Apple Music's doing a little bit better at about $0.01 per track or $0.10 for a whole album but that is still far too little to compensate for the decline in physical album sales and downloads.

What's the actual proportion between paid and unpaid downloads and music consumption via the web? 

I've never been much concerned about unpaid downloads – most people who download content from pirate sites would have never bought an album at the regular download price. Legitimate sites like YouTube have a much bigger negative impact on paid downloads and other legitimate streaming sites because the YouTube per-track rate (excluding YouTube Red which is about the same as other streaming sites but not yet generating much revenue) is even lower than what other streaming sites pay.

Many artists want to make their own cd, as a sort of demonstration of their existence on the market, and not for everyone this is an actual possibility. Do you think this is really important for a musician? What would you suggest to them as a possible alternative? 

A good recording on a respected label is still important for artists, orchestras and opera companies -- it's a calling card and gives them worldwide exposure, unlike concerts which only have a local impact. Physical CDs are important for concert sales. On the other hand, I think the whole recording business will have to change because it is too much focused on the physical album format which is really not relevant for the digital era where there are no restrictions on playing times and where it might make sense to release a 60 minute album along with five shorter tracks for promotion and marketing. But somebody might also make a recording with a playing time of 100 minutes to be released in 15 minutes or 20-minute segments. 

Heymann with his wife, the renown violinist Takako Nishizaki and their son Rick

How do you see the role and impact of e-learning and online teaching?

I think interactive e-learning could be useful for students who don't have access to a really good teacher in the place where they live. But it cannot possibly replace the one-to-one traditional teaching although it may supplement such teaching. What will become more important will be one-to-one distance teaching using video conferencing software.  Obviously, with a lot of material available online students will have access to an enormous variety of information which may also impact the relationship with their main teacher for example when a famous teacher does an online masterclass and says something different from what the regular teacher is teaching the student. On the other hand, teachers also have an opportunity to learn from master teachers' online classes.

The music always comes first

Naxos Records is the world's leading classical music label as measured by the number of new recordings it releases and the depth and breadth of its catalogue. Naxos was founded in 1987 by Klaus Heymann, a German-born entrepreneur based in Hong Kong. Under his continuing stewardship, Naxos has developed from being known primarily as a budget label focusing on standard repertoire into a global music group comprising a raft of downloading and streaming platforms, a significant catalogue of multimedia products, a vast international logistics network, a recording engineering arm, a publications division, and a licensing department.  The Naxos principle: the provision of a wide range of good music, well played and recorded and available at a relatively modest outlay.
> More than 67,300 CDs, Over 967,000 tracks, as of March 6, 2012
> 2009 Grammy ® Award-winning Titles from Naxos
> The Classical Listening Library Par Excellence, December 22, 2008
> Gail Golderman & Bruce Connolly, Library Journal - E-Reviews, January 15, 2006