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Naxos is 25 years old. The classical music label that started out as a small company making budget cds is now one of the biggest names in the business. It has a catalog of more than 7,000 releases and offices worldwide, including a US headquarters in Franklin. It got to that point despite breaking all the old rules for success in the classical record business: there’s no focus on big stars, no royalties, and Naxos music ventures far from the classical world’s greatest hits. In fact, even the company’s founder expresses surprise at what Naxos has become.

A MUSIC LOVER’S HOBBY

Heymann grew up in Frankfurt, Germany, but has spent much of his adult life in Hong Kong. His wife, Takako Nishizaki, is a concert violinist.

Klaus Heymann made his fortune in Hong Kong. He distributed Bose stereos and building music studios and radio stations. Heymann started Naxos essentially as hobby. For a while it was no moneymaker, to the point that Heymann says his bank manager questioned the wisdom of keeping Naxos afloat at all. “He always said, ‘Mr. Heymann, why do you make all those recordings? You already have so many. Invest your money in something sensible, you know, property, bonds, shares.’ He doesn’t say that anymore.”

NEW OPPORTUNITIES ONLINE

Naxos is a profitable company of its own now because it embraced the internet from the start. Even before Napster went online in 1999, Naxos was streaming low-fidelity audio of its albums on the web. Just a year after Steve Jobs unveiled the iPod in 2001, Heymann introduced an online subscription service with unlimited access to every Naxos recording, kind of like a classical Spotify. Soon after, Naxos became the first classical label to sell its entire catalog on iTunes.

Digital revenue, including the Naxos Music Library service, now accounts for half the company’s revenue and is likely to move up to 60-percent in the US this year. Digital operations are run out of the Franklin office.

Those moves provided protection for company when the market for compact discs began to wither. As for just how badly those sales have faltered, Heymann explains with numbers. He could once depend on a new cd to sell 30,000 copies, if not 40,000. Now he’s lucky to move 15,000 copies of a disc. If the music is what Heymann terms “rare repertoire,” the figure is more likely to be 5,000. In contrast, roughly 300,000 people now pay monthly or yearly fees for access to the Naxos Music Library. Betting on the internet paid off.

A DIFFERENT KIND OF CONTRACT

Most labels couldn’t move online so quickly. The industry’s standard contract gave companies the right to sell physical copies of performances; digital files weren’t covered. As Heymann points out, they hadn’t thought of the internet. Of course, as he’s quick to admit, Naxos hadn’t either. Still, his company had broken with the norm by always insisting on acquiring “all rights in perpetuity,” and that gave Naxos the legal leeway to move into a new medium as quickly as it wanted.

It is important to note what that kind of contract means for artists, because it’s a big difference for them as well. When Leonard Bernstein and the New York Philharmonic recorded with Columbia, they kept earning royalties for as long as the record sold. When the Nashville Symphony makes an album with Naxos, it gets a single check. That doesn’t necessarily mean a performer or ensemble makes little money; Naxos checks–especially these days–can be quite generous. If sales are slow, it could actually be a better deal for artists, but if sales are stronger than expected the company alone reaps that added financial benefit.

Last year, Nashville’s ALIAS Chamber Ensemble recorded a new composition written for them by Gabriella Lena Frank. As is customary on Naxos releases, the cover art is an image picked to reflect the music, not the performers.

On the other hand, Naxos offers a different kind of incentive: the chance to play something new, perhaps even to make the definitive recording of a work. Naxos releases about 20 albums a month, but rarely makes a second version of any one piece of music. Its catalog includes rarely performed Baroque music, obscure nineteenth century pieces, and new works by living composers. Variety adds value to the online service, plus it’s what Heymann has always been after. In his words, “it’s more exciting to listen to a new symphony than the fifth version of Beethoven’s Fifth, as much as I love that work.”

So, even without royalties, Naxos has come to attract high quality musicians, and accolades have followed in suit. In just the last five years, Naxos recordings have won 23 Grammys. Both Music Web International and Gramophone have named the company Label of the Year. For eleven years running, Audiophile Audition has listed Naxos albums on its list of the year’s top recordings.

A SERIES OF CHANCES

“There was no long term plan, there was no vision in the beginning,” Heymann says, reflecting on his quarter-century at Naxos. “It’s just, I saw an opportunity, I took it. I saw another opportunity and that’s how we grew.”

These days the hobby-turned-industry player distributes other labels and streams their music, the company makes audio books and iPhone apps, and a music encyclopedia is in the works. Klaus Heymann is in his mid-70s now, which does raise the question of who will take over the task of looking out for those chances. But what started as a hobby still clearly brings Heymann joy, and retirement doesn’t seem to be in his cross hairs.

For more on Naxos, check out the NPR Music blog where Heymann recently played guest DJ.