Classical record biz

Yesterday there was an ArtsJournal link to Anthony Tomassini's optimistic piece in the New York Times about the classical record business. In that piece, and in the ArtsJournal summary, was something that needs some qualification. Major record labels, Tony says, aren't doing so well, but

Smaller labels like Nonesuch and Naxos, which once just filled in the gaps with records of specialty repertory and adventurous artists ignored by the majors, are proving that it is possible to release important recordings at midrange prices and still pay the bills.

The biggest difference between the classical record business in past decades and what it does now is pretty simple. Formerly -- up to the mid-90s, maybe -- major classical labels recorded major stars doing their core repertory. If you were a leading conductor (or even a conductor on the way up, with enough promise to make a record company want to grab you before someone else did), you could record your Brahms, your Beethoven, and your Richard Strauss with whatever orchestra you led. Major orchestras had record contracts, and major opera stars sang their most important roles in complete recordings of the operas involved.

That's no longer true. To see why, first look at some numbers (ballpark figures; I don't have exact budgets). A major recording -- with a major orchestra, major conductor, and major soloist -- might cost (or so I've been told by people in the business) a quarter of a million dollars to record. If it sold 10,000 copies the first year it was out, that would be a miracle. Two thousand might be more likely, and some major recordings have sold a lot less than that.

Now figure that the record company gets $10 back for each CD it sells. That's $20,000 that the record company earns for the first year this $250,000 project sits in its catalogue. Do the math. The recording will take more than 10 years to recoup its recording cost -- and even then the record company won't start making a profit, because we haven't counted marketing costs and a share of normal overhead, which the record company naturally will allocate to each CD it sells (since it has to pay for office space, staff salaries, and everything else any business puts on the expense side of its balance sheet).

(These figures are highly approximate. I'm aware of some complex wrinkles in the way the money flows, but I'd welcome corrections if I've gotten anything seriously wrong. Record companies don't like to give out budget or income data. Though I did once see a pretty detailed budget for a debut major-label recording by a chamber group, and the recording costs for that were $50,000, a figure that didn't even include whatever the record company paid the musicians.)

Now, in past years, record companies might have accepted this financial picture. Classical music was a high-prestige operation then. Record companies figured their profitability on sales of their entire catalogues. They'd balance income and expenses for the operation as a whole, not worrying -- if, at the end of each fiscal year, they earned more money than they spent -- if some of their releases hadn't yet been profitable. And, of course, record sales in the '50s and the '60s were fueled by the advent of the LP, and, with it, the vast expansion of the recorded repertoire; in the '80s, sales were goosed when CDs were introduced.

Things are different now. Until the rock explosion of the late '60s, when for the first time pop album sales took off, the record business as a whole wasn't wildly profitable. It can be now, and the conglomerates that now own classical labels expect them to make more money. There's a change in overall business climate, too; businesses now seem to expect everything to make more profit. Surely the dizzying dance of record labels from one owner to another must play a part as well. Deutsche Grammophon, Decca, and Philips, three leading classical labels, once were independent. After various mergers and aquisitions, they were combined into Polygram Classics. They then were sold to Universal (as a byproduct of a giant acquisition), and then sold to Vivendi, which now is ready to sell them once again. Each sale is financed by borrowing; with each sale debt accumulates; as the debt grows, the corporate owners of these classical labels need to squeeze more cash out of every corner of their operation.

And then there's one more factor -- the disasters of the early '90s. Spurred by high CD sales, major classical labels signed artists to extravagant contracts. Giuseppe Sinopoli, for instance, signed with Deutsche Grammophon to make more than 80 CDs. Most of these CDs didn't sell, leading to financial crisis. As a result of this, and everything I said above, major classical labels aren't, on the whole, allowed to make recordings that won't be profitable for years. At some labels, each CD has to make a profit in the first year of its existence. Under these conditions, a major classical record label -- as we've known them in the past -- simply can't function. That's why they're all recording crossover.

Cut now to the smaller labels. Of course it's right to say they're doing better. But that's because they don't -- and never did -- try to go the major label route. They don't make grand recordings of major stars in standard repertoire. They make modest records, which don't cost so much, and thus can make a profit. Take one of Tommasini's examples, Nonesuch Records. They've never made a major-star orchestral record, and I doubt they ever will. In fact, I wouldn't even call them a classical label any more. They're an art music label, whose concept of art music includes people like Emmylou Harris, who aren't classical -- and who ought to sell more records than classical artists do, which then makes it easier for the label to stay profitable.

(And that's emphatically not a criticism of Nonesuch. I think they're one of the finest labels around, a truly artistic operation.)

Tony's other example, Naxos, is a special case. It really does function the way classical labels used to -- it makes its profit from sales of its entire catalogue, and can afford to do some projects (complete operas, now and then; ten volumes of Brahms's four-hand piano music) that might not make much profit quickly.

But Naxos also operates under special rules, rules it established by itself. It pays its artists relatively little. That means it almost never can record established stars. But then it compensates by selling its CDs for very little, so people buy them even if they don't know the performers. It also does something else that can be very profitable, and which it couldn't do with name artists -- it keeps all the rights to everything it records. If you're Yo-Yo Ma, you have a contract with Sony Classical. You make CDs. Now Sony wants to put tracks from your CDs on a compilation, or license them for use in a film. They have to pay you; they may even have to ask your permission, if you wanted that in your contract.

Naxos doesn't have these problems. Once they've recorded something, they can use it any way they like -- license it to Hollywood, put it on a dozen compilations, stream it on the Internet. And they keep all the money.

Other smaller record companies have their own ways of operating. Harmonia Mundi and ECM (two of the best independent labels that record classical music) don't do wildly expensive projects. Some labels (Bridge, for instance) are nonprofit operations, supported by donations. Others, like Albany Records (who released the Houston Grand Opera recording of Carlisle Floyd's Of Mice and Men, which I wrote about here earlier), in effect make the artists pay for their recordings. Even on major classical labels, some CDs are subsidized.

The bottom line? Tony Tommasini is right. The classical record industry doesn't seem to be dying out. Independent labels still release all kinds of interesting music. Even the major labels sometimes do. But the conditions under which this happens have drastically changed, and no classical musician now can count recordings