Rhinegold

Phillip Sommerich

Naxos closes ClassicsOnline

4:49, 13th February 2017

Naxos has closed its high-audio-quality streaming platform ClassicsOnline just a year after it launched, underlining the financial crisis classical labels face because of the digital technology.

Klaus Heymann, Naxos’ owner, said the Singapore-based platform was dogged by technical problems which delayed its launch for a year, and in the interim several other streaming services, such as Apple Music, entered the market.

More fundamentally, of the three major labels only Sony backed Naxos’ model; most major and independent labels either refused to offer new releases until after a quarantine period of several months or demanded hefty licence fees which meant subscriptions had to be pitched at $15 a month. ‘Not many people were prepared to pay that,’ Mr Heymann said.

He then decided to offer only recordings from his own labels – including Naxos, Marco Polo, Ondine, Dynamic and Cappriccio – and the firm operating the platform said that did not create sufficient traffic.

‘I don’t feel that terrible about it because nobody offering streaming is making money,’ Mr Heymann said. While some streamers have boasted recently that the format is beginning to show a profit because of increasing numbers of pop music fans taking out subscriptions, he insisted: ‘Nobody is making money from it.’

One barrier is the ‘churn’ rate: ‘Attracting new subscribers is very expensive and a lot of them leave again after a couple of months.’

The revenue model for streaming, with payments to labels geared to how frequently each of their tracks are streamed, handicaps niche genres such as classical, he said.

By contrast, the education-oriented Naxos Music Library (NML), which offers subscriptions only to organisations such as schools and colleges plus individuals involved in music professionally, is proving an excellent earner, Mr Heymann said.

‘We are a big revenue generator, even for the majors, and we are probably the third-biggest revenue generator of all the streaming platforms.’ He said NML subscribers comprised about 4,000 organisations and some 10,000 individuals. But the organisations included some countries, which offered access to all their schools and in some cases all citizens, while music colleges might take out several hundred subscriptions for students. About 20 million people had access to the platform, he said.

NML pays labels three cents per stream – about 10 times other streamers’ rates – and because of the specialist nature of its offer, its subscription renewal rate tops 99%.

‘I worry for most of the independent labels because the streaming rate at 0.3 cents just does not pay the cost of recording. The other big problem is that most of the revenue from streamers such as Apple Music and Spotify is playlists and most independent labels don’t have the repertoire for playlists.’

The only viable future is for streamers to have a separate revenue model for niche genres, he said. In the interim, Naxos – which celebrates its 30th anniversary this year – has begun  pressing only about 1,000 copies of each new release and ordering additional CDs – even just one unit – in response to demand. He said Naxos was assisting other labels it distributes to adopt that model.

Mr Heymann predicted that in five years’ time most classical sales would be consumed via streaming, with just a tiny market for CDs being satisfied by on-demand manufacturing.

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