Profits in the Classical Music Recording Industry

Two recent announcements from the recording industry shows that there are still profits to be made in classical music. According to the company's press release, Arkivmusic's 2007 year ended with a 30% increase in revenues year-over-year.

Operating exclusively online, ArkivMusic's advantage is its "endless shelf" of available classical CD inventory. The company is an example of The Long Tail theory where companies profit by selling less of more. Classical aficionados can access the largest number of classical recordings available anywhere in the world -- over 82,000 titles -- including nearly 5,000 formerly out-of-print titles produced "on demand" as ArkivCDs.

"The ArkivCD program made up about 10% of our overall business in the fourth quarter," continued Feidner. "That's a significant percentage for what is essentially a new line of products. We launched this initiative late in 2006, and we continue to reissue hundreds of releases each month as we expand the catalog of formerly deleted titles."

Just a couple of weeks ago, Naxos founder Klaus Heymann revealed in an interview with Stereophile that the company was profitable, especially with their digital strategy.

When I started, all I was trying to do was sell a CD at the price of an LP. It was a marketing idea for the Hong Kong and Southeast Asian markets. I never imagined we'd become a powerhouse, with 300 employees worldwide, and 60 programmers and systems analysts in our Information Technology department. We're the only record company in the world with our own digital platforms. We have our own download and streaming sites, handle digital distribution for some of the labels we distribute physically, and also have books, audio books, and educational materials.

For me, being in classical music has always been a lifestyle decision. For years, we didn't make any money. I've invested an enormous amount of money--$80 million US--in the entire catalog and range of products, and never had a normal return until, thanks to the advent of digital platforms, I made a decent return last year. I'm extremely happy. I'm doing what I love, and I'll finally make some money from it.

The moral of the story is that there are always winners and losers in any industry. While the major labels and retailers were downsizing, specialized companies can turn a profit.