Beethoven Goes Digital

Indies like Naxos have been the most aggressive online, but even at Decca Label Group—the classical division of Universal, the world's largest music company—the digital-music business now contributes a fifth of sales. This is in part because illegal peer-to-peer file sharing hasn't hit classical music at all, a sharp contrast to the way it has decimated the pop industry. Low-quality tracks, which are often uploaded as smaller files on networks like LimeWire and Gnutella, aren't a problem when you want to listen to relatively banal stuff like Britney. But they don't cut the mustard for complex orchestral compositions by Bach—the nuances and length of such pieces make them much tougher to share via peer-to-peer. Classical also benefits from the fact that most users want to buy an entire album, rather than a single or two. They may also want to download the liner notes, background on the artists, the recording venue and the composer. A pop song can be enjoyed for 99 cents, while a piece of classical music will likely cost more than $10.

Of course, none of this will save the recording industry from its larger problems. Classical-music sales are about a fourth the size of country's, and barely 10 percent of rock's. Still, the success of companies like Naxos have provided a case study in how to optimize profits. "Joan Tower: Made in America," a Naxos recording of the U.S. composer's work conducted by Leonard Slatkin of the National Symphony Orchestra, stayed in the top 100 on the classical charts for more than a month, rising as high as No. 47. That meant selling merely tens of thousands of copies, but because the distribution costs are low, it may be one of this year's most profitable items.

The lesson for labels is that prepackaging global pop stars isn't the only way to profitability, and the result might be more exposure for a broader number of artists. EMI digitalized some of its rare historical recordings by the late opera great Maria Callas, and Decca is resurrecting long-extinct labels like Argo and L'Oiseau Lyre in downloadable format.

At the same time, some industry watchers believe digital might also help create more classical megastars. Witness the rise of Lang Lang, a young, spiky-haired Chinese pianist who topped iTunes' charts in mid-May. The fact that he ended up on iTunes' main page helped push sales of his new album, "Beethoven Piano Concertos Nos. 1 & 4," even further into the top 15 of the general iTunes charts. "When you see Lang Lang right next to Toby Keith and 50 Cent, all of those artists get a chance to reach the consumer," notes Christopher Roberts, chairman of Decca.

Meanwhile, labels are working on the next big digital challenge: how to let consumers search a really long tail of recordings. Mike McGuire, vice president of Gartner Industry Advisory Research, notes that virtually all systems of organizing online music data were "designed for three-minute pop or rock songs." Finding a particular piece of Spanish piano music composed between 1850 and 1920 or looking for multiple movements that add up to a single title requires more-sophisticated technology. That's something Naxos developed for its own businesses, but is far from the current standard of popular digital-music retailers.

The upside of this is that the digital revolution could give smaller labels like Naxos yet another way to level the playing field—by selling or licensing their own proprietary technology. Niche search technology is one of the hottest areas of technology development at the moment. A classical label that can score on that front may find its audience—and its sales—get a lot, lot bigger.

© 2007