Vinyl factory in Germany - business growing

[Adam]

Wasn't sure where to post this article in today's LA Times. Here or Jazz in Print, and decided here.

Notice the growth of vinyl.

http://www.latimes.com/business/la-ft-viny...dlines-business

Factory Making Record Profits From Modern-Day Nostalgia

A company in eastern Germany spins out 4.5 million vinyl LPs and singles a year.

By Hugh Williamson, Financial Times

April 10, 2006

BERLIN — Looking for an old-style vinyl version of the latest album by your favorite band or orchestra? Then Jorg Hahn could be your man.

In a remote factory in northeastern Germany, the mild-mannered businessman is keeping alive a relic of the music industry that most people assume died years ago — and many children have never even heard of.

Perhaps equally surprising, he is doing so not for love of crackly sounding music but for money. Profits can be made in a segment of the recording industry written off by the big players.

Music production company Optimal is a classic case of how an unlikely niche business can be exploited in an equally unlikely place — in this case Robel, a small town in the former East Germany and a 90-minute drive north of Berlin.

"We moved into the niche when big companies like Sony and Universal moved out of it," says Hahn, the 42-year-old managing director. "That was 10 years ago and we have been going strong ever since."

Optimal's record workshop produces 4.5 million long-playing albums (LPs) and singles a year. Hahn lists small independent music labels, exclusive classical music publishers and the music industry giants as Optimal's main vinyl clients.

"The big labels often use the LPs as promotional tools but find it uneconomical to produce them in-house," he said. "Then there are the real freaks, who just love the sound and even the feel of vinyl records, with their traditional sleeves and other features."

Optimal, a wholly-owned subsidiary of Hamburg-based Edel Music, makes great efforts to please such customers. Colored records, rather than the usual black vinyl, are one specialty: a pink Madonna LP was in production during a recent visit. "Picture discs," with an image of the band pressed into the vinyl, are another.

Optimal is Germany's largest vinyl record producer and one of the biggest in Europe. Yet the true nature of its niche only becomes clear after a tour of all the production facilities it has developed since shortly after reunification in 1990.

As well as vinyl, Optimal makes 150 million compact discs and DVDs every year, and — in another innovation rare in the music industry — the company has diversified down the production chain. Printing presses churn out colorful covers for CDs and LPs, while in the next building thousands of packages whiz around mid-air conveyor belts before being dispatched to music industry clients and private customers.

"We have seen an increase in demand from music companies for logistics services, so we are responding," says Hahn, a technician by training and one of Optimal's founders.

Compared with the modern electronic CD production machines, humming quietly as they produce one disc every three seconds, a visit to the vinyl workshop is like a trip back in time.

Here, heavy green record-pressing machines, reminiscent of oily engineering factories of the 1970s, huff and puff, struggling, it appears, to spit out discs even at the leisurely pace of one every 25 seconds.

Indeed, as a plaque above one of the machines makes clear, the equipment conjures memories of a lost industrial era precisely because it comes from that time. "On loan from the German technical museum," it reads, referring to the machine used for picture discs. The other machines also date from before the 1970s and have to be imported from Sweden, Russia and elsewhere.

"No one makes these machines anymore, so we have to buy up what is on offer and use spare parts as best we can," Hahn says.

The mayor of Robel, Heinz-Fritz Mueller, is certainly pleased that Hahn and his team are so industrious. Optimal has 500 employees, making it by far the largest employer in a town of 5,400. Unemployment in the area is 22%. "This is traditionally an agricultural region. We are branching into tourism but tempting companies to come here is not easy," he said.

Optimal is a rare success story in the region where generous investment subsidies since 1990 often failed to generate long-term investors. Optimal has invested about 95 million euros ($1.1 billion) since 1991, with approximately 20% covered by public subsidies.

Hahn notes that profit margins on records are higher than on CDs, "where the competition is much more fierce." As a result, vinyl had a "small but significant" part in the company's 10.2 million euro profit in 2004 on sales of 58.5 million euros.

He is cautiously optimistic about the future. Sales of vinyl LPs in Germany (not including singles or promotional giveaways) have doubled to 1 million a year since the mid-1990s, and sales of record players are also rising, growing last year by 18% to around 100,000.

As Hahn concludes: "Long live the vinyl freaks, we need their business."