Starbucks curtails its musical ambitions

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Starbucks, the global coffee shop chain, this week abandoned its ambitions of playing a direct role in the music production business, ending an experiment that became emblematic of the dramatic changes in the music industry over the past decade.

The move comes less than a year after Sir Paul McCartney became the first artist to launch an album of new songs on Starbucks’ Hear Music label.

The retailer is handing over management of Hear Music, which it acquired in 1999, to Concord Music Group, its partner on projects including Sir Paul’s Memory Almost Full album.

The move is part of a drive to cut costs and to focus on its core coffee business led by Howard Schultz, who resumed the position of chief executive officer of the company in January.

Hear Music reflected a search by both music companies and retailers to find new ways of reaching potential customers.

The label’s first original recording, a 2004 tribute to Ray Charles called Genius Loves Company, won eight Grammy music industry awards when it was released two months after his death.

Starbucks will continue its efforts to exploit its stores’ potential as a retail outlet for music, with Concord selecting and producing recordings that will be exclusive to the chain.

However, the relationship will now be closer to that emerging between the music industry and Wal-Mart and Target, the two largest mass discount chains, which are the largest channels for sales of traditional CDs.

Last Christmas, Wal-Mart launched Long Road out of Eden, the first album in 28 years by the Eagles, which was produced by the band’s own recording company. The retailer also produces exclusive online recording sessions with artists ranging from Sheryl Crow to Lenny Kravitz on its website.

In January this year Target released an exclusive live album by John Legend, produced by his recording company, Sony BMG.

But while Wal-Mart’s and Target’s music strategy is aimed at attracting customers who will spend on other purchases, Starbucks says it will focus on selecting music and other offerings that reinforce the experience of visiting its coffee houses.

It is also continuing a relationship with Apple’s iTunes that includes giving a free music track away weekly, and selling downloads of music through in-store wireless networks. It had earlier experimented with Hear Music stores equipped with kiosks where customers could download music.

The chain will also continue to work with the William Morris agency to promote books.

Starbucks also indicated that it will drop attempts to co-promote films, after aggressively backing the 2006 film Akeelah and the Bee with Lions Gate Films and Arctic Tale in 2007 with Paramount. Both films were released on DVD through the coffee chain, but were box office failures.

As a result of the changes, Ken Lombard, the former head of the entertainment division, is leaving the company, and responsibility for future projects will go to Chris Bruzzo, chief technology officer – reflecting the focus on wireless services.

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