Selling Records At Starbucks

Labels tap into java chain as adult marketing platform

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%%STORYIMAGE_RIGHT%% Starting today, coffee drinkers can order a collection of Tony Bennett's favorite songs with their latte at Starbucks Coffee Co.

Bennett is the sixth artist to release a collection of favorite songs under Starbucks' Artist's Choice series begun a year ago under the aegis of Hear Music, a wholly owned unit of Starbucks.

Not only do the compilations contribute an additional strand to the company's overall lifestyle branding scheme, but also it has the potential to help a battered record industry promote its wares to the coffee chain's adult customer base.

Starbucks is poised to take advantage of demographic tendencies that the music industry is just starting to understand. According to a recent 2002 study by the Recording Industry Association of America, older music fans, compared to their youthful counterparts, are more likely to buy music at record stores than download it for free from the Web.

These findings are a clear indication of the value of the mature adult market. With pop, rock and country music shrinking in popularity in the U.S., compared to the fast growing hip-hop and rap genres, compilation CDs like Artist's Choice provide an alternate avenue for consumers to discover new music and build affinity for artists.

Interestingly, adults over 40 are one of the faster growing segments of music consumers with adults over 45 making up a quarter of all purchases, according to just-released RIAA figures.

"It starts with the premise that adults like to hear about music by sitting down and saying 'I love this record; let me play it for you,'" said Don MacKinnon, VP-music and entertainment for Starbucks. "When you were 15, you would go across town to get a record after hearing it on the radio. For adults getting music and learning about it at the same time is key."

Mark Pinkus, VP-strategic marketing and custom product at Warner Strategic Marketing, a unit of the Warner Music Group, has done 10 titles with Starbucks over the past year including a Ray Charles' Artist's Choice. "The great thing about Starbucks is that they are as passionate about music in the same way as [Warner] is passionate about music. As a result, their collections sound great, look great, and sell well."

David Schlange, exec VP-corporate marketing for Alliance Entertainment and chairman of the National Association of Recording Merchandisers, has high compliments for Starbucks concept and packaging but he says not to expect the record industry to change its marketing targets. "While the older market is somewhat of an untapped market and low hanging fruit, the larger numbers will come from rappers [like] 50 Cent or Eminem and that's where marketing dollars will be spent."

Begun as a compilation catalog in 1990, Hear Music opened a handful of retail stores in 1992. It also began supplying the in-store music programming for Starbucks. Three years later Starbucks began selling Hear Music's Blue Note Blend jazz compilations to give customers a way to take the coffee chain's atmosphere home with them. Starbucks bought the company in 1999 for $8 million

%%PULLQUOTE_LEFT%% "It started in an organic way," said MacKinnon. "They played great music, and…the most frequent question to the barista [was] 'what song is that?' We tried to find a way to take what we were doing in Hear Music retail stores and replicate aspects of that in the Starbucks [outlets], by playing great music and allowing people to explore music in ways they weren't doing elsewhere."

Hear Music launched the Artist's Choice series last February with a collection of favorites of cellist Yo-Yo Ma. "It's a beautiful thing that that CD with that content was one of the fastest selling CDs we ever released," said MacKinnon. "It verified that people moving through Starbucks everyday were interested in exploring music they didn't know and being guided by someone they trust, like Yo-Yo Ma." Other artists have followed, including the Rolling Stones and Sheryl Crow.

To date, Starbucks has sold about 70,000 copies of the Yo-Yo Ma compilation, 50,000 of the Rolling Stones and about 25,000 of the Sheryl Crow CDs, according to company records.

Admittedly, Hear Music sales as a percentage of Starbucks' $3.3 billion total revenue is miniscule, but MacKinnon contends that with 22 million customers a week, the music is an invaluable branding tool—in effect providing the soundtrack for a customer's Starbucks experience—that can't be measured directly. "The Starbucks brand has been built through the store experience as much as through anything else," MacKinnon said. "While retailers have dabbled in music as an accessory, Starbucks is committed to building an authentic brand for music."

He cites Coca-Cola's tack where someone buys a can of Coke and gets to download music. "It is not about the music as much as it's about building impressions for Coke," he said. "What Starbucks has is our stores and we're a part of their lives every week." –with Hank Kim

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