All He Needs Is ... Starbucks

Paul McCartney Signs With Coffee King's Record Label

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CHICAGO (AdAge.com) -- Paul McCartney no longer believes in yesterday's music-business model.
'It's a new world now,' said Paul McCartney of his distribution deal with Starbucks. 'People are thinking of new ways to reach the people. For me, that's always been my aim.'
'It's a new world now,' said Paul McCartney of his distribution deal with Starbucks. 'People are thinking of new ways to reach the people. For me, that's always been my aim.' Credit: Yui Mok

In signing with Starbucks' Hear Music label with Concord Records, the ex-Beatle is the latest artist to adopt new means to reach the masses in a music market profoundly different from the one he and his mop-top friends conquered during the 1960s.

"It comes down to the fact that in a different age, radio drove everything," said Seth Friedman, an artist manager with DAS Communications, who represents John Legend, Will.i.am, the Black Eyed Peas and other artists who have worked with the coffee chain on entertainment deals. "Today [radio is] less and less of a factor, and without radio as a promo driver, artists have a more difficult time reaching their audience. These days more people are going to Starbucks than a record store."

Filling a void
And there are fewer of them. Tower Records' brick-and-mortar stores are but one casualty of digital downloads, which are also a problem for artists because they more often distribute singles and artists create albums. CD sales fell 20% to 89 million copies during this year's first quarter, according to SoundScan, while individual tracks purchased online grew 10% to 288 million.

Starbucks and Hear Music provide an attractive alternative because the coffee chain sells the complete album and promotes it and sells it at a fair price, said Mr. Friedman. "Starbucks doesn't sell below wholesale," he said. The Concord deal for Sergio Mendes' "Timeless" album sold at Starbucks resulted in close to a million copies being sold worldwide.

In a deal that came together "very quickly" over the last few weeks, Mr. McCartney will release one album and will keep the master recording, a spokesman for Starbucks confirmed. (Hear Music hopes to release two other albums this year and eight in 2008.) Mr. McCartney's relationship with EMI Group's Capitol Records has recently been on an album-by-album basis, according to knowledgeable executives. He is said to be continuing working on a new classical album under the Capitol label; EMI doesn't comment on artist contracts, according to a spokeswoman.

'Tomorrow Never Knows'
"We fully respect Paul McCartney's decision to try something new with his next record," she told Advertising Age. "Starbucks is a valued retail partner for us in the U.S."

The former Beatle's last studio album, 2005's "Chaos and Creation in the Backyard," while critically acclaimed and nominated for three Grammy awards, sold just 533,000 units domestically, according to Nielsen SoundScan. His last album to bust the million mark in the U.S. was 2001's "Wingspan." Compare that to the 23 million combined unit sales of the top six "American Idol"-discovered artists, and Sir Paul needs more than a little luck to reach the masses that he once was chased by.

"It's a new world now," said Paul McCartney via a live feed from London to Starbucks' annual meeting in Seattle last week. "People are thinking of new ways to reach the people. For me, that's always been my aim." He praised Starbucks for its interests in music. "The great thing was to see was the commitment, the passion and the love of music. It's good to see."

Larger distribution trend
All Together Now Starbucks isn't the only retailer artists are flocking to in order to sell more music. In recent years, retailers have struck exclusive distribution deals to help drive traffic to their stores, a move some observers speculate are loss leader sales to draw potential sales for appliances or similar big-ticket items. Last month, Target Corp. said it would release 15 exclusive CDs through the 180 Music label called the Spotlight Music Series, first by Kenny Loggins and David Cassidy, to be followed by others. Wal-Mart Stores struck exclusives with Garth Brooks and the Eagles.

But with the Hear Music label Starbucks is upping the ante by acting as the impresario and producer as well as distributor. Mr. McCartney's move illustrates how even famed artists are struggling to find the right way to distribute music, according to Gary Bongiovanni, editor in chief of Pollstar, which tracks concert ticket sales.

"A lot of major ticket-selling acts from the end of the baby-boomer generation are hugely popular and can sell tickets at an enormous premium, yet people are more interested in their older songs than buying a new record from them," he said. "The fact that the Eagles are making an exclusive deal with Wal-Mart -- 10 years ago nobody would have thought that feasible. Starbucks has kind of an edgy, a certain hipness factor there that works."
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