Will McCartney Help Starbucks Rebuild Its Brand Identity?

Deal With Singer in Works for New Label as Chain Continues to Push Music

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CHICAGO -- Can Howard Shultz and Paul McCartney sell more records for the singer than his longtime label Capitol Records? A widely reported deal between Mr. Shultz's Starbucks and Mr. McCartney that would make the former Beatle the first artist to sign with the coffee chain's just-announced Hear Music label is better for the artist than for the Starbucks brand, observers said.
Photo: Humphrey Nemar
Considering how successful Starbucks' other music ventures have been, a potential deal with Paul McCartney makes sense for the coffee chain. But does the move benefit its brand?

So far, Starbucks isn't confirming or denying it has a deal with Mr. McCartney, despite recent print and TV reports that said a pact was close to being signed. Mr. McCartney's reps couldn't be reached for comment. One of the singer's former associates was surprised by reports that claim Mr. McCartney is splitting with Capitol.

A music-industry insider cast doubt that Mr. McCartney would split with Capitol and said the pop icon more likely has a deal with Starbucks that allows him creative control over content that doesn't conflict with Capitol Records.

Offshoot of Starbucks Entertainment

Starbucks on March 12 said it and Concord Music Group were forming the Hear Music label. The label, an offshoot of Starbucks Entertainment, would allow the marketer to deal directly with artists to distribute their recordings at the coffee chain and through traditional retailers, and give the label a "greater hand in developing music that fits within the profile of the Starbucks Experience," according to the company's statement.

On paper, from an entertainment-marketing standpoint, the Hear Music deal makes sense, considering the runaway success of other Starbucks-Concord releases, including the Ray Charles album "Genius Loves Company," which sold some 5.5 million units and won eight Grammy Awards, and Sergio Mendes' "Timeless," which is approaching 1 million albums sold and won a Latin Grammy Award.

With 13,000 stores worldwide and 44 million weekly customer visits, Starbucks is a powerful distribution channel and artists "came out of the woodwork" after the success of the Ray Charles album, spurring management's desire to have more control over its artist selection.

"As we move forward with this new venture, Hear Music will seek out unique and compelling artists from a broad range of genres to help them reach the widest audience possible," Ken Lombard, president of Starbucks Entertainment, said in the statement. He will run the Hear Music label with Glen Barros, president of Concord Music Group. There was no mention of Mr. McCartney or any other artist in the statement.

The deal with Mr. McCartney makes sense to executives in the record industry.

Reaching hard-to-reach demos

Music "is part of the brand DNA" for Starbucks, said Steve Yanovsky, principal of Brand Alchemy and a longtime music-industry executive, noting that the target demographic -- aged 25 and older -- doesn't go into music stores, preferring to buy singles online instead, and that Paul McCartney fans are not active record buyers in traditional channels.

Mr. Yanovsky said that with the label, Starbucks should be able to have access to all artists directly. The upside for Mr. McCartney is that he gains another distribution outlet, as "traditional music retailers are having issues." Mr. Yanovsky speculated that Mr. McCartney would likely get the better end of the Starbucks deal from a financial standpoint.

So far, nobody has confirmed the deal or its terms.

But considering the challenges facing Starbucks -- famously outlined in a memo last month by Mr. Schultz, Starbucks' chairman -- launching a record label now seems risky.

Is music part of Starbucks' core?

"Just when Howard Schultz is trying to get the company 'back to its core' (let's see, it was coffee, right?) they are heading full steam into the music business," David Lemley, president-chief brand strategist for Lemley Design Co., which earlier created iconography, architectural elements, language and packaging for Starbucks, said in an e-mail. "Granted, they may have a legit opinion about music simply because of their coffeehouse roots and their positioning of the Third Place. But, Paul McCartney? Sir Paul is to the Starbucks Brand what Nutritional Information Facts are to McDonald's consumers. It's a risky move that will further dilute their coffee expertise -- thus further diluting the Starbucks brand experience."

Mr. Lombard, in a statement to Madison & Vine, said, "For almost 20 years, music has been an integral part of the Starbucks Experience. Like our commitment to quality coffee, our hand-selected CDs enhance the total Starbucks Experience. ... We have established a trust with our customers when it comes to music selections, and have built an innovative channel for the promotion and distribution of artists -- both established and emerging. By creating this label, we are ensuring this remarkably personal experience will continue for the Starbucks community and that the culture we cherish and that is so vital to our business will flourish."
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