- The Washington Times - Thursday, April 5, 2007

Starbucks Coffee’s sortie into music retailing just got a little more intense. The Seattle coffee giant and incipient cultural tastemaker not only started a record label of its own, it signed none other than Paul McCartney as its test-market guinea pig. (A release is expected by June.)

Granted, Mr. McCartney doesn’t move as many units as he once did; his last CD, 2005’s favorably reviewed “Chaos and Creation in the Backyard,” has sold a middling 533,000 copies in the United States. Dissatisfaction with that figure provoked Mr. McCartney into bailing from his longtime home at Capitol Records and plumping for the fledging Hear Music label.

Hear Music is a joint venture between Starbucks and Concord Music Group, the Beverly Hills, Calif.-based specialty label that has collaborated successfully with Starbucks on marketing releases such as late soul legend Ray Charles’ multiplatinum “Genius Loves Company” and Brazilian crossover star Sergio Mendes’ “Timeless.”

With his peerless reputation, Mr. McCartney’s move away from a traditional major label sent a shockwave through the music industry.

Did it — do Starbucks’ music machinations — merit such hype?

It’s a question that, in one form or another, has been on the lips of industry watchers since the 2004 Ray Charles bumper crop. It has, in some cases, elicited a frothy paranoia. New Republic music critic David Hadju, for example, said Starbucks’ taste in emerging artists, as well as its penchant for selling artist-chosen compilations, smacks of Stalin.

No kidding: CDs sold at Starbucks are “conceived, produced, and marketed with such authoritarian rigor and with such a narrow conception of their listeners’ good that they represent nothing less than the return of state-sponsored music,” he wrote in August.

With the recent addition of Mr. McCartney, we are truly, it seems, “Back in the U.S.S.R.”

Starbucks Chief Executive Howard Schultz no doubt wishes he had that kind of sway over the music market.

The numbers tell a slightly different story.

Starbucks sold 3.6 million albums in its last fiscal year (October 2005 to September 2006), according to data provided by the company. For a chain that boasts 8,000 franchises in the U.S. alone, that’s not exactly an industry-transforming figure. It shakes out to about one or two sales a day per franchise.

For perspective, consider how many CDs have been sold via non-Starbucks outlets so far this year — about 99 million. (That’s down a whopping 17 percent over last year, according to Nielsen SoundScan, a decline that no doubt has sent teeth in search of fingernails.)

Overall, Starbucks accounts for less than one-half of 1 percent of domestic U.S. music sales, according to Russ Crupnick, senior industry analyst with the NPD Group, a market research firm.

Moreover, Starbucks risks compromising the standards of taste it so sedulously pursues.

Next to indie-haloed artists such as Neko Case and Belle & Sebastian are back-catalog releases such as the Beatles’ “Revolver” and the Who’s “Who’s Next” — landmark LPs, to be sure, but hardly well-kept secrets. The wider Starbucks opens its musical floodgates, it would seem, the less meaningful its stamp of approval will be.

Yet, to this point, the company has rationed that stamp judiciously enough to forestall such an inflationary effect, according to a source close to the Starbucks-Concord deal.

In stark contrast to less aesthetically conscious retailers such as Target and Wal-Mart, both of which offer exclusive CD releases, Starbucks franchises carry a maximum of 20 titles at any given time — more specifically, 20 titles that are in the direct sightline of 44 million affluent American coffee drinkers whose cultural preferences Starbucks has proved it can well predict.

“If you’re lucky enough to be one of those titles, you have this massive distribution to a very targeted audience,” the source says. “It’s so wide and deep. A typical record can’t get that type of exposure anymore. You can see why the music business is so excited about it.”

This is what Mr. Crupnick means when he calls Starbucks, despite its puny raw market share, a “thought leader.”

“They don’t move very many products, so it remains to be seen if Starbucks is truly a lifestyle brand and not just a coffee company,” says David Card, music and media analyst with Jupiter Research. “But they’re on their way to convincing me.”

A crucial test of seriousness for the Hear Music label, Mr. Card says, is whether it succeeds in distributing music outside of Starbucks coffee shops. Thus far, he says, Starbucks has done a good job of “managing medium-sized hits” — which may satisfy boutique label executives but may ultimately fail to attract artists.

Still, as digital music sales tick ever-upward and as the allure of combing through stacks of plastic and cardboard at record stores continues to fade, the Starbucks brand may come to represent a kind of last-ditch offensive for established artists like Mr. McCartney, whose draw at the concert box office remains strong even as he struggles to sell new material.

This is to say nothing of the plum publicity platform Hear Music will be for the eight “emerging” artists the label plans to introduce this year following Mr. McCartney’s forthcoming release.

The Starbucks music-business model may not stand to alter the face of the industry; rather, it offers a zero-sum promotional lifeline to a select few artists.

Perhaps that crack about “state-sponsorship” wasn’t so hyperbolic, after all.


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