Starbucks & HP To Offer Music Downloads

by , 10:00 AM EST, March 11th, 2004

Imagine this scenario: You're cruising on a Saturday morning, and you stop by your local Starbucks. You walk up to the counter and say, "I'd like a tall, half-caf latte, and the Blood, Sweat, and Tears Greatest Hits album to go, please."

While sipping on your latte, you whip out your wireless laptop, connect to Starbucks' music download service, and get your album. While you are there you check out Nelly Furtado's new album, and maybe listen to your favorite Classical piece; Vivaldi's "The Four Seasons." Could life be sweeter?

According to BusinessWeek, the above scenario may occur soon. Starbucks, with the help of Hewlett Packard, will be selling music along with their cappuccinos via a unique service that is bound to turns some heads, even at Apple.

From the article:

BusinessWeek has learned that on Mar. 16,Êthe Seattle coffee giant will unveil an in-store music service allowing customers to do just that, using Hewlett-Packard (HPQ ) tablet computers to make their choices. The first musical Starbucks opens in Santa Monica, Calif., and the service will expand into 2,500 stores over the next two years. "This is not a test," says Starbucks Chairman Howard Schultz. "We're going for it.''

Known for taking innovative risks, this is Starbucks' boldest attempt to redefine "the Starbucks experience" since it pushed overseas in the mid '90s. Company execs say the effort is aimed at capitalizing on the forces revamping the music-retailing industry, where advances in digital-music technology push customers onto the Internet, and traditional brick-and-mortar record stores struggle to survive.

[...]

... Starbucks foresees its music-customer base centered among middle-age javaholics, many of whom don't even go to music stores, let alone download songs. Prices will be comparable to Apple's (AAPL ) iTunes service: US$6.99 for five songs, the minimum purchase. Albums will cost US$12.95. To appeal to a younger set, Starbucks will ultimately offer wireless downloads to laptops or portable players.

Starbucks execs also tout this as an opportunity to introduce people to new and more obscure music and artists. At the very least, being able to listen or buy music in a Starbucks café will enhance the company's core business and keep customers coming back. "The time it takes you to order a latte, you could have any CD burned on demand for you,'' says Don McKinnon, vice-president for music and entertainment for Starbucks. "That's truly transformative and unlocks for so many people a need that's not being served -- making it easier to learn about music, easier to get it, and easier to create your own compilations.''

The article is an interesting read so stop by BusinessWeek Online for the full account.

The Mac Observer Spin:

Now, there's a new twist! Never mind Virgin with its teen-centric marketing push, or WalMart's undercutting tactics, selling music in coffee shops is a move Steve Jobs would have been proud of. In fact, we wonder why Apple isn't in on this since the company and HP are kind of friendly at the moment?

This bring up more questions, too, like how will HP's iPod fit into the Starbucks scenario? Will Apple iPods and laptops be able to take advantage of the service?

To answer the first question: We can't imagine HP making this new service iPod unfriendly, but HP is a big company and you never know. It will be interesting to see how this works into HP's broader musical strategy.

One last thing: Who does Starbucks/HP think they are kidding with their prices that will be "comparable" to Apple's? 5 songs for US$6.99 is US$1.40 a piece, not US$.99 a piece, and that is, roughly, not at all comparable! The same thing is true with the album pricing, which is 30% higher than Apple's.

To be honest, we don't see this as a threat to the iTMS, but as with Virgin's effort, it may bring more people into the music download market.

Starbucks Tunes In to Digital Music