Starbucks Launches L.A.-Based Record Label

Monday, March 12th 2007, 8:25 pm
By: News On 6

SEATTLE (AP) -- Starbucks Corp.'s push into entertainment moved further from the coffeehouse shelves Monday as the company launched a record label based on its existing Hear Music brand.

The world's largest specialty coffee retailer said it would partner with Concord Music Group, which controls several other labels and helped Starbucks sell the Grammy-winning "Genius Loves Company," an album of Ray Charles duets.

Now, rather than basically lending the Starbucks brand to an album, the Los Angeles-based Hear Music label will sign its own artists and sell records through Starbucks stores and other retailers.

"We're not setting this up so that Starbucks stores would have any advantage over other retailers," said Ken Lombard, president of Starbucks Entertainment.

Officials refused to say whether the label had signed any artists, but said they would welcome both emerging and established musicians.

Seattle-based Starbucks has been extending its brand beyond the world of coffee in recent years to embrace music, books and even a movie, "Akeelah and the Bee."

The company also has opened four hybrid Hear Music Coffeehouses, where customers can purchase music from thousands of titles and burn the selections to CDs, and it has a branded page at Apple Inc.'s online iTunes store.

Starbucks' brand strategy, however, has been publicly debated in recent weeks, following a leaked memo from Chairman Howard Schultz that lamented a loss of authenticity as Starbucks expanded to some 13,000 stores worldwide.

In the e-mail to top Starbucks executives, Schultz said various changes over the years have led to "the watering down of the Starbucks experience, and what some might call the commoditization of our brand."

Some may now question whether launching a record label is the right move for Starbucks, said Dan Geiman, an analyst with McAdams Wright Ragen.

But music always has been close to what Starbucks sees as the identity of its brand, even though it remains a relatively small business, generally about 1 percent of all sales, he said.

"I think it's going to be kind of viewed as something that's going to detract from the experience and gets away from their core. But I don't necessarily think that's the case," Geiman said.

The record label expansion is sure to prompt more questions about whether Starbucks will begin offering digital downloading stations at its stores, Geiman said. Lombard said the company was focused mainly on the success of its iTunes page.

Starbucks and Concord said the label "advocates creative control for artists and encourages musicians to stretch and take risks."

Recording artists also should like the idea of a built-in audience in Starbucks stores, particularly at a time when digital downloading has created "a stressful time for the music industry," said Glen Barros, president of Concord Music Group.

"This is a pretty powerful new platform, when you can reach 44 million customers per week through Starbucks' stores," Barros said.

Lombard will lead management of the new label, working with Barros and reporting to a management committee made up of officials from both companies.

Starbucks shares fell 24 cents, or 0.8 percent, to close at $30.07 Monday on the Nasdaq Stock Market. The shares added 5 cents in after-hours trading.