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The Honolulu Advertiser

Posted on: Saturday, December 11, 2004

Starbucks brews up Grammy nominee

By Geoff Boucher
Los Angeles Times

There are many paths to Grammy glory — the world's grand concert halls, the elite recording studios of Los Angeles, Nashville's storied Music Row. But the caffeinated confines of your neighborhood Starbucks?

When "Genius Loves Company," the duets album that became the final work of the late Ray Charles, garnered nominations Tuesday in the marquee Grammy categories of album and record of the year, it didn't just add to the 2004 outpouring of appreciation for the singer, it also marked the first time a Grammy contender was brewed up to be sold alongside mocha Frappuccinos and grande nonfat lattes.

Starbucks, a partner in the financing and marketing of "Genius," has sold more copies of the CD than any other individual retailer. The fact that the coffee purveyor has rung up more than 350,000 copies of "Genius" (and, at $15.95, sold them at a steeper price than most mainstream music retailers) has been eye-opening for some music industry stalwarts.

"It's another nail in the coffin of traditional music retailers," said one major-label executive who asked for anonymity because of his voting status in the National Academy of Recording Arts and Sciences, which awards the Grammys. "They take this as yet another party taking a bite at their apple."

Or maybe not. Geoff Mayfield, the director of charts for Billboard, the music trade publication, said the buyer who picks up "Genius" in Starbucks is likely one who otherwise would not be buying it at all.

"The market they isolate there is people who don't spend a lot of time in music stores and it's an impulse purchase," Mayfield said, pointing out that diligent music fans probably would not pay the coffee chain's top-tier prices for CDs. "I haven't heard a lot of protest from traditional retailers."

In either case, "Genius" has sold 1.3 million copies, and the role of Starbucks in that platinum success story is more than just purchase-point trivia — it represents the all-bets-are-off landscape of the music marketplace in the new age when iPods, streaming media, ring tones, song downloads and file sharing have changed the very idea of music consumerism.

More specifically, it amps up the trend of non-music retailers such as Victoria's Secret, Pottery Barn and Anthropologie using their own CD titles to lure customers and also shape their brand.

Most of those packages have been compilations of previously released music, though, and not the work of an in-house record label. Starbucks and its Hear Music imprint have gone well beyond the typical model by partnering in "Genius" with the small jazz label Concord Records. The closest similar effort might be Best Buy's involvement in new albums by classic rock acts, but Best Buy is a major music retailer, not a brewer of coffee.

"It's a unique collaboration, and it's at a time when the traditional way of the music business is in turmoil," said Ken Lombard, president of music and entertainment for Starbucks.

Starbucks created the artwork for the album and created much of its marketing program. Perhaps most important, the chain gave the music intense air play within its 6,100 U.S. locations from Maine to Maui.

"The way people discover and buy their music is evolving," Lombard said, "and a big part of our model is to make it comfortable for discovery."

The idea of Starbucks — to many, a symbol of corporate ubiquity — as music boutique makes some independent retailers roll their eyes, but one of them, Rand Foster, owner of Fingerprints in Long Beach, Calif., said the Hear Music selections are well done and he likes "seeing people buy good music."

"Although," he added, "as a music store owner, clearly I don't like seeing more competition."

Foster, a board member of the Coalition of Independent Music Stores and a merchant who shares the 2nd Street shopping corridor with two Starbucks, said the chain's limited number of titles and top-tier prices make them far less a threat to small shops than the mass-merchandisers who sell albums at a loss to lure in customers for other purchases.

"It is clear, though, that they were really serious with this Charles CD; they were more aggressive with it than anything they had done before," he said.

Was "Genius" a singular success or a template for the future? It may not take long to find out.

"It has caught the attention of a lot of people in the music industry and a lot of artists, and we've been hearing from them," Lombard said, although he declined to cite specific projects because of the early stages of their discussions.

In Seattle and Austin, Texas, some Starbucks also are experimenting with kiosks that allow customers to peruse a selection of 200,000 songs and pick and choose tracks for a tailored CD that is produced on the spot and paid for via the swipe of a credit card.

The company has announced plans to put the CD burners in 2,500 stores in the next few years. And the company has announced an aggressive expansion that would set as its goal 30,000 stores worldwide — triple its international total today. That could make Starbucks a heftier player in music retail, a sector that has been shriveling in recent years.