The Zen of Starbucks Records

So Starbucks is starting a record label.

Will we someday have to use the term "The Big Five" labels when referring to the majors? Even if the record business stinks we can say Starbuck's record business smells great.

Starbucks is aiming to release eight albums in its first year. You'll be able to buy them while you're ordering your coffee, but they are also doing a distribution deal that will enable others to sell their albums as well.

And, Starbucks is launching with a big splash signing Paul McCartney to a one project contract now that he is no longer contracted to Capitol Records. I like McCartney, but I don't think that his deal will launch Starbucks Records into orbit. I may be wrong. Who would question Starbucks on marketing? But any McCartney album would have to have it "in the grooves" as they used to say back in the day. Nonetheless, by signing McCartney Starbucks has just gotten everybody's attention.

I must confess to being worried about this announcement. Not for Starbucks. But for the record labels that may very well now say, "ah ha, Starbucks knows how to run a business and they want into our business, selling CDs".

No. No. No.

Yes, Starbucks will sell CDs and that is probably an appropriate way to start, but this is the company that stated their intention to outfit its stores with equipment that would allow coffee drinkers to plug their MP3 devices in and fill up with music (at an additional charge, of course) while also ordering a latte.

That is the future.

The CD business is over. On its way down progressively and steadily.

You don't build a successful business model for the future on an outdated product that the next generation doesn't really want. My students at USC drink a lot of Starbucks coffee (perhaps to stay awake for my classes) but they are more likely to plug in and fill up their iPods than they are to buy a CD.

But will my students be Starbucks' target market for its new label? Not likely if the signing of McCartney signals any strategy. If they wanted to send a message to Gen Y they could have gone after a Gen Y artist. If their experiment succeeds, they probably will, but this label will likely also be true to its main business -- socially selling coffee. The Starbucks experience will be all over and deeply embedded into its music.

The future of the music industry is digital.

The new record store is iTunes, maybe Starbucks and other destination locations where socialization and other consumption is going on.

The new radio is social networking and probably Internet radio once WiFi is available. Starbucks doesn't need radio to push its music. And don't forget that Starbucks already sells a lot of music.

As an aside I wonder if Starbucks, when it gets to be a big player in the music business, will have its own answer to the RIAA suing customers who steal music. Maybe Starbucks could scald music pirates with hot coffee instead. I actually think that would be more effective than the RIAA's strategy. And it would be cheaper because Starbucks mixologists would cost a lot less than lawyers.

So drink up! Support the music industry!

And rest assured that a smart company like Starbucks is not about to get into yesterday's record business. They are using their heads to enter the digital future --- mobile music.
Because they see what record label execs cannot or will not see. Music consumption will be like food consumption. Customers want it when they want it. The record label's production of a product (CD) or download is antiquated.

Music is the new food.

Even Nicole Richie can be on a heavy diet of music and not worry about gaining weight.

Sam Goody can't sell food. It wouldn't work.

God forbid, Tower Records added coffee it its day.

Or Virgin superstores feeding you and quenching your thirst.

MySpace can't serve coffee, but Starbucks can serve MySpace.

Starbucks has it right. Coffee is the new sustenance.

The next generation can cut back on eating, but they can't live without music so when they do one, they'll be inclined to do the other.

And, if this is true, Starbucks Records is likely to have a hit on its hands.