Coffee House ROCK

After conquering the world one latte at a time, java monolith
Starbucks looks to get its caffeinated clutches on the music
industry

By MALCOLM MAYHEW

STAR-TELEGRAM STAFF WRITER

SAN ANTONIO — You’ll have a Tall Java Chip Frappuccino with extra whip, a
piece of marble poundcake and a coupla Rolling Stones songs — to go,
please.

Starbucks Coffee — the powerhouse chain that started out in a ramshackle
little space in Seattle and, more than 9,000 stores worldwide later, now can be
found in such exotic locales as Qatar, Oman, Turkey and downtown Fort Worth —
has gone one step further in conquering and consolidating the worlds of hot
cappuccino and Coldplay.

Their plan can be found here, at the just-opened Starbucks Hear Music
Coffeehouse, on the edge of San Antonio’s touristy River Walk. You can not only
browse through racks of CDs; you can also make your own at digital “music
bars.”

The idea of the store, Starbucks reps say, is to build on the age-old
philosophy that music is just as pertinent to a coffeehouse as java.

“Music has always been a part of the coffeehouse culture and is an essential
part of the Starbucks heritage,” says Ken Lombard, president of Starbucks
Entertainment. “So our extension into music is a natural move.”

It’s also just the latest leap that Starbucks has taken into the music
industry. The company already owns a record label imprint, also named Hear
Music; it releases or co-releases CDs by Venti-sized artists like the Rolling
Stones, as well as up-and-comers; and it has a 24-hour radio station on XM
Satellite Radio (called, of course, Starbucks Hear Music).

With the arrival of the Hear Music stores, Starbucks is now going head to
head with music retail chains big and small, from mammoths like Best Buy and
Circuit City, to small, independent record stores. And they have two major
advantages over their competition: Some of the Starbucks CDs, such as a recent
Rolling Stones compilation called Rarities: 1971-2003, are “exclusive”
releases (meaning that while other retailers may carry them, the “Starbucks”
name brand is embedded on them); and, well, you can’t just walk into a record
store and get a White Chocolate Mocha Frappuccino.

“It’s smart to do what they’re doing, but it’s not good for existing record
stores,” says Erv Karwelis, owner of Idol Records, an independent record label
based in Dallas. “Most record store retailers are already having a difficult
time as it is, with more and more people downloading songs from the Internet or
buying CDs at places like Target and Best Buy. This is even more
competition.”

Starbucks Chairman Howard Schultz says the company is being so aggressive in
its music-selling campaign not necessarily to compete with the Best Buys of the
world but to offer visitors a “third place” to be, after home and work. Get them
in there for the coffee, maybe they’ll buy or burn a CD, the company is
saying.

It’s the second such store that Starbucks has opened. The first one was born
a year ago in Santa Monica, Calif. The third store is slated to open in Miami’s
South Beach sometime in the next few weeks. In addition, more than 40
traditional Starbucks stores in Austin and Seattle now offer the “music bars,”
allowing users to burn and buy CDs.

Depending on how these stores fare, more may be opened, although there are
currently no plans for additional stores.

At the San Antonio store, 35 “music bars” are sprinkled throughout the
two-story, 5,100-square-foot building, which is at 111 West Crockett St.
downtown. Music buffs belly up to the bars (which are, basically, HP computers),
type in the name of their favorite artist, then choose the songs they want to
download. For $8.99, users can burn a seven-song disc. This includes the CD and
artwork. Additional songs are 99 cents; there are more than 1 million
downloadable songs to choose from.

A large video screen in the middle of the room lets users know the status of
their CD-in-the-making. When it’s done, a message flashes across the screen.
It’s all very high-tech and Blade Runner-ish: When not in use, the music
bars chirp tunes and display images of downloadable artists such as Death Cab
for Cutie and Kanye West.

“I’m afraid I won’t leave here now,” jokes 16-year-old singer Sonya Kitchell,
who performed at the store’s grand opening party. “I love coffee and I love
music. This place will probably break me.”

Kitchell is here today to tout her debut, Words Come Back to Me, a
co-release between record label Velour Music Group and Starbucks’ Hear Music
label. Although the disc won’t be available for another four months, Starbucks
is already spreading the word about her, hoping to build hype and get customers
to join them for the countdown to the disc’s April 4 release.

Signing and championing new artists also is part of Starbucks’ foray into the
music industry. They’re off to a good start: Antigone Rising, a new New
York-based band whose debut CD was jointly released by Starbucks and Lava
Records, has sold more than 70,000 copies, an impressive figure considering the
band has not relied on radio airplay or MTV for sales.

Starbucks has also released or co-released CDs by heavy hitters such as the
Rolling Stones, Elton John and Ray Charles. The Charles CD, Genius Loves
Company, won eight Grammys last year. This year, the chain
co-released another Grammy-nominated CD, Herbie Hancock’s Possibilities
— a good sign, Starbucks says, that they’re doing something right.

“We’re finding that our customers trust the curatorial voice of Starbucks
Hear Music,” Lombard says. “We offer unique and compelling music selections that
either they can’t get anywhere else or would have a hard time finding
elsewhere.”

Just how much money Starbucks is making from selling music is not entirely
clear, since the company declines to publicly say how much revenue it generates
from CD sales, according to a story in the Wall Street Journal. But the
Journal story says that whenever Starbucks carries a CD, its stores are
often credited for 20 to 30 percent of the CD’s weekly sales.

Interestingly, it’s the more obscure artists who seem to be benefiting the
most from having their CDs sold at Starbucks. The Wall Street Journal
article says that Starbucks is responsible for about 50 percent of the sales
of up-and-comer Amos Lee’s new CD, and only about 6 percent of the 1.5 billion
U.S. sales of pop behemoth Coldplay’s latest disc.

“That’s because people who go to Starbucks to buy music want something
different,” says 17-year-old Starbucks customer Sid Riley of North Richland
Hills. “I can go to Circuit City and get the same ol’. Or I can go to Starbucks
and get something that I might not be able to get anywhere else.”

Starbucks first started dabbling in music more than a decade ago, with the
release of jazz compilations. As the company was growing, executives began to
push the idea of selling more music, as sort of an homage to traditional
coffeehouses.

In 1999, the company dove into the music industry head-first, purchasing for
$8 million dollars a San Francisco-based company called Hear Music that ran a
quintet of music-retail shops in San Francisco. The guy who ran the company, Don
MacKinnon, was named vice president of Starbucks’ Hear Music.

The company’s increasingly aggressive interest in music has not come without
controversy. When a record company, earlier this year, gave Starbucks the rights
to carry an acoustic CD by popular rock singer Alanis Morissette — six weeks
before retail chains were allowed to carry the disc — several retail chains
complained; HMV Group PLC, the largest music retailer in Morissette’s native
Canada, protested by pulling her other discs from the shelves, according to the
Wall Street Journal.

“Stuff like that is both a good and bad thing,” says Karwelis of Idol
Records. “It was good that Starbucks’ music sales have made so much of an impact
that record labels want to do ‘exclusive’ and ‘special’ deals with them to help
sell records, but it’s bad because those labels are burning bridges with other
retail chains. Right now, in this industry, no one can afford to burn
bridges.”

While regular Starbucks stores are slowly beefing up their inventories with
both exclusive and non-exclusive releases, the San Antonio store sells more than
10,000 non-exclusive CDs. An entire section is devoted to Latin music,
reflecting the city’s cultural makeup.

“We assessed many different variables when deciding where to locate the
second Hear Music Coffeehouse including location, foot traffic and the music
culture of the city,” Lombard says. “The physical and digital CD selections have
been hand-selected by the Hear Music content team to reflect the music heritage
[of San Antonio].”

In a lot of ways, the store is breaking new ground. In others, it’s still a
traditional Starbucks, with all its usual signature coffee drinks, sweet snacks
and health-conscious sandwiches. Areas to quietly sit and chat are scattered
throughout the space, and a 1,000-square-foot patio overlooks the River Walk;
despite its big music push, it’s still a place where you can escape noise, an
image that, Starbucks’ Lombard says, will not be shattered anytime soon.

“At our core, we are a coffee company,” Lombard says. “And we are very
mindful that the music should always complement the coffeehouse experience, not
distract from it.”

New artists getting a latte of
attention

Starbucks is already brewing two new Hear Music CDs to be released early next
year.

First up will be a new disc from Brazilian pop/jazz star Sergio
Mendes, who had a string of hits in the ’70s and ’80s, including Never
Gonna Let You Go, and is now hoping to make a 21st-century comeback.

The disc is called Timeless and Starbucks is co-releasing it with
Concord Records; it’s the same union that bore Ray Charles’ Grammy-sweeping
effort, Genius Loves Company.

Like that record, Timeless will be heavily driven by duets and
collaborations. Chipping in on Mendes’ record: Black Eyed Peas, Jill Scott, John
Legend, Q-Tip, Stevie Wonder and Dallasite Erykah Badu. Produced by Black Eyed
Peas member Will I. Am, Timeless will have a heavy slant toward modern
R&B.

The record should be out in February.

Out in April will be the debut by 16-year-old singer Sonya Kitchell,
who grew up in rural Massachusetts. Words Came Back to Me, due April 4,
will be released jointly by Hear Music and Velour Records. It’ll be a
predominantly acoustic record, spotlighting Kitchell’s lyrics and unadorned
voice. The Los Angeles Times is already raving about her, calling her a
“fascinating performer.”

Starbucks is banking on Kitchell big-time, shuttling her around the country
to make appearances at their coffeehouses and landing her a Feb. 1 gig at
Carnegie Hall, where she and other artists will pay tribute to the music of Joni
Mitchell.

— Malcolm Mayhew