Starbucks puts music division on back burner
Starbucks Corp., which several years ago began an ambitious effort to extend its brand into entertainment, on Thursday said it was scaling back to focus on its core coffee empire.
The Seattle-based retailer -- which warned earlier this week that economic weakness would hurt this year’s earnings -- turned over day-to-day management of its Hear Music record label to Concord Music Group and said Ken Lombard was leaving as president of Starbucks Entertainment.
“As part of our ongoing transformation, we are committed to examining all aspects of our business that are not directly related to our core,” Chairman Howard Schultz said in a statement.
The entertainment division, perhaps best known for Ray Charles’ Grammy-winning smash-hit CD from 2004, “Genius Loves Company,” has been a pet project of Schultz’s as he strives to broaden the reach of Starbucks as a global brand, but it is not considered significant to the behemoth’s overall financial results.
Lombard, who the company said was leaving “to pursue other business interests,” was replaced by Chris Bruzzo, Starbucks’ chief technology officer, as head of the music, books and film division.
Starbucks said it would continue working with the William Morris Agency to find books that it could offer in its stores.
Starbucks has been successful in marketing CDs and books, but its efforts to promote two movies had lackluster results, and the company has announced no further Hollywood efforts. The inspirational drama “Akeelah and the Bee” and the environmental documentary “Arctic Tale” were box-office disappointments.
In a message to employees Thursday, Schultz stressed the need for “constant innovation and stellar customer service” in the company’s main business, its coffeehouses.
The company faces increasing competition for coffee drinkers from rivals such as Dunkin’ Donuts and McDonald’s Corp. But Schultz blamed a drop in store traffic on the troubled U.S. economy and sagging home values, saying premium retailers of all stripes were suffering as consumers cut back on their spending.
The company’s stock plunged 10.4%, or $1.86, to $15.99, its lowest level in four years.
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