XM, Starbucks in Music Deal

Satellite radio provider XM Satellite Radio Holdings Inc. said Tuesday that it would carry a music channel programmed by Starbucks Coffee Co. beginning this fall.

Washington-based XM, which has more than 2 million subscribers, said the move was part of a multiyear, exclusive marketing pact.

Currently, Starbucks sells about 100 CD compilations at its cafes. As part of the XM deal, the “Starbucks Hear Music” channel will feature music from these compilations as well as other sources.

Seattle-based Starbucks launched its first music cafe at a former Hear Music store in Santa Monica and announced plans to expand the service to 2,500 stores in two years.

Founded in 1990, Hear Music, which operates four stores in Santa Monica, Palo Alto, Berkeley and Seattle, was acquired by Starbucks in 1999.

Also under the deal, the companies said Starbucks would play XM’s “Starbucks Hear Music” programming at 4,000 of its stores beginning next year.

It was not immediately clear whether the programming would be transmitted by XM or distributed through other means, a Starbucks spokeswoman said.

In March, Starbucks announced an initiative to open Starbucks music cafes, using Hewlett-Packard Co. technology to enable customers to make custom CDs as they sip coffee.

Starbucks shares fell 62 cents Tuesday to close at $45.85 on Nasdaq. Shares of XM Satellite fell $1.03 to $25.80, also on Nasdaq.