Starbucks to Sell Music Downloads for Portable Players

Starbucks Corp., seeking to expand its entertainment business at a time of music industry “chaos,” plans to move beyond compact disc sales and CD burning to allow customers to transfer songs onto MP3 portable music players.

“A lot of our customers are asking for device fill-up, and going forward we’ll do that,” Ken Lombard, president of Starbucks Entertainment, said Saturday in an interview at the Midem music-industry conference in Cannes, France.

Starbucks, the largest U.S. coffeehouse chain, hasn’t yet set a date for moving into MP3 downloads and is still talking to various companies about the technology, said Lombard, whose company has more than 10,000 retail outlets globally.

Apple Computer Inc. is the global leader in such technology with its iTunes download system and iPod portable player.

The coffee chain’s move into MP3 sales would follow its co- production of Ray Charles’ “Genius Loves Company” album of duets, and plans announced last month to promote movies and offer DVDs and soundtracks at its 5,500 company-operated U.S. and Canada stores.

Starbucks’ venture would come at a time when the music industry is “in the midst of a tremendous amount of chaos,” Lombard said.

Global music sales declined to $33.6 billion in 2005 from $39.7 billion in 2000 partly because of piracy and competing forms of entertainment such as video games.

Other factors have also limited music buyers’ choice, including less selection at many retail outlets and narrow programming on U.S. radio that has caused “limited exposure” of many new acts, Lombard said.

At many big general retail outlets, music is located “in Aisle 28 in the middle of a lot of other merchandise being sold, and that has not provided for a quality music experience,” he said. Starbucks sold about 3.5 million CDs in its fiscal year ended Sept. 30.

Starbucks remains committed to CD burning through the Hear Music stores attached to its coffee shops as it explores MP3 sales, Lombard said. The company also will continue to offer some CDs on an exclusive basis before they’re available in retail stores, a move that some retailers objected to in the case of releases by such artists as Canadian singer-songwriter Alanis Morissette.

“We’re not the first retailer that’s had exclusivity,” Lombard said, citing such examples as an agreement between country artist Garth Brooks and Wal-Mart Stores Inc.

He said the music industry had broadly welcomed Starbucks’ music initiatives.