Starbucks Chairman Howard Schultz last week gave some insight into the company’s future music strategy at a talk in New York, stating: “Within 12 months, probably, you’re going to be able to walk into a Starbucks and digitally be able to fill up your MP3 player with music”. He also added that “over the next 6 to 18 months you will see us look at it, perhaps test it”. The question is - why would people buy their music at Starbucks in the first place?
It is fairly clear why it makes sense for Starbucks to sell music: diversification of revenue streams; increasing foot traffic and time spent in stores; as well as the opportunity to increase sales per customer. However, Starbucks removed CD-burning machines out of most stores that trialed them last year. It seemed like a natural step to replace those machines with technology for downloading music to MP3 players, since the general trend in the music industry is towards digital delivery - so far so good. But the question remains, why would people buy their music at Starbucks?
One reason might be if Starbucks were to give customers some kind of incentive to do so, perhaps a free song with your latte. So who might provide that free song? Apple seems like a prime candidate due to its existing involvement with Starbucks. However, Apple would not have any motivation to discount its songs, with such a strong market leadership position.
Note that Howard Schultz said “MP3&Prime player in his informal prediction. Currently iTunes does not sell songs in MP3 format; consequently iPods are rarely referred to as MP3 players. The use of the word “MP3” is most likely carefully chosen language so that Schultz can keep his options open, since there are a number of candidates besides Apple that would be highly interested in a partnership with Starbucks.
The most obvious contender would be, of course, Microsoft’s Zune, which also has another advantage to the current generation of iPods – its Wi-Fi support that in theory, could be used to conveniently transfer songs wirelessly to the player in Starbucks.
However, in Zune’s existing form, the player can only temporarily share songs with its own kind rather than buy or download songs from a central location. But that is likely going to change, and if you read our interview with Zune’s Head of Artists Development, Richard Winn, Zune’s editorial voice would not be a bad fit with Starbucks. However, Zune is locked down with DRM-restrictions and its pricing is ridiculously complicated.Microsoft, Zune, Statbucks, Howard Schultz, Digital Music