One More Cup of CD for the Road

Starbucks boldly markets its mild music blend

It's a cool night in mid May at the Supper Club in midtown, and the place is crawling with industry reps—of both the music and coffee varieties. "I'd like to give a shout-out to Starbucks and all the baristas and partners here!" Kristen Henderson, a guitarist for Antigone Rising, yells into her mic. About a dozen people in the audience reflexively holler and throw their hands up in the air. "You make a mean soy latte. Thanks for supporting our band!" Not exactly on par with Paul Stanley's homage to "Cold Gin," but the New York-area hottie female rock quintet is getting from Starbucks what Kiss never got from Bombay Sapphire. The week before, the coffee behemoth had begun selling Antigone's acoustic major-label debut, From the Ground Up, which it co-released on its own Hear Music label and sold exclusively out of its 4,400 U.S. stores. In its first week the record SoundScanned 10,656, more than well-known artists such as Mars Volta, Mario, and Queens of the Stone Age. Pretty impressive for a "baby band," but for Starbucks's next release, that figure would barely amount to a hill of Sumatran coffee beans.

On June 13, 10 years to the day Alanis Morissette's Jagged Little Pillcame out—the second biggest album ever by a female artist—the java corporation will begin peddling a new acoustic version of the 16-times platinum CD. Hear Music is banking on Jagged being its bestseller since Ray Charles's spectacularly successful Genius Loves Company. The coffee establishment even worked out an exclusive if controversial deal with Morissette's label, Maverick Records, to carry it for six weeks before it's available in other stores.

"Your Alanis plan is not very cool," the president of the Coalition of Independent Music Stores, Don VanCleave, wrote in a vitriolic open letter to Starbucks. "Securing yourself a six week window of exclusivity on the Alanis before everyone else gets it is only gonna make you a moving target." Music retailers across the country, facing a declining market, are furious with Maverick and are threatening to pull its titles and/or remove them from advertisements. With sales down 7 percent in the first quarter from last year, according to Nielsen SoundScan, it's no wonder record shops sound a little desperate.

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The anti-Starbucks: Dancing to the beat of the Mudtruck at the Howl Festival in 2004
photo: photo: Nora Szilagyi
"It's really hard to run a successful business selling records these days," says Josh Madell, co-owner of Manhattan's Other Music, a store that 10 years ago had the cojones to open up across the street from Tower Records, which was still the city's dominant music retailer (before it filed for Chapter 11). "There's definitely a lot of financial problems in the music industry right now, but the bottom line is that the markup on music for retail is much smaller than any other type of retail. The markup for clothing is 100 to 200 percent or more. For CDs you're lucky if you can get a 30 percent markup." Most successful music retailers, Madell explains, make their money on selling peripherals. Best Buy, for instance, sells new releases as loss leaders to get people to buy electronics.

Not so for the coffee leviathan, which now shifts units (3 million Ray Charles fans can't be wrong), tops music charts (Brother Ray hit No. 1, Tina Turner No. 2), wins anachronistic Grammys (eight for Genius Loves Company), and has its own label plus 33 million weekly customers with disposable income to burn. The chain store is filling iPods and CD carousels of the time- challenged and overcaffeinated at full retail price, which is why the majors are lining up to get their CDs in the cardboard containers next to the cash registers.

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Alanis Morissette
photo: Chapman Baehler

Starbucks's entertainment division significantly ratcheted up its game in the third quarter of 2004. That's when Hear Music released Genius, launched an XM satellite radio station (to complement corporate partnerships with United Airlines, T-Mobile, Hewlett-Packard, and The New York Times), and began rolling out its digital-downloading Hear Music media bars. Since then, the corporation has opened its first Hear Music coffeehouse—essentially a full-fledged music retail store with a Starbucks—and announced a deal to produce Herbie Hancock following in Ray Charles's footsteps, complete with an obligatory roll call of milquetoast collaborators: John Mayer, Sting, and Carlos Santana. In spring, the store began carrying some of the major labels' biggest sellers, including Beck and the Dave Matthews Band. In July comes a live album from Carole King. And then, according to industry scuttlebutt, the caffeine monger plans a live album by venti-rock icon Bob Dylan, culled from his 1962 performances at the Gaslight Café.


"Basically it sounds like they're doing to the small record stores what they once did to the small cafés," says Anette Baldauf, professor of sociology specializing in globalization and culture who teaches at the New School for Social Research. "They have very aggressive business strategies. . . . They've made it really difficult here in New York for the small coffee shops to survive. Naomi Klein calls it 'cluster politics'—they take over entire neighborhoods, like what they did at Cooper Union, where they have three or four locations so any alternative or small coffee shop wouldn't have a chance to make it." Witness Starbucks's 341-store carpet-bombing of our fair metropolis, from Bay Ridge to Riverdale.

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