October 14, 2004

CD Burn

Starbucks Expanding Custom CD Service to 45 Stores

Thu 14 October, 2004 15:15

By Nichola Groom

LOS ANGELES (Reuters) - Starbucks Corp. SBUX.O on Wednesday said customers will be able to make custom music CDs at 45 of its U.S. coffee shops by later this month, the first step in a plan to expand the service nationwide.

The company will install three to six terminals for choosing music and burning CDs in each of 15 stores in Seattle and 30 in Austin, Texas, said Ken Lombard, president of Starbucks' entertainment division.

"This is by no means a test," Lombard said in an interview. "This is the initial phase of a national rollout."

Using a variety of computer gear and support provided by Hewlett-Packard Co. HPQ.N , Starbucks customers will be able to record seven songs for $8.99 while they wait for their favorite foamy coffee drinks. Additional songs will cost 99 cents each.

Neither Starbucks nor Hewlett-Packard would disclose financial terms or how much they were spending on the program.

Wednesday's announcement is the latest in a series of moves Starbucks has made to expand its music offerings. Earlier this year, the chain opened its first music cafe at a former Hear Music store in Santa Monica, California.

Starbucks will expand the music service to other locations in mid-2005, but would not say where or to how many stores.

Earlier this year, the Seattle chain said it aspired to expand the service to 2,500 stores in two years, but a spokeswoman said on Wednesday that that figure was no longer necessarily accurate.

The company will expand the service in a disciplined way, Starbucks Chairman Howard Shultz said in an interview.

"This is how Starbucks traditionally rolls out new products," Schultz said. "Whether it's WiFi, or the Starbucks Card, or even Frappuccino, we've had a long history of doing this on a region-by-region basis."

In addition to selling music in its cafes, Starbucks earlier this year struck a deal with XM Satellite Radio Holdings Inc. XMSR.O under which XM will provide the "Starbucks Hear Music" channel to its more than 2 million subscribers.

The chain also collaborated with jazz recording label Concord Records to produce the late Ray Charles' last album, sales of which have soared since its Aug. 31 release.

The chain has several other proprietary CDs featuring other recording artists in the works, Schultz said, but declined to name the musicians or give a timeline for their release.

Reuters | Latest Financial News / Full News Coverage

Posted by Craig at October 14, 2004 03:57 PM