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Business - Written by on Sunday, September 30, 2007 21:33 - 1 Comment

Denis Hancock
Starbucks and iTunes finally unite

Ever been in line for a Grande double semi fat Mocha Frappo Cappucino with an Espresso Vanilla twist, popped your iPod earphone out to place the order with the barista, and found the Starbucks was playing a better song than you were listening to? And if so, at that moment did you really, really want to buy it? Well if you answered yes you may want to rethink some things about your life, but you should be happier soon because according to the New York Times:

Starting tomorrow at certain Starbucks stores, a person with an iPhone or iTunes software loaded onto a laptop can download the songs they hear over the speakers directly onto those devices. The price will be 99 cents a song, a small price, Starbucks says, to satisfy an immediate urge.

I’ve been waiting for this announcement for a long time, because it just makes so much sense (particularly since Starbucks has been running HearMusic cafes for years that are tied to CDs). The obvious problem, however, has been one of business models – Apple only makes a few cents a song at best. If Starbucks wants to make a few cents too, there just aren’t enough cents to go around to make any sense.

So why now? Well I think we continue to slooowwwllly move towards a more fundamental shift here. As I posted back in June, the most successful musician of all time has seen the writing on the wall and has a new label – Starbucks. Now let’s pop back to another quote from the NY Times article:

Impulsive music lovers will have to sign onto the cafe’s Wi-Fi network to discover what song is playing over the Starbucks speakers. With a few taps, users can download the song onto their iPhones (which double as an iPod), or the new Apple iPod Touch with its wireless connection. The 99-cent charge will appear on their phone bills.

Interesting. So (for example) Paul McCartney lovers can buy the album from the Starbucks label, with their iPhone, in a Starbucks. That seems to eliminate somebody from the music industry equation – those pesky legacy labels. And why might that matter? Well, to quote the article again:

Mr. Entner said the sticking point on the growth of the phone as a full-service payment device had less to do with technology, which is adequate, and more to do with business questions. He said that all the potential participants — phone carriers, retailers, credit card companies, music labels — wanted a cut of the action, and it was not clear how the money for over-the-air payments would be divided.

For example, he said, the mobile-carrier profits for downloadable songs were about 3 cents a song, which he deemed “razor thin.”

Razor thin indeed – but let’s just say one of those “participants” account for a lions share of that cut. But if you could get a musician out of the clutches of the old labels, there might just be a heck of a lot more money to go around for everyone else (including the artists).

At least that’s what I keep hoping is happening here – Apple, Starbucks and others are using Trojan Horse tactics to force the music industry to somehow, someday, move to a much better model than what they’ve been clinging to.

Of course, I also see what Apple is doing with the iPhone right now, so I won’t exactly be surprised if songs I might buy at the Starbucks are rendered unlistenable if I grab my next coffee at the Second Cup.

1 Comment

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Oct 11, 2007 7:45

Great idea !

When will car manufacturers include a USB port in the car such that digital radio “subscribers” can request and download a song they hear whilst in-car ?

Or a particular pod-cast for that matter ?

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