Appetite For Disruption

Starbucks Downsizes its Entertainment Ambitions (With Update)

It was just a few months earlier I was predicting how Starbucks Coffee Company's Starbucks Entertainment unit was overreaching.

In the midst of CEO Howard Schultz's revamping of the company Starbucks has decided to hand over the music operations for its Hear Music label venture to partner Concord Records.

But I think it should be emphasized that Starbucks's music initiative lost steam because they lost touch with what made their music effort cool to begin with.

1. Starbucks concentrated on music that gave its stores a cool vibe: jazz, blues, classic R&B, classical, singer-songwriters.
2. The Starbucks customer spends a lot of time in the store: ordering, waiting on line for their order, and, if they choose, drinking their order in the location (or just working on their laptops).
3. Starbucks, while they have some teen customers, is clearly more focused on the adult market.  This is a demographic that is not as active a music consumer as teens and college-age students.  They want the commuter, the office worker, the business traveler.  Starbucks, when they practiced a more honed musical aesthetic, found an easy audience in these demographics.

When any brand seeks to make themselves an arbiter of cultural taste the focus needs to be tight.  It can't be all things into all people.  When Starbucks Entertainment was launched in the wake of the Genius Loves Company Grammy-winning triumph it undid much of the good work the Hear Music team had accomplished in building to that particular moment.  It chose more mainstream material and allowed themselves to get involved with labels trying to market new acts which did not fit within that previous core aesthetic.

It's a cautionary tale.  A strong focus on music to help drive profits and branding initiatives has to take into account the brand's customer base and how that customer interacts with the brand.

UPDATE:  Great minds think alike; Charlie Moran from AdAge.com's Songs For Soap Blog is also thinking the Hear Music division of Strabucks suffered more from lack of focus.

And, as large as their ambitions were, I'm also now thinking that Hear Music got mis-directed.  All of that early emphasis on jazz, classical, folk, blues, and singer-songwriters; think how much influence the company could have wielded (and may yet still wield) in introducing and/or touting artists of significance in those more eclectic genres.  Their customers are yearning for something great, something special, out of their music.  And even with the instant familiarity of the artists in recent projects you just can't create a cultural phenomenon out of a normal Paul McCartney album release, nor out of a live James Taylor greatest hits record.  And, sadly, lest we forget, a lot of the buzz behind Genius Loves Company started happening in the culture only once Ray Charles passed away.  That ain't gonna happen twice.

What is "Selling Out?"

NOTE: Sorry - I started this post last week and just had the time to get it out today.

A discussion I've heard far too often, both among music industry personnel and those in the media and in the corporate marketing world, is that of trying to define what "selling out" is in terms of a musical act's relationship with a corporate brand.  On the one hand, it is an accepted fact that many acts need some kind of corporate involvement at certain times during their careers to help them financially or with major exposure boosts.  On the other hand, the artists themselves are rightfully wary of aligning themselves with brands in ways which leave them open to criticism from fans and press alike.  An article by Charles Moran in this week's Advertising Age explores this topic again.  Charles also co-writes the great Songs for Soap blog for AdAge.com with Mike Tunnicliffe, which explores the many different brand/artist interactions taking place these days.

One thing rarely discussed is this: artists - ALL artists - need to "sell out" to corporate interests at some stage in their career, and often this involves the corporations they align with the closest and with the highest stakes for their longevity - namely their own record labels and the radio stations/video outlets (and the conglomerates which own them).  Even in this digital, DIY age the large majority of artists seek to be signed by a record label so the label can provide marketing, PR, radio promotion, and distribution of their recordings.  Once the act has music to be released, then they need to go out and promote their single across the radio stations and video channels/outlets which they depend upon to drive their music up the charts, thereby driving album sales and the revenue they might receive based on that airplay.  Yet the major labels (and those indies which are divisions of major corporations) and the big radio conglomerates use music to their own ends just as any corporate brand seeking to license the content from those acts. 

How many artists feel their careers were mismanaged by their labels, both when they were current artists, and with their catalogs after leaving a particular label?  Too many to count.  Those corporations keep cutting staff and roster acts as the industry's physical sales woes increase.  They also have lousy reputations for being dishonest in their accounting to the artists they rely on to develop the content the companies are based on.  But those labels are still the key engines for allowing artists to create and distribute their art as efficiently as possible across a wide range of media.  Even the band Birdmonster, once touted as a completely DIY outfit in Chris Anderson's classic business book "The Long Tail," has signed to a label.

How many artists decry how radio airplay decisions have been centralized by corporate behemoths, leaving virtually no local station autonomy and relying almost solely on audience research to make programming decisions?  How many fans hate when radio conglomerates change station formats in their local markets, thereby leaving music fans deprived of easy access to certain kinds of music?  Radio conglomerates especially just use music to sell advertising time and advertising programs to marketers.  So, in essence, while artists use radio to air their songs, the stations use the music to draw in audiences attractive to advertisers, and the artists have ZERO SAY in what advertising those stations play around their music.

Even the venue owners, ticket sellers, and concert promoters are large corporate entities which must be dealt with: Live Nation, AEG, Ticketmaster, etc...  and these companies all have divisions which deal with artist fan clubs, merchandising, and other key parts of the artist's live performance and ancillary revenue streams.

Many artists who would refuse any proactive alignment with a particular brand nevertheless do not complain when particular retailers, hotels, restaurants, banks, health clubs, etc... have in-store music systems which include playlists featuring their own music.

So, let me use a rather crude analogy.  Much as Mademoiselle Rimbaud, the busty French girl pleading to Mel Brooks's King Louis in "History of the World, Part I" pleads she simply does not "do it," I reply to those artists who think they aren't already neck deep in corporate involvement with the King's blunt response: "Come on.  You know you do it.  We all do it.  We love to do it."  There is always a price to pay for releasing one's art and striving to have it make an impact on as mass a scale as possible.  There is always a beast which needs to be fed.  And if you want to achieve mass success, then there is always a game to be played to fire up the engine of that success and keep it running smoothly... which doesn't mean there aren't conscious choices artists shouldn't exercise, just that any claims of artistic purity are proven false on prima facie evidence alone.

Noted music supervisor Josh Rabinowitz of The Grey Group writes a bi-weekly column for Billboard magazine entitled "With the Brand."  In last week's column (no link available through all my search efforts) he espoused the virtues of artists "selling in" to the world of music licensing and doing music promotions with brands.  Why?  The answers are obvious.  In an interconnected world where one is more likely to hear about a video via YouTube than MTV, or hear a new band or song on MySpace or "Grey's Anatomy" than on commercial radio, then the choice to be anything but completely channel agnostic is short-sighted thinking.  Yael Naim and her song "New Soul" are part of the cultural zeitgeist due to an Apple TV ad.  And both the artist and the brand can measure their success together.  Since her song was featured in the ad her download sales have been significant, and Apple can actually, in some fashion, track how much consumers are paying attention to its advertising by watching that immediate reaction.  Similarly, the company can also check out how many YouTube views of its commercial have been seen by consumers, and, as Yael Naim's record is released, how many albums she sells and her success in the digital and mobile arenas - in great part to her association with the brand.

Haven't those been the great questions marketers consistently seek to answer: "How can I quantify the effectiveness of the advertising my company and/or marketing agencies is producing?  How can I tell, in this TIVO/DVR world, if people are just skipping through my company's ads and ignoring them?"  The measurements above are imperfect to be sure, but they are still measurements one can gauge effectiveness by.  Was there any shot "New Soul" would have received any consumer attention in today's oversaturated media marketplace without a major ad or television licensing opportunity such as the Apple ad?  Did she stand any chance at garnering radio airplay of any significance?  No way.

The quotient may be different for some older tracks or artists whose music is used in such a way, but not by much.  90s dance star Haddaway had his once-ubiquitous hit "What is Love?" licensed for a diet Pepsi Max ad aired on this year's Super Bowl.  He had a tremendous increase in download sales after the ad was aired.  Was it an increase the Diet Pepsi Max brand manager thought was significant given his multi-million dollar media buy for the Super Bowl?  Who knows?  But it at least gave him some quantifiable evidence to suggest the ad was the sole reason for that sales increase.

Production music companies are more than happy to be to taking corporations' easy money and leaving the moralizing to the artists with egos who find these opportunities to be analogous to selling one's soul.  There is a market to be served and they are glad to serve it as efficiently and cheaply as possible.

So every artist needs to take a step back and truly ask themselves this: if they are willing to give up their masters to one company - the record label, or if they are willing to go and provide programming to radio conglomerates who don't have any vested interest in music per se, then why are other types of brand partnerships taboo?  They shouldn't be, and if you don't think fans realize this, then you're selling yourself... short.

E-commerce Sales of Physical Product - Revisited

As I mentioned in my last post - sales of physical CDs were up 2.4% at E-commerce sites last year.  E-commerce sites can offer up wider selection of product, allow customers to listen to audio clips of tracks, and peruse editorial and customer reviews of the album.  What the E-commerce experience lacks in immediate customer gratification it gains in terms of ease of shopping experience.

Yet sales of albums at E-commerce sites represent just 6% of overall album sales.  For labels with huge catalogs facing further consolidation of record retail floor space E-commerce sites represent the last best hope for the compact disc.  So where is the great marketing effort on the part of the major labels, the RIAA, and independent labels to drive customers online to purchase physical product.  This does not mean shunning label retail partners.  So many major music retailers have online sites which sell music as well.

But it also broadens the number of accounts the distribution companies ought to be targeting to sell physical product (and digital music as well).  So many "non-traditional" retailers operate E-commerce operations.  Why not get these accounts to test the viability of music sales via their web site?  How can the labels get these retailers to give them visbility on their site?

The point is this: in this area where the labels have a growth story to sell we hear little from the industry touting this success.  Now is not the time to play possum.  Now is the time to flaunt your plumage like a peacock and go out and convert the non-believers.  CDs, especially catalog and deep catalog in this current market, need to be championed.  Get out there and grind it out!

Starbucks Entertainment Officially Jumps the Shark

Kenny G.  No artist's name makes the hair on my neck stand up straighter.  As someone who got involved with the music business in the 90s from a love of jazz and during the "jazz renaissance" of that decade Kenny was, in my opinion, the epitome of everything wrong with music.  The saccharine sounds.  The Michael Bolton connection.  The complete lack of soul.  Sure, the guy had chops up the ying-yang, but to what end?  The coup de grace was when he paired himself with the disembodied voice of the deceased scion of jazz music: Louis Armstrong, for a "duet" on "What a Wonderful World."

I'm a pretty inclusive music consumer and listener.  I listen to all kinds of music, even the occassional smooth jazz record.  But I draw the line with Kenny G.  Today, Starbucks Entertainment announced an exclusive release with the above-mentioned Mr. G.

When I worked at Universal Music Special Markets I really wanted to work on the Starbucks account.  They had always approached music with a very sure-handed and opinionated curatorial sensibility.  Certain music worked for their brand.  Certain music didn't.  I distnctly remember one of the first meetings I attended with someone from Starbucks in 1999.  We had someone from Verve Music Group in on the meeting.  That person tried to pitch Starbucks on doing a smooth jazz CD as part of the company's branded CD compilations for the coming year.  They Starbucks employee looked at our Verve guy like he had two heads. 

Smooth jazz was not what Starbucks was about.  They emphasized artistic quality and warmth, intimacy and collaboration.  They did instrumental jazz compilations, singer-songwriter collections, blues, Brazilian music, world music, even some classical and opera.  The music for the brand had a point of view.

Starbucks never did too much advertising.  Their advertising was their product and their stores, and the environment created in those stores.  The couches and the ability to sit and enjoy your latte were part of that environment, but the music playing in the in-store bed was what you felt, what made you feel like sitting and staying at Starbucks, that being there was worth the price of that latte.  And the music on the Starbucks CDs and the music being piped in were synched up.  When you bought one of those CDs you could take a little piece of the Starbucks brand experience home with you.

Even as Starbucks purchased Hear Music and became more ambitious, the artistic specificity remained in their brand point of view.  They launched the "Artist's Choice" series of CDs, where musicians would create compilations based on their artistic taste.  And they chose artists that furthered the Starbucks brand's image as tastemaker: Lucinda Williams, Willie Nelson, Yo-Yo Ma, Elvis Costello, Diana Krall, Norah Jones, and many others (not all the titles are in print anymore).  Even on their "Opus collection" single-artist greatest hits packages they were able to delve into some very significant artist catalogs that were normally difficult to license: John Lennon, Bob Marley & the Wailers, Jimi Hendrix, Frank Sinatra, and The Doors, to name a few.  For this they should be recognized and applauded.

Starbucks also became a more significant account for selling frontline records, records which not many other accounts were carrying.  They championed artists who were releasing good records rather than just carrying the latest record the labels wanted them to flog.

After the groundbreaking partnership with Concord Records which was responsible for the Ray Charles mega-hit Genius Loves Company the company was sitting even prettier.  But, after the massive, Grammy-winning triumph of Ray Charles that curator's sense of knowing what was right for the brand diminished.

Starbucks is a huge brand, with a massive retail footprint.  At some point earlier this decade the company decided that the exclusiveness of the type of music Hear Music was producing and buying needed to diversify to account for a wider, more diverse customer base that crossed many different age cohorts.

So there is no longer a "Starbucks sound" per se.  Starbucks can't do deals with Kenny G AND Joni Mitchell and expect there to be continued trust in the brand's musical taste or sensibility among its customers.  Similarly, on the frontline side the Starbucks Entertainment team is now stocking more big hits and well-known artists: Led Zeppelin, Alicia Keys, Wyclef Jean are current highlighted titles.  And the titles released by Starbucks by Paul McCartney, Joni Mitchell, and James Taylor haven't excited customers as much as they've generated PR buzz.

Starbucks has always aimed to be the "third place" in people's lives, other than home and work.  But, more so than they realize, Starbucks' music initiative, from its beginnings, has helped give the brand the respect it needs to keep people trusting in their brand experience.    I mean, even the baristas can't be excited at the prospect of having to have Kenny G music piped into the stores.

Starbucks needs to reclaim their musical mojo - not just take on projects because they can.  If the gentleman from Starbucks I know who delivered that "no smooth jazz" edict to Verve back in 1999 is still working at the company I can hardly imagine how disappointed he is in this choice by the company he's worked at for so long and done so much for in developing their music business.

Shotgun Wedding?

Over the past few years record companies have made pronouncements that they would like to be in business with bands not just with regard to their recording careers, but also with regard to touring revenue, corporate sponsorship, and merchandising revenue.  Most of the time these desires are laughed at by both artist managers and artists alike.  If anything certain artists with solid careers and clout have taken an opposite tack.  Not only did Paul McCartney decide to release his new record via a partnership between Concord Records and Starbucks Coffee Company, but he also owns all his masters from his solo career.  He took those with him when he left EMI and will probably shop them around to a label to distribute or create his own label.

In fact several successful artists from the heyday of the music industry obtained the rights to at least their future master recordings, if not their catalog recordings as well, when re-negotiating their record deals.

Some high profile acts have negotiated new recording contracts which do indeed give the label more of what they want: a share of the act's non-recorded music revenue streams.  Both Korn and Robbie Williams signed deals like this with EMI owned labels.

Now there are rumors that Warner Music Group might be interested in purchasing one of the industry's big artist management concerns.  But I, for the life of me, can't see that happening.  It would ruin any management company's credibility with its artist roster because the manager is person tasked with, among other things, managing the record company relationship.  If that boundary is compromised, or has the perception of being compromised, then that manager is most likely going to be sacked.  While I still believe artist managers need to get out of the license approval process in order to streamline licensing of repertoire across all potential record company revenue channels they do play a constructive role in holding the label's feet to the fire and working with the label re: the artist's schedule management.  This isn't MGM in the golden days of Hollywood.  The "studio system" which existed for the movie business is gone, and for the music business such tight reins on the acts dissolved when Motown Records' artists like Marvin Gaye and Stevie wonder fought for more artistic control (though every once in a while you get some Svengali manager/label head like Lou Pearlman who is successful in developing acts out of a defined, repeated formula).

One can say "we're all creative businessmen. Such an arrangement could work with the proper checks and balances."  There are a lot of pitfalls the artist could face if both manager and label were aligned together.  Any manager worth her salt ought to keep the foxes from the label out of their chicken coop.

Freefall or Opportunity Knocks?

When it comes to Sales in the music industry, as Elton John once sang, "... it's a sad, sad, situation / And it's getting more and more absurd."  The decline is sharp, and no one seems to be able to keep the wolves at bay.  It is harder and harder for artists and record companies to count on the new release album being a mass medium.  In the Ethan Smith article referenced above artsits manager Jeff Rabhan is quoted as saying:

"Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than an income stream... It's the vehicle that drives the tour, the merchandise, building the brand, and that's it.  There's no money."

To me, this just highlights the conundrum that will plague the industry once they become just owners of back catalog - they still have to depend on artist managers with this philosophy to approve license requests.  The Business Affairs depts. at labels are smoking crack - GET RID OF THE ARTIST CONSENT CLAUSES IN ARTIST CONTRACTS.  It does not serve the labels' interest, and if this quote is representative of the new attitude of the artist manager community, then screw them.  They've obviously abdicated their responsibility to maximize the artist's multiple revenue streams as provided by the record label.

THE OPPORTUNITY - YES, THERE IS AN OPPORTUNITY

The Top five music accounts: Wal-Mart, Best Buy, Target, Transworld, and Apple's iTunes account for approximately 65% of the market for recorded music. 65%!!!  Over 800 record stores closed in 2006 - over 800!!!  CD sales still represent over 85 percent of all music sold (legally).  Some might look at those figures and shed more than a few tears.  Some might look at it and cheer on the decline of the major labels.

Not me.  Call me the cockeyed optimist.  I walk through drugstores that stock greeting cards, ice cream, and home video titles.  I walk through supermarkets stocking HBA merchandise, books, Starbucks kiosks, and home video titles.  I walk through specialty retail chains that work with companies to design customized music playlists to be piped into their stores.  The one thing missing in all of these types of stores is a coherent strategy to sell pre-recorded music titles.  Why would I think there is a market for music at these stores?  Here's why: the common denominator between mass merch accounts and the supermarket/drug accounts is that these companies never want you to leave the store.  Otherwise, why so many merchandise categories?  Why so many aisles?  The consumer has dictated to retail: "I want to make one stop whenever possible to pick up basic food, drug, HBA, and entertainment products."  And the consumer is boss.

In my local A&P there's a dump bin of various music titles - some even current hits - located after the registers.  That's right, after I've whipped out my credit card, bagged my groceries, and done a jig to make sure my toddler doesn't throw a tantrum on the check-out line - that's when I'm ready to browse through a bin of mixed CD titles.  Are they out of their freaking mind?!?!?!  If that's the music merchandising strategy chain-wide, then someone deserves to be fired.

I walked through a very clean, very nice Super Stop & Shop today.  There is a nice, wide-aisled Book section in the store, where magazines and home video titles are also positioned.  Where's the tunes?

Two things come into mind here:

1. Commercial music titles are just too damned expensive for most chains to make a decent profit on selling them, and can't sell them through at full price when mass merch. accounts are selling them as loss leaders.
2. Most commercial music titles lack distinction, and these stores, when they do merchandise music, stock too many titles for one to break through the clutter in a consumer's store visit.  Think about your local supermarket or drug chain.  If you don't have a specific need for a product, then if it's not on an endcap do you see it?

So what if brands like this took a more comprehensive approach, a more lifestyle-oriented approach, to the pre-recorded music category?  Why not go the private-label compilation route?  The brand could create attractive packaging, possibly get certain accounts to co-op the product in exchange for placement of a product coupon in the packaging, develop a limited series of titles for sale.  Is it a bigger commitment to the category? Certainly.  But it's also a smarter strategy than going at the category half-assed with no distinction in the marketplace.  Whole Foods seems to be doing alright with the limited commercial CD title strategy, but they are an exception.

What's even more amazing is that chains like this have hundreds, if not thousands of stores.  Even a product test of private-label CDs in a portion of a chain's stores might be enough to convince a chain of the concept.