Starbucks: Why Mainstream Can Kill
by
Paul Resnikoff, Publisher
Digital Music News, April 25,
2008
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It's amazing. Starbucks mastered the art of selling $4 drinks and
ultra-expensive snacks. Not only that, customers will spend their most precious
commodity - time - waiting in line for the privilege.
Think it's
ludicrous? Most of us have done it before, and many of us do it every morning.
But there's no shame to the game - we all splurge on something, whether it's
high-priced coffee, $250 jeans, expensive cars, iPods, iPhones, or any number of
supposed must-haves.
But Starbucks has always been selling more than just
coffee. Part of the allure is the predictability and comfort that Starbucks
offers - the famous "third place" envisioned and carefully crafted over the
years. Sitting, sipping, philosophizing, zoning out, or just running in-and-out
- the Starbucks atmosphere is worth its weight in gold. And once at ease,
consumers are more than willing to pry their wallets.
Or, at least that's
been the story until recently. Starbucks is now hitting hard times, thanks to a
slowing economy and steepening competition. Consumers are reeling from
unmanageable mortgages and out-of-control gasoline costs, and cutting
expenditures accordingly.
And that is dampening earnings and eroding
confidence on Wall Street. On Thursday, shares hit a four-year low after the
company issued yearly profit warnings, blaming a "sharp weakening in the US
consumer environment."
Whether Starbucks is suffering from broader
consumer and competitive shifts remains unclear, though the company just might
rebound alongside a resuscitating economy. After a recession, Starbucks may
eventually reverse its fate, and start selling ultra-expensive lattes once
again.
But when it comes to CDs, there is really nothing to bounce back
to. Jeff Leeds of the New York Times recently blew the lid off the Starbucks
music initiative by exposing embarrassingly low sales volumes. Using a simple
back-of-the-envelope calculation, Leeds noted that Starbucks has been selling
just two CDs per day, per store, a shockingly flat figure.
Why so low? Is
the CD format that much of a dud? On a broader level, consumers are quickly
shifting away from the physical disc, and embracing digital forms of acquisition
- both paid and unpaid. And that is a trend that even Starbucks cannot
reverse.
But Leeds also identified another serious problem - in his
words, the "funny mainstream taste" of titles picked by entertainment chief Ken
Lombard and others. Instead of cutting-edge, overlooked, or emerging talent,
Starbucks started leaning towards big-name favorites.
That included baby
boomer mainstays like Paul McCartney and Joni Mitchell, though mainstream
artists like Alicia Keys and James Blunt were also being selected. That bucked
an earlier strategy that focused on lesser-known, but highly talented artists, a
move that may have dulled the edge.
Perhaps mainstream kills, at least
outside of huge retailers like Wal-Mart, Best Buy, and Amazon. But isn't
Starbucks a mainstream place, one that caters to millions of Americans with less
refined musical tastes? Isn't that crowd more likely to gravitate to Alicia
Keys anyway?
Well, it turns out that the answer is mostly no. Despite
the broad reach that Starbucks enjoys, the average latte buyer is often
sophisticated, and probably wants selections that are more eclectic, localized,
and even obscure. Or, at least they want Starbucks to beat the
trends.
And the proof is in the numbers. After blowing Paul McCartney
sky high, worldwide, Starbucks was unable to generate a multi-platinum story.
It was just another underachieving solo release for the ex-Beatle.
The
over-the-top, mainstream blend turned bland in the end. Perhaps playing curator
is the better angle, one that appeals to consumers tired of overly-mainstream
selections.
And where else is this true? Sounds crazy, but video games
are also a place where mainstream content often plays poorly. Just talk to
Steve Schnur, worldwide executive of Music and Marketing at Electronic Arts, and
a decidedly non-mainstream philosophy emerges.
Schnur wants gamers to
hear stuff well before it breaks - years, in fact. "For the past seven years,
we feel we've been pretty instrumental in helping to break and expose new
artists," Schnur told Digital Music News recently at SXSW.
Down in
Austin, Schnur was combing the clubs for something fresh. "I want someone to
hear a song in a game that they'll hear on the radio two years from now," he
explained.
And gaming is anything but a niche pastime. In fact, gaming
is bigger than Hollywood, and Grand Theft Auto 4 might just become the biggest
entertainment release in history. And on any given title, millions are dialed
into the same experience - on their own, or via connected, multiplayer
experiences.
But Schnur wants to create a club, a feeling of being on the
inside. It's like the seminal rock album of old - Schnur wants parents to hate
everything about the gaming experience, including the noisy music emanating from
the console. But instead of fighting the noise, parents are often jumping into
the experience themselves, part of a rapidly growing population of
gamers.
That is part of a widening group of users, though Schnur knows
that slotting mainstream artists is still a recipe for flatness. And that may
have been the critical mistake for Starbucks. Sure, CDs are no longer a
sought-after format, and broader consumer trends affect everyone. But amazing
artistry and well-curated collections are always interesting, and could
ultimately revive a stale musical brew at Starbucks.
-----
Paul Resnikoff is the founder and publisher of Digital Music
News (www.digitalmusicnews.com), a premier industry source for news,
information, and analysis. Digital Music News has quickly grown from its humble
roots as a small, executive news service to the most widely read information
source in the field.
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