Coffee, Tea, or MP3

by John Davidson
3 February 2006

So, Starbucks is looking into the MP3 business.

Is there any more seemingly obvious news in the world?

Starbucks is selling lifestyle to the leisure class, and the company already has a formidable foray into music (compilation CDs, exclusive titles, early-window titles, etc.). MP3 download stations, currently on trial at select locations, are then the logical next step, no?

Maybe, although the chance of profitability in this case seems rare at best. This move does, however, put additional pressure on record stores to at least consider something similar. You’d think it would be cheap. A high-speed cable line and a computer are all you need to hook up an iPod; throw in a payment scheme on the computer and you’re all set. It likely eliminates the expensive hardware required for a CD-burning station. But maybe record stores are better off waiting until Starbucks tries it first…why be the first to market when duplication of the original offering is likely to be inexpensive? Apple, for example, has been very, very successful with a “second to market” strategy.

If Starbucks is suddenly successful at having downloading stations, you’ll see kiosks like theirs everywhere. And then, as always, it will just be a matter of getting people into the stores. These kiosks, and this strategy, are so easily duplicated that it is likely to be pervasive if successful. Yet any retailer who sees it as a panacea for declining music sales is going to be very disappointed.

Also, if I were a music retailer, I’d keep a sharp eye on Amoeba Music, whose feature in this week’s Business Week should be required reading.

Filed under business music industry