In mid-March, the coffee franchise announced that it would begin a new service, letting customers create and purchase CDs culled from songs selected from digital music libraries in each coffee house. Established through a partnership with computer giant Hewlett-Packard, Starbucks' "Hear Music Café" debuts Tuesday, March 16 in Santa Monica. The company plans to expand the service over the next two years to 2500 other Starbucks outlets.
Hear Music Café's music library will contain 250,000 songs, according to a joint press release from the two partners. Starbucks already has a deal with T-Mobile providing high-speed wireless Internet connectivity for its customers. The coffee chain is one of the great startup success stories of the last decade, having posted $4.1 billion in revenues for its most recent fiscal year, an increase of 24% over the previous year. Smith Barney analyst Mark Kalinowski told Reuters news service that Hear Music Café could add significantly to Starbucks' bottom line. "If Starbucks can get 5% of its customers to spend $10 on music annually, it would add one to two full percentage points to overall revenues," Kalinowski estimated.
The Virgin Group is also trying a new delivery system for music fans—this one an immersive experience. On March 8, the company announced the formation of Virgin Digital, a partnership with online music company MusicNet. The service will offer downloads and subscription music in addition to "integrating retail, mobile services, consumer electronics, and the Internet," according to an announcement.
Virgin Group describes the venture as "a revolutionary environment," in which subscribers to the service will have access to their personal music libraries on the Internet, over their mobile phones, and via consumer electronics, as well as in retail stores. Virgin Digital president Zack Zalon said the service will "fundamentally change what a music subscription service feels like because it will go with you everywhere."
Virgin Group founder Richard Branson, never known to shy away from hyperbole, said, "Passionate music fans have made it clear that they want their music when they want it, where they want it, and how they want it…. Well, we've heard them. We're going to redefine the way that our customers relate to their music—we're going to take digital music into the stratosphere."
Virgin Digital will be available worldwide, encoded with Microsoft's Windows Media System. The service will let users choose individual songs for permanent download or let them subscribe on a monthly basis with unlimited access to a catalog of more than 700,000 recordings. Pricing has not been announced.
In other music news, Arista Records is in the midst of restructuring, according to reports in mid-March. Some Arista workers are being laid off, and some artists under contract to the label are being moved to others under the BMG corporate umbrella, such as J Records, Jive Records, and RCA Records.
Arista artists include Dido, Kenny G, Whitney Houston, Avril Lavigne, Sarah McLachlan, OutKast, Pink, and Carlos Santana. Founded by legendary record producer Clive Davis, Arista will retain its own artist roster, development team, and marketing group. In February, Davis was named chairman and CEO of BMG North America.