As part of a promotion to launch its partnership with Apple (NASDAQ: AAPL) to offer free wireless access to download iTunes songs, Starbucks (NASDAQ: SBUX) will give away 50 million songs.
According to Reuters, "from October 2 to November 7 at more than 10,000 U.S. Starbucks locations, customers can receive "Song of the Day" cards redeemable on Apple's iTunes store."
The program may be a good deal for Apple, but it is hard to see why Starbucks would offer the package unless it is trying to drive additional traffic to its stores by paying iTunes for all of the content. If business was robust for the world's largest coffee chain, it is hard to see why it would makes such a large investment.
Apple could be giving away the songs using Starbucks as the marketing medium, but the company hardly needs help driving traffic to iTunes.
The move may well be a signal that Starbucks needs to kick start consumer demand for its core coffee and food products. Competitors like McDonald's (NYSE: MCD) have been taking customers away. Starbucks stock is off more than 20% so far this year.
Giving away iTunes downloads to help bring in customers may not be a good sign.
Douglas A. McIntyre is a partner at 24/7 Wall St.











Reader Comments (Page 1 of 1)
9-24-2007 @ 6:56AM
Outtanames Dude said...
The glow is fading. The only people who still believe it are SB executives. They would have been much better off bundling their coffee with music downloads instead of bundling music with their coffee.
9-24-2007 @ 9:36AM
Veronica said...
Doug, you make a good point and I agree Starbucks is maturing on a national level, but on the bright side... winter is coming and Starbucks will rise as always, to the season. Also, their ongoing international expansion, which is huge, continues to brighten the future outlook.
But again, I think you're right... it's not gonna hurt
Starbucks to add a little nice music to that cup of coffee.
Thanks for listening,
Veronica
9-24-2007 @ 11:24AM
Jeff said...
wow enough assumption in this article... specifically based on the unconfirmed idea that Starbucks is "paying iTunes for all of the content" ... songs that consumers don't even get to choose.
9-24-2007 @ 11:13AM
douglas mcitnyre said...
There is no reason Apple would pay for them, and the record companies and artists have to get their cuts.
9-24-2007 @ 11:50AM
laurence said...
come on, i don't know how many times you have been to starbucks
starbucks ALWAYS GIVE AWAY FREE THINGS
free sample drinks when you sit in the store long enough,
free coupon (for next time) when they miss your order or make the wrong drink
when you use their starbucks credit card, you get free drinks all the time, i even got a 1/2 pound of coffee shipped to my house as a gift
this is the way they do business,
i don't see how Starbucks giving away free iTunes song would be a bad signal at all
they are different from just a "coffee" shop in so many ways, the way they do business is just different. they make it a total cultural experience.
9-24-2007 @ 11:52AM
george scandalis said...
Doug, you did it yet again.
You took a couple of facts and wove a story with a subplot that I'm sure doesn't make sense even if you were to think it through.
Try this...T Mobile and Starbucks in a co-marketing deal underwriting the discounted iTunes costs.
Who wins?
Everyone... T Mobile gets a chance for additional visibility and revenue for their network access profit model.
Starbucks gets a chance to sell more house artists material on iTunes where they may have profit participation with Apple and the artists management.
Sounds like a winner all around.
9-24-2007 @ 1:01PM
douglas mcitnyre said...
That still does not answer the question of who pays the artists and record companies.
Doug McIntyre
9-24-2007 @ 1:05PM
george scandalis said...
Actually it does, let's think this one through.
T Mobile and Starbucks perhaps share a discounted iTunes cost which allows both to expose their businesses to a greater potential customer base.
The artists who might have a reduced royality arrangement with Starbucks still get their money, Starbucks gets more coffee drinkers, T Mobile exposes more users to their pay-per-use network and Apple gets more iTunes customers.
Sounds like a hat trick to me.