LOS ANGELES Starbucks Corp (SBUX.O) on Thursday
took a major step back from its music and book business by
handing over day-to-day management of its year-old music label
to Concord Music Group, as it strives to contain costs and
rejuvenate its coffee shop business.
The restructuring of Starbucks Entertainment, the small but
profitable unit that oversees the chain's music and book sales,
comes a little more than a year after the company unveiled its
Hear Music label with great fanfare.
Paul McCartney was the first artist to release an album
under the Hear Music label, which has since also released CDs
by Joni Mitchell and James Taylor, among others.
Ken Lombard, who oversaw Starbucks' music unit for much of
its existence, is also leaving the company.
Starbucks' influence as a music retail outlet has grown
rapidly in recent years, posting perhaps its biggest hit with
the Ray Charles album "Genius Loves Company," which it
co-produced with Concord Records.
Concord Music Group, based in Cleveland, Ohio, was formed
in 2004 with the merger of Concord Records and Fantasy Records.
Besides the Hear Music joint venture with Starbucks, its
projects include a revival of the classic Stax label for rhythm
n' blues and soul music.
Most recently, Starbucks reached a deal with Apple Inc
(AAPL.O) to allow customers to buy songs wirelessly from the
Apple iTunes music store without paying WiFi connection fees
when they are in Starbucks stores. Starbucks said on Thursday
that it will maintain its relationship with Apple.
Starbucks Entertainment has also had its failures. In 2006,
the company promoted a movie, "Akeelah and the Bee," which
turned out to be a box office flop. It also scrapped a plan to
allow customers to create customized CDs in its stores.
In recent months, however, the chain's overall fortunes
have soured due to a sharp downturn in U.S. consumer spending.
On Wednesday, the company blamed hard-hit housing markets
in California and Florida for slowing sales and warned that its
quarterly and 2008 profits would be below expectations.
"We are committed to examining all aspects of our business
that are not directly related to our core," Chief Executive
Howard Schultz said in a statement.
Chris Bruzzo, Starbucks' chief technology officer, will
assume responsibility for the entertainment division, the
William Morris Agency will continue to work with the
company on potential book and other opportunities in
"There are people who can handle it better," Bob Goldin of
industry research firm Technomic said of Starbucks' music
business. He added that it was not a big contributor to the
(Reporting by Nichola Groom and Lisa Baertlein, editing by