Starbucks steps back from music business

LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O: Quote, Profile, Research, Stock Buzz) 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: Quote, Profile, Research, Stock Buzz) 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.