Apple in wireless music deal with Starbucks

SAN FRANCISCO (Reuters) - Apple Inc said on Wednesday it has reached a deal with Starbucks Corp that will allow iPod users to buy music from Apple's wireless iTunes music store while they are at one of the chain's coffee shops.

The service will debut at more than 600 Starbucks stores in New York and Seattle on October 2, the companies said, and will be expanded to other markets later this year and next.

"We know a lot of people are going to be very happy with this new combination of coffee and iPods," Apple Chief Executive Steve Jobs said at an event in San Francisco, adding that he had been working on the deal for more than two years.

Starbucks customers with the new iPod touch, an iPhone, or a computer running iTunes will be able to navigate to the new iTunes Wi-Fi music store without paying a connection fee.

Currently, customers pay to use the Wi-Fi wireless Internet service provided by Deutsche Telekom AG's T-Mobile at Starbucks' U.S. stores.

While they are navigating the iTunes store, Starbucks customers will be able to see what song is playing in the store at that moment and will be given the option to buy it with one click, the companies said.

"We think we will drive incremental traffic into our stores," Starbucks Chairman Howard Schultz said of the new service.

Starbucks shares were down 30 cents, or 1.1 percent, at $27.42 in afternoon trade on Nasdaq, and Apple shares were down $4.32 or 3 percent at $139.80.

(Reporting by Scott Hillis and Nichola Groom)