Music’s on the Menu

RESTAURANTS, CAFES and retailers are all going digital — Starbucks has partnered with Hewlett-Packard to bring a CD-burning service to latte lovers; McDonald’s is said to be putting its promotional muscle behind Sony’s new music service and Wal-Mart’s online tunes have passed the test.

Digital music is projected to grow from $256 million in downloads this year to $2.1 billion in 2007, according to Forrester Research. Some 25 million digital tracks were sold in the first three months of 2004, versus 19.2 million in the second half of 2003, per Nielsen Soundscan. Marketers hear those numbers loud and clear as they continue to associate with the latest in digital technology.

Raising the bar

Starbucks is offering more than just lattes, biscotti and scones these days — the Seattle-based coffee company has rolled out a new digital music service with HP.

“The relationship began with offering high-speed Wi-Fi Internet access at Starbucks stores and has since extended into other innovations, including our CD-burning service,” explains Jenny Walsh, spokesperson for Starbucks.

This month Starbucks and HP will roll out the service to 10 Seattle stores, offering customers the ability to burn full-length albums and personalized compilations priced at $6.95 for five songs, and $1 per additional tune.

“Starbucks is working with the majority of major record labels — Sony, EMI, Interscope, etc., and a number of independent labels to obtain licensing to burn individual songs,” Walsh says.

This launch follows closely on the heels of the March opening of the first Hear Music Coffeehouse in Santa Monica, CA, which was promoted with local newspaper ads and direct mailings to Hear Music customers. Marketing plans for a Seattle location are in the works.

“This is an example of how HP is helping our customers and partners create new revenue streams and expand their businesses,” says Dayna Fried, HP spokesperson. “If Starbucks opens new stores, HP plans to partner and be there with them.”

Over the next two years, Starbucks will extend the service to 2,500 locations, offering its 30 million weekly customers the latest in digital music technology.

Java junkies can enter an HP-enabled Starbucks location and listen to any of 250,000 songs from major labels housed on an in-store server. The Hear Music Coffeehouse in Santa Monica houses 70 HP Tablet PCs (63 digital listening stations, 7 CD burning stations) at the Hear Music listening bar, which is staffed with music experts. Customers can create customized CD labels, cover art and liner notes to complete the project. Currently digital music at Starbucks is limited to listening and burning, however it’s likely that the HP-branded iPod, slated to debut this summer, will find its way into the mix.

McDownloads?

Less than a month after Starbucks’ CD-burning service launched, news reports began to surface of a McDonald’s and Sony Connect deal. The two companies have been working out a pact by which McDonald’s will provide customers with free downloads from Sony Connect, Sony’s online music store. In turn, Sony Connect will reap the benefits of McDonald’s overall advertising budget, estimated at $30 million, which will be used to push the promotion.

McDonald’s global presence could catapult the launch of the Sony Connect service, making the new service a key competitor to similar services such as Apple’s iTunes. The service is slated to debut this spring with upwards of 500,000 songs.

As part of the deal, McDonald’s will buy music from Sony Connect at unspecified discounts and give away free tunes to customers when they purchase certain menu items via codes that can be redeemed online.

McDonald’s has already begun an attempt to woo younger and more hip consumers by forming partnerships with entertainers, sports stars and musicians, such as pop prince Justin Timberlake.

Interestingly enough, McDonald’s was said to have been working out a deal with iTunes, but switched to Sony Connect at the last minute, as song redemptions for the Pepsi/iTunes promotion seem to have fallen short of Apple’s initial expectations.

Music for the masses

Wal-Mart announced that after a successful test launch in December, its online Music Downloads service is official. The site undercuts many competitors by offering songs up for 88 cents each, rather than the standard 99 cents.

“After launching the test phase in December, we gauged customer feedback and have an understanding of what customers like and don’t like,” says Amy Colella, walmart.com spokesperson. “We used that feedback to make improvements and enhancements to the site.”

The launch features an integrated in-store and online campaign including in-store signage at store entrances and in the music department; 30-second TV and radio spots in-store; advertising in the store circular and Wal-Mart gift cards featuring Music Downloads’ artwork. An online push consists of home page announcements as well as music download references on category pages within the site.

“Of the 138 million customers that visit walmart.com in a week, two-thirds of those customers are online and two-thirds of online consumers have a broadband connection. The time was right to launch this service,” Colella points out.

Wal-Mart has added exclusive song offerings by artists Jessica Simpson, 3 Doors Down, Black Eyed Peas, Hilary Duff, Shania Twain, Shakira, POD, JC Chasez and music from Oprah’s Pop Star Challenge

“We’ve expanded our music offerings by 50% — there are more than 300,000 songs available for download in a broad spectrum of musical categories,” Colella says.

Additionally, Curb Records, home to Tim McGraw, LeAnn Rimes and Jodee Messina, is making more than 3,000 of its songs available exclusively on the mass-merch site through the end of May.

According to Colella, Wal-Mart stores may feature in-store download capabilities in the future, “We’re always evaluating and looking at those opportunities that are available to us.”

Brit beats

No longer a virgin to music downloads, British billionaire Richard Branson’s latest venture consists of a digital jukebox and online music store slated to launch this August.

Virgin Digital, developed with online music delivery company MusicNet, will provide consumers the ability to burn, rip and encode songs onto CDs along with access to Virgin’s digital music club and its Radio Free Virgin Internet radio stations. The Virgin Digital software product will be available for download through the Internet and on CD in Virgin Megastores.

As part of its plans to promote the service, Virgin will put special consoles in its record stores worldwide, allowing customers to download tracks directly to CD or their portable players.

Over 700,000 tracks will be available in the online store, with pricing expected to rival the 99 cent downloads currently offered by competitors.