[JPL] Starbucks and iTunes Bridging the Digital Divide

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Fri Feb 1 07:16:13 EST 2008


Starbucks and iTunes Bridging the Digital Divide
WED OCT 10, 2007
Listen to/Watch entire show:
This is Celia Hirschman with On the Beat for KCRW.
Industries rarely transition smoothly, and change is often clumsy. Case in
point ­ the record business. The market has become bifurcated with two
distinct paths, each with its own dysfunctional ecosystem. On one side, the
traditional record market, weighted down by outdated, expensive and
unrealistic operating systems. Record labels will not sustain growth using
the traditional sales model anymore.
On the other side; the digital revolution. Sales on this track are fueled by
consumer's interest in efficiency, portability, innovation and value.
But record labels were built for the physical goods industry. They are under
spent in the digital arena. Their best option is to partner with technology
companies willing to make the sizeable time and investment.
Over 110 million iPods have been sold worldwide since the player was first
launched and over 70% of cars sold in the US have iPod connectivity. Digital
music files are readily available, and CD sales are declining fast. But not
quite fast enough. Though many consumers have lost faith in building their
CD collections, they haven't fully embraced the digital platform as the
replacement yet. I suspect the slow transition is due to the tradition of
collecting music, whether 45's, full-length vinyl, cassettes, or CD's.
Consumers are used to getting physical goods for their music investment, but
digital air has no weight. Smart entrepreneurs would seize this opportunity
to become the bridge between the physical and the digital goods arenas.
Starbucks and iTunes are doing exactly that with their new partnership.
Whereas decades ago, consumers camped out at record stores, today, they're
hanging in coffee houses. The java-rich generation still wants to feel
connected to music, without sacrificing time or lifestyle, but they may need
a little boost to help get them over the digital divide. Last week,
Starbucks launched a promotion to give away 50 million downloads in
conjunction with iTunes. Walk into a Starbucks and ask for your free
music-download card. Why not get a free song from Bob Dylan, Joni Mitchell,
Mavis Staples or any one of the 37 artists featured every day through
November 7.
Giving away downloads is just one of the initiatives of the Starbucks/iTunes
partnership. But I'm more interested in their retailing experiment. ITunes
has quietly placed highly designed laminated cards in 6,000 Starbucks
locations to sell full-album downloads. It's the first time a major digital
retailer (iTunes) is selling downloads in a physical store (Starbucks). The
cards feature the album artwork and song selections. If the experiment
works, it could open the door to much greater consumer acceptance of digital
downloading. And it's ideal for physical goods retailers. Like the gift card
business, there are no returns, and sales are paid on redemption. It's a far
more efficient business model. What's more, the separation between digital
and physical worlds would be closed.
Right on cue, this is exactly what's needed to bridge the digital divide
that has plagued the record industry for the last decade.
This is Celia Hirschman with On the Beat for KCRW.

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