Starbucks to Offer iTunes Access

Starbucks Corp.’s agreement to offer a special Apple Inc. music downloading service helps the Seattle coffee giant tap into the fastest-growing part of the music business.

The new service, which Starbucks announced at an Apple media event in San Francisco on Wednesday, will let customers buy music using iPods in several hundred Starbucks cafes before the end of the year.

The service will allow customers with iPods that have wireless Internet access, such as the new iPod Touch or iPhone, to browse, search and preview for free, as well as buy, millions of songs on Apple’s iTunes Wi-Fi Music Store. Customers with PCs or Macs will be able to use the service too. Users won’t have to pay a wireless connection fee to shop in the iTunes store like they currently do when they access iTunes from a Starbucks.

(Read more¹ on Apple’s new iPods.)

One aspect of the service will answer a question that customers often ask Starbucks’s baristas: the name of the song playing inside the store. Now, when a customer walks into a Starbucks that has this new iTunes service, the customer’s music device or computer will tell them the name of the song that’s currently playing and allow them to buy the song in what Starbucks describes as a “seamless” transaction.

“I’ve said for years that an unexploited asset was this wireless network,” Starbucks Chairman Howard Schultz said in an interview. “The big payoff is the sense of discovery that will exist.”

The move is Starbucks’s latest effort to stretch its brand beyond coffee by integrating music, film, books and other forms of entertainment into its cafes. Starbucks has been successful in selling exclusive CDs and reviving older artists by placing their new albums next to its cash registers. Last year Starbucks put its Hear Music catalog on iTunes under a Starbucks-branded area.

Starbucks has for years been trying to branch its CD business into music downloading inside its cafes. In 2004, Starbucks said it would install several dozen so-called media bars in cafes under its Hear Music brand that would allow customers to burn a selection of 200,000 songs onto compact discs, but later backed away from that strategy.

“We didn’t get it right the first time,” Mr. Schultz says. He says the chain spent two years negotiating this deal with Apple. The companies declined to say how they’ll share revenue from songs purchased inside Starbucks but Mr. Schultz said of the arrangement: “It’s beneficial to both of us.”

Starbucks plans to launch the service Oct. 2 at 600 cafes in New York and Seattle, then add it to 350 stores in San Francisco in November, 500 stores in Los Angeles in February, 300 stores in Chicago in March and in more U.S. cities later next year. The price of the songs will be the same as in the traditional iTunes store, which is currently 99 cents per song. The service will run on the T-Mobile HotSpot Wi-Fi network. Customers will continue to have to pay to access sites outside iTunes while inside Starbucks.