Sunday, June 29, 2008
32 Flavors, but More is Less
News from Seattle last week has Starbucks drastically cutting back on the number of CD titles it sells in its 6,500 locations. And my reaction is, "Thank you and what took you so long?"
Back in the good old days, the Starbucks music initiative was an outgrowth of two small brick and mortar music retail outlets (remember what those were?) called Hear Music. Dealing with them from the label side was always challenging because Hear didn't take everything. They wouldn't even take your money as a bribe to order units which were 100% returnable. But the good part of this relationship was that when they accepted a title, it really meant something. They were going to join you in evangelizing to the unwashed masses for whatever the release was. Customers going to the store were well aware of this dynamic and came to trust the taste of these gatekeepers.
It's like the Seinfeld episode when Elaine completely trusts Vincent's picks and is undone when she strays, at Kramer's urging, to one of Gene's picks ("Weekend at Bernies II," fittingly enough).
So when Starbucks started carrying CDs, we all sang, "Huzzah" at the prospect of the Hear concept being scaled up on a massive level. And it worked, at first, but the powers that be became less discriminating, and the idea got diluted to the point of rendering the whole thing ineffective beyond the blockbusters like the Ray Charles disc. Someone in Seattle thought they could be a major player in the entertainment world. Remember how they were going to start promoting movies and books? Even though one of their executives once told me that he knew that they were a coffee company and no matter what success they may have in selling CDs, they would ALWAYS be a coffee company, their behavior was the height of cognitive dissonance.
From a practical viewpoint, they also had a massive shrinkage problem with thousands of CDs walking out the door under raincoats or in the scone bag. And as far as being able to coordinate company wide promotions, having so many titles made it close to impossible. Do you have any idea how hard it is to ensure store compliance on one title when you're dealing with a chain of only 400 stores? And you want to do that with 20 titles across 6,500 in 50 states? Not so much.
Ironically, many acts who sold well at Starbucks earned a Pyrrhic victory in regards to long term artist development.I remember talking to the manager of a Starbucks featured band and she was relatively unimpressed by the sales story. When I gave her a quizzical look, she invited me to do the math. If there's an 8 week promotion and the CD sells 3 copies per week in every store, then you have 156,000 sales which in these times is an enviable total. But because the sales are so spread out, it's not as if the act is gaining any type of critical mass which one would expect in a regional breakout story.
In a neat piece of corporate symmetry, since I started writing this post, Starbucks has also announced the closing of 600 stores, including 1 out of 5 U.S. company operated stores which were opened in the past two years. Get the message? There's a point at which having too many offerings starts collapsing the model.
So let's hope that this new focus will enable Starbucks to have a hand in artist development for worthy projects, although we assume that the four slots for CDs will be taken up by releases on Concord Records which markets and distributes Starbucks' Hear label. And for all the other marketers out there, please remember that there's no shame in doing a few things VERY well.