LOS ANGELES - Starbucks has formed its own record label, Hear Music, to develop records for sale both in its coffee shops and through traditional music retailers.
Starbucks' influence as a music retail outlet has grown significantly in recent years, posting its biggest success with the Ray Charles' Genius Loves Company album, a co-production with Concord Records that won eight Grammy awards. Concord is also partnering with Starbucks on the new record label.
The New York Post and the Associated Press reported on Monday that Starbucks was close to signing former Beatle Sir Paul McCartney.
Artists like McCartney, Charles and Sergio Mendes are seen fitting the Starbucks demographic.
"It'll be interesting when they realize it ain't easy putting out records," said another senior record company executive, who asked not to be named.
"Are they really taking a chance? On who? Paul McCartney?
"
Starbucks Entertainment is a small but profitable unit of the coffee-shop chain that oversees the sale of music and books in its stores.
The chain has parlayed sales of music compilation CDs into a business that has included deals with musicians such as Alanis Morissette and Bob Dylan for exclusive content. In turn, those sales have helped increase revenue at Starbucks stores.
Hear Music will be based in Los Angeles, and Ken Lombard, president of Starbucks Entertainment, will serve as chief manager, Starbucks said.
Concord President Glen Barros will work closely with Lombard. Concord will also help promote, distribute and market the Hear Music label outside of Starbucks stores.
Hear Music began as a chain of music stores that allow customers to burn custom music CDs and listen to any CD in the store before buying it. Starbucks acquired Hear Music in 1999 and has developed a growing music business around the brand.
In addition to selling CDs in its coffee shops, Starbucks also has a Hear Music radio station on XM Satellite Radio Holdings Inc.
But executives at record companies were doubtful that Starbucks would do any better at breaking new artists than a traditional label.
"They got the retail and marketing distribution to leverage," said one executive who asked not to be named. "But are they going to sell a million records?
No, but they probably don't need to."
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