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Coffee …. with a Tune

Coffee …. with a Tune. Starbucks Entertainment: . Global Delivery of Music. Lindsay Reddick Terence Robinson Ashlei Tower Kazziwah Williams. Expanding Starbucks Entertainment Internationally. Contributing to the Bottom Line. Enhancing the Customer’s Experience.

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Coffee …. with a Tune

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  1. Coffee …. with a Tune Starbucks Entertainment: Global Delivery of Music Lindsay Reddick Terence Robinson Ashlei Tower Kazziwah Williams

  2. Expanding Starbucks Entertainment Internationally Contributing to the Bottom Line Enhancing the Customer’s Experience Music Products to Sell Internationally Five - Year Forecast from Offering Music Internationally

  3. Expanding Starbucks Entertainment Internationally North America United Kingdom Asia Europe Africa Japan Australia South America

  4. Expanding to Japan Japan

  5. Expanding to the United Kingdom United Kingdom

  6. Increasing the Bottom Line Increase in Music Sales Increase in Operating Revenues Increase in Net Income Bottom Line

  7. How do we increase music sales? Expand Internationally Japan United Kingdom Respond to pressures to be locally responsive by adhering to the tastes and preferences of the local customers

  8. Increasing the Bottom Line Music Sales and Operating Revenue Correlation

  9. Loyalty Program

  10. Enhancing the Customer’s Experience Soft Music Play music softly in the background to provide comfort but not hinder communication. Information Monitor TV screens display “now playing” information about the song and artist . Listening Stations Customers can preview featured albums at stations equipped with headphones. Maintaining a core focus on coffee

  11. Product Offerings Music Products to Sell Internationally Locally Relevant Music- Music by artists that have global appeal- Selecting Music at a Micro- level Japan United Kingdom Selling Methods • Digital Downloads (iTunes) • CDs

  12. Product Offering Japan United Kingdom Music by Artists with Global Appeal Culturally diverse demographics Top Ten Billboard • Locally Relevant Music • Culturally condensed demographics • Top Ten Billboard

  13. Selling Methods Digital Downloads CDs Limited amount in inventory to cater to: Customers without downloading capabilities Impulse buyers • Key focus of music sales • Projected increase of overall digital sales • Japan and the United Kingdom are in the Top 10 digital markets

  14. Calculate US, Japanese, and British music sales Our Projections Calculate the average growth of Starbucks music sales Apply the results to a five year forecast of music sales in Japan and the United Kingdom Compare US, Japanese, and British music sales (percentages)

  15. Our Projections Five Year Forecast Projected Music Sales Total International Music Sales = $93.3 million Years

  16. Our Recommendations • In order to achieve the projected sales, we must implement a strategy that allows Starbucks Entertainment to reach more international customers by: • Selecting appropriate countries in which to expand • Offering a wider variety of products while maintaining the focus on coffee

  17. Further Analysis Selected Countries 2007 Locations Unsuitable Countries Consumption of Coffee Industry Forecast Time Line Chris Bruzzo Remarks Bottom Line Company Operating Retail Percentage Change Product Offerings iTunes Information iTunes Starbucks Locations 10 Digital Markets Hits of the World Five Year Forecast Projections Analysis Music Sales Total Revenue Total International Music Sales Enhancing Experience “The Dot” The Experience

  18. Hits of the World Billboard; 9/22/2007, Vol. 119 Issue 38, p88-88, 7/8pCharts present the most popular songs in Japan and United Kingdom for the week of September 22, 2007. Appendix

  19. 2007 Locations Company-Owned Appendix Hoover’s Company Records Database

  20. Chris Bruzzo’s Remarks • “Some relationships with customers around the Starbucks brand can only occur once the brand is established and mature…..” Appendix

  21. Unsuitable Major Countries Appendix

  22. Sources of Unsuitable Countries • International Federation of the Phonographic Industry • Company Timeline

  23. Top 18 Countries http://www.nationmaster.com/graph/foo.con-food-coffee-consumption Appendix

  24. Starbucks + iTunes Connect for free As long as you have an iPod touch, an iPhone, or a computer with the latest version of iTunes, you get free Wi-Fi access to the iTunes Store and to Starbucks Now Playing content. Stroll into a participating Starbucks and you’re connected automatically. Browse and search the entire iTunes Store from your laptop or millions of songs on the iTunes Wi-Fi Music Store from iPod touch or iPhone. All at the same prices as the regular iTunes Store. Bring it home Every song you buy on your iPhone or iPod touch at Starbucks syncs back to your Mac or PC the next time you connect. And if you’ve only partially downloaded a song on your iPhone or iPod touch, your computer completes the download automatically. Appendix www.apple.com/itunes/starbucks

  25. Starbucks + iTunes iTunes is available at participating Starbucks and arrives in major metropolitan areas in the U.S. by the end of 2008. Appendix www.apple.com/itunes/starbucks

  26. Top 10 Digital Markets, Sales by Channel Source: IFPI, based on first half 2007 industry revenues. Appendix

  27. Industry Forecast • What trends do you see coming in this industry? • “We see the specialty coffee movement gaining momentum in both Europe and Asia” – Ted Lingle, SCAA • Do you see any changes in consumer demographics? • “We see younger coffee drinkers becoming a larger percentage of the occassional coffee drinker segment as the category of cold coffee beverages continues to grow” – Ted Lingle, SCAA Industry Forecast Volume 176, No. 12, December/January 2002 Ted Lingle, http://www.teaandcoffee.net/1202/special2.htm Appendix

  28. Connecting the Dots Music sales at the world’s largest bookseller outperformed the industry. Barnes and Noble sells CDs across all musical genres in 793 stores. To increase the interactive experience of customers and boost sales, Barnes and Noble uses the Dot, from RedDotNet, in its superstores. Customers can listen to any CD in the store, sampling more than 200,000 music titles through the interactive device. Appendix

  29. Enhancing the Experience In October, Hear Music, an alternative record retailer that Starbucks bought five years ago for $8 million, launched a satellite radio station that plays the kind of adult-oriented jazz, blues, and alternative rock that Starbucks has long featured in its stores. The company is also installing kiosks, called Media Bars, in its shops that let customers listen to digital music, create their own compilations, and purchase them while waiting for their grande double latte. Now, with the in-store kiosks, it's possible to mix and match. You sit down on comfortable lounge chairs and use a stylus to click through different genres of music, picking out a single song or up to a dozen. So far, record labels are letting Starbucks sell some of the music from their catalogs -- partly because they see it as a chance to crack the market for new adult music that they have largely ignored. Music sales make up less than 1% of Starbucks' total revenues, and it might be years before they turn a profit. http://www.businessweek.com/magazine/content/04_47/b3909094_mz017.htm?chan=search Appendix

  30. Bottom Line Justifications • Company Operating Retail: • Comprised mostly of in store coffee sales • Music sales supports the coffee sales Appendix

  31. Bottom Line Justifications Percent Change in Music Sales and Company Operating Retail Appendix

  32. Music Sales Total Revenue United States Price per unit for CDs calculated by dividing total revenue by total units sold United Kingdom Total revenue for CDs given in pounds and converted to dollars using December 31, 2007 rate Japan: Total Revenue = 2.969 billion Total revenue from music sales for Japan was given including CD sales and Digital sales in Yen and converted into dollars. Appendix

  33. Projection Analysis Appendix

  34. Total International Music Sales 2008 through 2012 projections are based on 25% increase Appendix

  35. Timeline of Relevant Events 1995 Begin selling CDs 1996 Starbucks Coffee International opens in Japan 1998 Acquires Seattle Coffee Company in the U.K. 1999 Acquires Hear Music 2002 Launches high speed internet service in U.S. stores 2004 Debuts strategic marketing alliance with XM Satellite Radio featuring a 24-hour Starbucks Hear Music™ channel Launches Hear Music media bar CD burning service Releases Ray Charles, Genius Loves Company CD 2005 Herbie Hancock: Possibilities becomes first global release by Hear Music 2007 Starbucks Entertainment and Concord Music Group form a new record label, Hear Music, to forge relationships with artists and distribute recordings in Starbucks and traditional music channels. Hear Music announces Paul McCartney is the first artist signed to the new record label. Announces an exclusive partnership with Apple Computer, Inc. that lets customers wirelessly browse, search for, preview, buy and download music from the iTunes® Wi-Fi Music Store at Starbucks while at participating Starbucks locations in the U.S. Appendix

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