Brand on the Run

Starbucks (Nasdaq: SBUX  ) is bringing out the big guns to launch its Hear Music record label. The popular coffeehouse chain announced yesterday that it will team up with indie distributor Concord Music to release Paul McCartney's new album this summer.

Sure, you've seen Starbucks tie its name to CD releases before. The java giant has had a hand in unearthing early recordings of Bob Dylan, Sergio Mendes, and Ray Charles. It even teamed up with Warner Music Group (NYSE: WMG  ) to catapult Antigone Rising to the national music scene two years ago.

It's different this time, though. McCartney is an established legend, and this will be the former Beatle's first CD of all-new material since 2005 brought us Chaos and Creation in the Backyard. It's also the first release from the Hear Music label, which was formed earlier this month.

Hear the difference
Starbucks has had more than a passing interest in music and the Hear Music brand in recent years. Hear Music has been a staple on the XM Satellite Radio (Nasdaq: XMSR  ) dial since 2004. The java giant has also experimented with music listening kiosks at some of its Seattle stores, and it has gone all out with the rollout of five Hear Music-branded coffeehouses and music stores.

As conventional CD shops like Tower are shuttered, lifestyle concepts that bring something new to the listening table, as Hear Music does, are rising from the ashes of perpetually falling compact-disc sales. If you can't move a $12 CD, a $3 espresso with a $5 slice of cheesecake will have to do.

This doesn't mean restaurants and retail merchandising are joined at the hip. If that were the case:

  • Planet Hollywood would still be a force in themed dining.
  • Johnny Rockets would have its tableside jukeboxes connected to a CD-burning hub where customized oldies CD could be purchased.
  • There would be such a thing as the Best Buy Burger.

This also doesn't mean that the sheer girth of Starbucks alone can muscle a new product to higher ground. If that were the case:

  • Antigone Rising would be more of a household name.
  • Chantico would be still be flowing freely.
  • Akeelah and the Bee would have been a bigger hit.

Sting like a spelling bee
Oh, yes, that movie. A year ago, Starbucks got together with Lions Gate Films (NYSE: LGF  ) to market the release of Akeelah and the Bee. It was a feel-good film that Starbucks figured it could rally behind. The company didn't just promote the flick with in-store posters; it also screened Akeelah for its employees and encouraged baristas to help spread the word to customers. Starbucks even sold the film's soundtrack on CD.

Yet at the end of its theatrical run, Akeelah generated a meager $18.8 million in domestic box-office receipts. That's fewer than 3 million tickets. So as big and persuasive as Starbucks may appear to be, most of the country seems to have chosen not to see the movie.

Will McCartney fare better? You bet. This is all-new material. He's not simply going to rerecord "Silly Love Songs" as "Silly Latte Orders," or "Maybe I'm Amazed" as "Mocha I'm Unfazed." And even though I'm sure McCartney wouldn't want this form of publicity, his testy split with Heather Mills is generating a good deal of media attention for the seasoned rocker.

In short, the timing couldn't be better. It's taken as few as 60,000 to 65,000 units sold in a week to propel a CD to the top of the stateside charts. The CD will be sold through traditional retail outlets as well as through Starbucks stores. Think about that. There were more than 9,400 U.S. Starbucks locations at the start of the year. If each store sold just one copy a day during the CD's first week, Starbucks alone may propel McCartney to the top.

So despite some of its shortcomings, let's also not underestimate the power of Starbucks. Jones Soda (Nasdaq: JSDA  ) has a hearty following as an alternative soft drink, but a big reason for the company's success has been the placement of its bottled beverages within the Starbucks chain.

If CKX's (Nasdaq: CKXE  ) American Idol has broken more music stars lately than some of the shell-shocked record labels have, what's to stop Starbucks from making the most of its time in front of the microphone?  

Live and let roast, my friends. Live and let roast.

Starbucks is an active recommendation for readers of the Motley Fool Stock Advisor newsletter service. Take a free 30-day trial to see what else is brewing in the newsletter's portfolio.

XM is a former pick out of the Rule Breakers growth-stock research service.

Longtime Fool contributor Rick Munarriz can actually walk to two Starbucks locations from his home, but he's still not much of a coffee sipper. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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10/21/2016 4:00 PM
SBUX $53.63 Up +0.04 +0.07%
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LGF $19.71 Up +0.41 +2.12%
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WMG.DL $0.00 Down +0.00 +0.00%
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XMSR.DL $0.00 Down +0.00%
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