Given the whole "Starbucks losing its soul" debate, I'll bet Starbucks' (NASDAQ:SBUX) decision to launch its own Hear Music label isn't music to everybody's ears right now. Under the circumstances, there's probably nothing like launching a new endeavor that's unrelated to your core focus to give people a little more to fret about. But I think investors who worry about this move would be letting negativity get the best of them.
Starbucks said that it will launch its own record label with Concord Music Group, under the Hear Music name. It will distribute the recordings not only in Starbucks stores, but also through traditional music channels. Bear in mind that Hear Music already has some pretty powerful relationships in music, including a special entertainment section on Apple's (NASDAQ:AAPL) iTunes Store and a 24-hour station on XM Satellite Radio (NASDAQ:XMSR).
The Hear Music label, according to Starbucks' press release, will embrace emerging artists and established acts alike. Starbucks said the Hear Music label will be an advocate for artists' creative control, while encouraging them to take risks.
That's arguably a departure from music-industry heavyweights such as Warner Music Group (NYSE:WMG), Sony's (NYSE:SNE) and Bertelsmann's Sony BMG, Vivendi's Universal Music, and EMI. Their traditional status as hit machines has resulted in what many audiophiles would describe as commoditization of the worst kind. And as digital trends have threatened their business, their often heavy-handed tactics have scarcely inspired loyalty in many listeners. The landscape is arguably ripe for new entrants that embrace creativity and risk-taking.
But here's the big question of the day: What about Starbucks' brand? I'm sure many people would argue that a music label is a risky swerve off the coffee giant's main turf. However, when it comes to its media distribution, Starbucks seems to be treading carefully thus far, choosing content that doesn't conflict with its brand. As long as folks think its options are special, I don't see anything wrong with Starbucks trying to put some "good taste" into taste-making. Meanwhile, sophisticated choices that appeal to certain niches, as opposed to mainstream blockbuster hits, will differentiate the java giant from rivals like McDonald's (NYSE:MCD). If McDonald's has stood for the masses, Starbucks seeks to appeal to that section of the masses who view themselves as individuals.
This move isn't risk-free; businesses that diverge from their core competencies can make some dangerous mistakes. However, as long as Starbucks proceeds with prudence and makes sure it's pushing quality talent, a Hear Music label could help breathe more life into its lifestyle brand.
Pour yourself a little extra Foolishness:
- Starbucks' disputes with Ethiopia add up to a conundrum.
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Starbucks is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have recommended to subscribers, check out a 30-day free trial.
XM Satellite Radio is a former Rule Breakers recommendation.
Alyce Lomax owns shares of Starbucks. The Fool's disclosure policy is a rock star.
