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Starbucks entering the movie business
Coffee retailer plans film-promotion tie-ins
Friday, January 13, 2006

What's next for the ubiquitous coffee retailer Starbucks Corp. -- movie-themed action figures?

The Seattle-based coffee chain, which has more than 5,000 stores in the United States and Canada, is joining the race championed for years by fast-food chains such as McDonald's and Burger King to capitalize on family-friendly films.

Starbucks, which already moonlights as a CD retailer, plans to partner with Hollywood film studio Lions Gate Entertainment to promote a new movie "Akeelah and the Bee," to be released in the spring.

Instead of diminutive plastic toys in kids' meals, Starbucks will offer movie ads on coffee cup sleeves, movie screenings for its employees to generate buzz and sneak previews on its in-house Wi-Fi network.

The terms of the deal between the two companies were not disclosed.

Company officials said they shopped around for a year to find the right movie to launch its entry into the film industry. "Akeelah" is the only film Starbucks said it has agreed to promote so far. "Our customers will find that this film meets the high quality standard they have come to expect from us," said Starbucks Chairman Howard Schultz.

After all, say industry analysts, Starbucks' customers expect it to be an arbiter of good taste. The company's entertainment division handpicks the limited selection of CDs sold in its stores, offering music most often aimed at an older, more sophisticated crowd. Teeny bopper and hard rocking selections apparently aren't the sort of music you want with a Vente Skim Caffe Latte. The company plans to begin selling selected DVDs, movie soundtracks and reportedly even books in the near future. Industry insiders expect those offerings to be geared toward similar audiences.

The company's merchandise sales, including the CDs, coffee cups and other coffee-related paraphernalia, add up to only 4 percent of its revenues. "It's a fairly low-risk kind of opportunity for them to pursue," said analyst Sharon Zackfia at Chicago-based investment and research firm William Blair & Co. "They don't want to do anything to dilute the brand."

At the end of the day, she added, Starbucks is in the coffee selling business.

Why then bother adding movies and music to its repertoire?

For one, its music effort, by all accounts, has been a success.

The company told the Wall Street Journal that it sold $3.5 million in CDs in its stores in its most recent fiscal year, ended Sept. 30.

Starbucks, said Ms. Zackfia, is an entrepreneurial company that is known for seizing an opportunity that presents itself. The company has launched a mini-coup in the music industry and flustered other music sellers by signing deals to sell CDs by such popular music stars as Alanis Morrissette, Bob Dylan and Elton John.

The company also has opened several music retail outlets -- Starbucks Hear Music Coffeehouses in select markets such as Santa Monica, Calif., and San Antonio, Texas -- devoted to selling CDs and even burning custom CD mixes.

Known for its caffeine-infused coffee specialities that can cost upward of $4 and its ever-expanding presence in communities nationwide, marketing movies and selling DVDs is another opportunity for Starbucks to strengthen its brand name and ultimately ensure its survival.

With other coffee retailers and fast-food outlets nipping at its heels, venturing into the entertainment territory will help Starbucks set itself apart and generate more revenues.

Starbucks' shares closed down yesterday 16 cents or .51 percent at $30.96

The new strategy of offering a "Happy Meal" for the grown-up coffee set is not just a clever marketing trick for Starbucks, Lions Gate Entertainment is sure to gain from the effort. With movie makers facing slumping theater ticket sales, Starbucks could help broaden the audience base for movies such as "Akeelah and the Bee." The movie tells the story of a precocious 11-year-old African-American girl from South Los Angeles, who encouraged by her teacher, played by Laurence Fishburne, makes it to the Scripps National Spelling Bee.

Lions Gate President Steve Beeks said the Starbucks' promotional campaign will reach "millions of customers and potential moviegoers for 'Akeelah,' many of whom would not be targeted by more traditional media and print campaigns."

First published on January 13, 2006 at 12:00 am
Corilyn Shropshire can be reached at cshropshire@post-gazette.com or 412-263-1413.