Spotify, Starbucks Team to 'Make Baristas the DJ' at U.S. Stores
Spotify and Starbucks Coffee Company will begin a multi-year music program to make “the barista the DJ,” in the words of Spotify CEO Daniel Ek, essentially turning over control of in-store music to the coffee makers at Starbucks’ 7,000 U.S. stores. On Monday, May 18, all of Starbucks’ 150,000 U.S. employees received a complimentary Spotify Premium subscription to prep for a planned fall in-store music program that will be powered by the streaming service, giving customers access to exclusive playlists and the opportunity to play their own favorite tracks at their local stores. The partnership will also promote My Starbucks Rewards, a loyalty program with 10.3 million members.
Though Starbucks' core business is healthy -- American sales increased 7 percent and store traffic lifted 2 percent in second-quarter 2015 compared the same period in 2014 -- the Seattle-headquartered chain nevertheless faces increased competition from Dunkin' Donuts and McDonald's, which have both enhanced their coffee offerings to reach more millennials.
“We think we have an historic opportunity to take advantage of a brick-and-mortar brand,” Starbucks chairman-CEO Howard Schultz said in a conference call Monday. “The music and business acumen Spotify has around building subscribers will enhance the music industry to provide further value for artists and reinvent the way our global customers discover music.”
Of course, Spotify isn’t Starbucks’ first foray into the music industry. A 2006 pact with Apple’s iTunes used to give away 1.5 million free song downloads per year, helping shine a light on a different artist each week. And in 2007, the company’s Hear Music label was founded in partnership with Concord, helping propel new albums from Paul McCartney, Joni Mitchell and James Taylor to the upper reaches of the Billboard 200. Though Starbucks continued to offer physical music even after Hear Music scaled back in 2008, declining sales eventually caused the chain to stop selling CDs entirely earlier this year.
But the main purpose of Starbucks and Spotify’s new pact doesn’t seem to be giving a boost to specific label-sanctioned artists. Rather, Starbucks’ Schultz saw Spotify as the first third-party app for users to gain “Stars as Currency” for free food and drink via the My Starbucks Rewards program, while Spotify’s Ek saw an obvious link to drive paid subscriptions. Of the 60 million users currently active on Spotify, only 15 million are paying subscribers. Apple, which is expected to launch its own new streaming service powered by Beats as early as next month, has reportedly been pressuring the major labels to kill Spotify’s free tier -- a move that’s already flagged a Federal Trade Commission and possible European Commission investigation over antitrust practices.
The Starbucks pact is similar to Spotify’s announcement with Uber last November that enables Spotify Premium users to DJ their rides in more than 10 cities globally. Up next: a likely entry into video for the service, which on Wednesday, May 20 is expected to make another major press announcement.