Starbucks boosting entertainment unit

THE BALTIMORE SUN

SEATTLE -- Starbucks Corp., seller of music CDs and co-producer of Ray Charles' Genius Loves Company album, will begin promoting movies and offering DVDs and soundtracks at its coffee shops to expand its entertainment offerings.

Starbucks' first movie promotion will be Akeelah and the Bee, produced by Lionsgate and about a girl who enters a spelling bee. It will make its debut in April, and Starbucks will have spelling-related trivia games in its stores and promotions on its cardboard-cup sleeves for the movie, the company said yesterday.

The largest U.S. coffee-shop chain is adding DVDs and soundtracks at its 5,500 company-operated U.S. and Canadian stores, and it is expanding its music offerings to boost sales beyond coffee.

Starbucks sold nearly 3.5 million CDs in the fiscal year that ended Sept. 30. The company also is expanding its music business by building larger Hear Music stores attached to its shops. It bought the Hear Music chain in 1999.

"Over the past year, we viewed countless films and spoke with numerous studios in pursuit of finding the perfect film," Starbucks Chairman Howard Schultz said. "Just as we have demonstrated with music, we believe Starbucks can ultimately change the rules of the game for film marketing and distribution."

Schultz already has ties to the movie industry. He sits on the board of DreamWorks Animation SKG Inc., and he hired Ken Lombard, former head of Earvin "Magic" Johnson's Johnson Development Corp., to run the burgeoning entertainment division of Starbucks. The company doesn't break out results for the entertainment business.

The new DVDs and soundtracks won't be available at Starbucks stores outside the United States and Canada or at licensed shops inside supermarkets, bookstores and airports, spokeswoman Sanja Gould said.

Starbucks' agreement to promote Akeelah doesn't include any other films by Lionsgate, whose parent company is Lions Gate Entertainment Corp.

Gould also said Starbucks has been meeting with Hollywood studios about possible film projects and plans to begin selling books later this year.

Starbucks has been expanding its music business via Hear Music, a chain of music stores in Seattle and Austin, Texas. The company has since created larger Hear Music stores attached to Starbucks coffee shops where customers can choose from more than 1 million song titles and burn their own CDs while sipping lattes.

Starbucks won't have more than 20 CD and DVD titles at any one time in its stores so customers don't get overwhelmed, Gould said.

Shares of Starbucks fell 16 cents to $30.96 as of 4 p.m. in Nasdaq stock market composite trading. The company has 10,801 stores, two-thirds of them in the United States.

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