I admit I'm addicted to Starbucks coffee. And Tully's, Pete's, and The Coffee Bean & Tea Leaf (when in LA). My coffee drinking is a more-than-daily habit, and it's hard - very hard - to kick. So it's been interesting to observe the coffee shop turning into a test lab of sorts for digital media.
This month, I was surprised to see Starbucks handing out cards for free iTunes music. Many Starbucks are now getting flat screens on the wall showing "Now Playing" and "Available on iTunes." Is this designed to sell more coffee? Or is it designed to sell more music? Both?
Tully's Coffee, meanwhile, has deployed Ripple, which looks a lot to me like the PointCast screensaver on the wall with news, weather, stock quotes, and animated ads (doesn't someone own the patent for that?). Several other in-store advertising networks are targeting the coffeehouse market.
Back in the 90s, several companies paid Starbucks to run Wi-Fi networks in the stores. In general, those investments didn't pan out well. Mobile broadband rolled out to the same customers who would otherwise be heading to Starbucks to log in. T-Mobile runs at least some of those networks since purchasing Mobilestar, the company that set them up. Paid Wi-Fi revenue pales in comparison to mobile broadband.
Now Apple is eyeing the same coffee drinkers as potential iTunes buyers. With the iPhone and new iPod touch, I can download music without my PC in a pretty slick interface. I can also use iTunes in the store to get the last 10 songs played and buy them if I'm interested, with free Wi-Fi. But outside of people with the appropriate devices and software, it's pretty hard to make the digital supply chain work in an analog store since you have to enable the digital transaction.
The biggest challenge is the iTunes card. The cards look nice, but using them is a mess. I've seen several stores with cards spread around the cash register, with some from the prior day. The codes are long and hard to enter. One of the barristas I talked to commented that it's a hassle to keep the cards on hand, and most people don't understand them, but "it makes money." Does she think Starbucks is getting paid by Apple for this, or Apple is making money on Starbucks? I'd love to know.
I'm in favor of trying every possible experiment to access limited consumer attention. When I'm in Starbucks waiting for my Americano, I can give Apple some of my attention, or Ripple, or anyone else who wants to put a flashy, animated flat screen on the wall. If you give me a card for free music, I'll download it. But I'm not going to Starbucks to buy music. I'm pretty convinced most people don't want to do anything in a coffee shop other than drink coffee, read, write, surf the web, or have a discussion. It will be very interesting to see if these distribution points for music and for advertisers move the needle.
I'd love to hear otherwise, but I still think the biggest leverage point for digital products is digital distribution. And the best place for coffee is a coffee shop. Lots of people are buying virtual coffee on Facebook, but I'm still going to Starbucks (and their competitors) for the real thing. And buying music everywhere else.
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