The barista becomes the DJ as Starbucks ties up with Spotify

Profile picture for user slauchlan By Stuart Lauchlan May 19, 2015
Putting control of the music in the hands of the Starbucks customers is only one aspect of this alliance.

Team work

I never really understood who it was that used to buy those CDs that sat unloved by the cash register in Starbucks, so when the coffee giant decided to stop selling them a few months ago, it didn’t really come as much of a surprise.

Rather more startling has been this week’s announcement of a tie-up between Starbucks and music streaming service Spotify, designed to give the former’s loyalty card customers access to exclusive content and the latter an opportunity to upset its premium subscription service.

So how’s this going to work? Well, according to the formal announcement, from this fall Starbucks partners -that’s customers to you and me - will be able to

shape the in-store music programming using tools provided by Spotify.

These partner-influenced playlists will then be accessible on Spotify via the Starbucks Mobile App so that customers can stream music anywhere, anytime from their mobile devices.

In addition, Spotify users will enjoy opportunities to obtain “Stars as Currency” for My Starbucks Rewards loyalty program.

Spotify will also include a dedicated section on Spotify featuring new playlists from Starbucks and its most popular music from the past 20 years, available to all Spotify users.

In addition, Starbucks' U.S.-based employees will receive a Spotify Premium subscription, followed by those in the UK and Canada as those countries follow suit.

In a conference call, Starbucks CEO Howard Schultz said:

We think we have an historic opportunity to take advantage of a brick-and-mortar brand. 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.

The latest stir of the cup

For Starbucks, this deal is a significant move as it’s the first time it has opened up its loyalty program to a third party. Currently, Starbucks has about 10 million loyalty members.

Spotify meanwhile has around 60 million users globally, but only 15 million of those actually pay for the premium, ad-free music services. From the streaming service provider’s point of view, the captive Starbucks audience will be one that it hopes to upgrade to parting with cash.

This is of course only the latest attempt by Starbucks to be at the forefront of music industry collaboration. Back in the early noughties, the firmeven offered a CD burning service in some US stores to allow customers to create their own playlists on discs.

More recently the firm has been a long-standing iTunes partner, a relationship with Apple which began by enabling iPod users to evaluate what music was being played in Starbucks stores.

Later the coffee firm began giving away songs from iTunes which could be played on the Starbucks mobile app, later extending the partnership to accessing free downloads on the App Store. Most recently, the two companies began teaming up for (Product) Red iTunes / Starbucks gift card combined offerings.

howard schultz
Howard Schultz

It’s unclear at this stage what impact the Spotify deal will have on this relationship, particularly in light of Apple’s own live streaming music ambitions.

From Spotify’s perspective, this is another high profile partnership, akin to last November’s deal with Uber that allows Spotify Premium users to DJ their rides in more than 10 cities globally.

But the Starbucks tie-up is something more, reckons Gartner Research VP Andrew White, who calls it:

just amazing on so many levels.

White picks out 4 main benefits:

  • Monetization of a mobile infrastructure
  • Collaborating on new business development
  • Intersection/Collision of hitherto disparate and disconnected market
  • Monetization of information.

The last of these is the one that excites him the most:

From selling in-store CD’s to now developing consumer, even customer-level and store-level digital experiences that mash-up physical and digital worlds, this opportunity recognizes a wholly new game.  Even pure streaming services are virtually outdated.

White predicts further partnerships of a similar nature, suggesting:

  • Physical and web-based retail, coupled with
  • Music, news, sports, gossip, build on platforms
  • Social networking, communication, mobile, IoT (think Fitbit) etc. using
  • Crowd-sourcing and store-sourcing preference and voting lists.

Certainly further tie-ups appear to be on Starbucks mind. Kevin Johnson, President and Chief Operating Officer of Starbucks, says:

We plan on building one of the most robust digital ecosystems of any retailer in the world….Starbucks ability to innovate with partners such as Spotify, creating new ways and platforms to engage with our customers, will afford us unprecedented interconnectivity across all of our capabilities.

My take

We're really making the barista the DJ here

That’s according to Spotify CEO Daniel Ek.

It’s a nice soundbite, but as someone who’s never even listened to Spotify, this isn’t an announcement that is likely to impact on me directly in the first instance.

But like Gartner’s White, I’m intrigued at the potential for such tie-ups. It’s worth remembering that for those too lazy to walk to Starbucks for their flat white, the Starbucks mobile app has an Uber summoning button, which if you add in Spotify’s own deal with the cab hire firm, makes a neat little menage a trois.

CEO Schultz says this is only the first of a number of such partnerships in vertical sectors that he has in mind as the firm builds out its digital ecosystem. I watch with interest to see what’s next.