NEW YORK (Dow Jones)--Starbucks Corp., having conquered the coffee business and staked a claim in music, now is making its boldest expansion moves yet, into movies and books.
The Seattle-based coffee-shop chain is expected to announce Thursday that it will help promote and share in the box-office proceeds of "Akeelah and the Bee," a new film being produced by the studio Lions Gate. Starbucks also plans to sell DVDs of the film and CDs of its soundtrack in its 7,450 U.S. stores.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
The partnership on "Akeelah" is just Starbucks' first small step in a more ambitious move into the movie business. The company has begun vetting screenplays and is meeting with various Hollywood studios to launch film projects, executives say. It will soon begin selling DVDs of select movies alongside the CDs that have become as familiar at Starbucks as lattes and frappucinos.
Separately, the company is planning later this year to begin selling books, either with a publishing-house partner or through a self-publishing effort, Chairman Howard Schultz said in an interview. "Starbucks isn't an entertainment company," Schultz said. But "we want to have an entertainment strategy that supports the foundation of the coffee experience that our customers have come to expect and enjoy."
The moves further demonstrate Starbucks' seemingly boundless ambitions in the entertainment world, and its intent to constantly differentiate itself from competitors. As it opens more drive-through windows and introduces hot breakfast sandwiches, Starbucks puts itself in more direct competition with McDonald's Corp. (MCD) and Dunkin' Donuts. At the same time, in extending its reach into music, films and books, the company is positioning itself to vie with retailers such as Borders Group Inc.'s (BGP) Borders Books and Music Stores - many of which include Starbucks-owned Seattle's Best Coffee cafes.
The Hollywood strategy is perhaps as risky as it is bold. In the volatile film business, every project is an often costly undertaking with uncertain results. Box-office attendance was down 7% last year, according to the tracking firm Exhibitor Relations Co., and some of Hollywood's most expensive, $100 million-plus-budget pictures-like the action flicks "Stealth" and "The Island" - turned out to be the most disappointing.
Other outsiders have ventured into the movie-production business, with mixed results. The British entrepreneur Richard Branson issued a handful of films in the 1980s under the label "Virgin Films," including a screen adaptation of George Orwell's "1984." But after concluding that the movie business was too risk-intensive and that his airline, Virgin Atlantic, was a better bet, Branson largely shelved the moviemaking effort until recently, when he invested in an Indian comic-book company that hopes to turn its more profitable stories into celluloid.
It's not unusual for consumer-products companies, including McDonald's and Gap Inc.'s (GPS) Banana Republic, to help promote films. But Starbucks is in discussions with Lions Gate and other film companies about getting involved in the business from script to screen. It reflects Schultz's long-held desire to make Starbucks more than just a coffee-shop chain. In recent years, he has cultivated relationships with Hollywood executives, earned a seat on the board of DreamWorks SKG (SKG.XX), and frequented the Sundance Film Festival.
In 2004, Schultz hired Ken Lombard, former head of Earvin "Magic" Johnson's Johnson Development Corp., as president of Starbucks' new entertainment division. Lombard increased the number of executives charged with finding emerging artists and striking deals with music labels. He hired Nikkole E. Denson, formerly president of Magic Johnson Entertainment and, previously, Magic Hallway Pictures, to begin vetting screenplays.
"Nikkole's responsibility is to be our eyes and ears," Lombard said in an interview this week. "We recognized we needed to have someone who has this experience" in the film world. Starbucks probably will recruit other executives from the film business to help cultivate projects there, he said.
Talks with Lions Gate began in earnest about eight months ago. Lombard said Starbucks executives viewed about a dozen films from various studios before settling on "Akeelah." The movie was written and director by Doug Atchison, partly as he sat in Starbucks stores. It centers on an 11-year-old African-American girl from South Central Los Angeles who discovers a passion for words. Akeelah, played by Keke Parker, defies her mother, played by Angela Bassett, and enters a spelling bee. With the help of her teacher, played by Lawrence Fishburne, the girl reaches the National Spelling Bee.
Lombard, an African-American, said he was drawn to the film because of its "emotional tie, and the inspiration we thought was fitting and compatible with the texture and layers of the Starbucks brand and experience. It's a movie that had a natural tie to what we're about - the sense of community in our stores."
Publicly held Lions Gate of Santa Monica, Calif., is a small but significant Hollywood player that produces 15 to 18 movies a year. They've included slasher flicks like the "Saw" franchise and edgier creative fare like last year's drama "Crash"- among Schultz and Lombard's favorite films of 2005.
Because of the setting of "Akeelah" and its largely African-American cast, Lions Gate executives feared it would be pigeonholed as an "urban" movie that would appeal only to inner-city blacks. But with Starbucks involved, "we can make more of America aware of it," said Lions Gate president Steve Beeks. Jon Feltheimer, chief executive of Lions Gate, said, "It's a company with a pristine brand putting their brand on the line and saying, `You should go to this movie."'
Starbucks played no role in producing the film, but it will be hugely instrumental in promoting it. "Akeelah" will be released on about 2,000 screens April 28. In the month before its release and for two weeks after, Starbucks plans to take the unprecedented step of promoting a film in its stores. Chalk boards will offer trivia games with words from the film, and words from the movie will appear inside pastry cases. The film will also be promoted on its coffee cup sleeves. One thing customers won't see: life-sized posters of the film's actors. "That wouldn't be us," a Starbucks spokeswoman says.
In addition, the company will host advance screenings for some holders of Starbucks cards, as well as Starbucks' servers, known as baristas. "The baristas want to tell their customers about the things they get excited about, and we're convinced this movie is going to be one of those things," says Anne Saunders, Starbucks' senior vice president for global brand strategy and communications.
Starbucks also plans to run trailers of the film over its Wi-Fi network. Currently, most Starbucks customers use the network exclusively to check e-mail, and Schultz said this is an "evolving" opportunity to broaden that usage. "We've known for quite some time that the Wi-Fi opportunity in our stores (is) the perfect place for shorts, documentaries and other things that wouldn't be seen on the big screen," he said.
The company will begin selling DVDs of "Akeelah" as soon as August. Sometime this year, Starbucks will begin selling DVDs of other films in its stores. Lombard said the company will sell no more than 20 titles, including music CDs and DVDs, at any given time. Pricing has yet to be determined, but Lombard said it will be consistent with how the company prices CDs.
Schultz said Starbucks isn't aspiring to compete with Blockbuster. "We have no interest in selling anything that appears to be pedestrian in nature," he said.
