… as foreshadowed here. And if nothing else, the Sonic Youth promotion was an excellent sign that the company’s music plans had gone straight off the track. The Silicon Valley Insider story is here:

Starbucks, which has been scaling back its once-grand ambitions to turn itself into an entertainment hub, is about to shrink its plans yet again. We hear that by September, the chain will have dumped almost all of its in-store music retail offerings.

That means no more “spinner” racks offering multiple CD choices to latte-buyers. And that also means no more gift cards and promotional giveaways for Apples iTunes (AAPL). Instead, we’re told, the coffee chain will offer just four CD “slots” per store. But it will also continue to offer free Wi-fi access to Apple’s online music store and may continue to try to sell entertainment online.

The Insider repeats two Starbucks music factoids that seem to be contradictory: That the company was selling more than four million CDs a year, but that (per a Jeff Leeds NYT story from March) the average per store was but two discs sold each day. Given that the company has 10,000 stores, roughly, in the U.S. and another five around the world, those two figures don’t gibe. (If the two-discs-per-day figure is true, the company would have sold seven million CDs in the U.S. each year, or more than ten million if they were counting international outlets. The discrepancy seems to come from a distinction the Times was making between company-owned outlets and licensed ones.)

Anyway, the real reason the campaign collapsed is that it was all based on novelty. You might buy a Norah Jones CD in line at Starbucks if you like her, you were going to buy it anyway, and you notice it on the counter. And then, caught up in the excitement of an effective marketing campaign, you might grab the McCartney disc a month later. But at that point reality kicks in: Most folks were quickly reminded why they hadn’t bought the last dozen or so McCartney albums. (His songwriting talents have deserted him.) Other so-called Starbucks artists don’t sell many records in any case. (Like Lucinda, for example.) And the shift to more mainstream acts, like James Blunt, drained away the novelty.

The myth that this was an important story was agrreably parroted by the press, which unaccountably found the idea of Starbucks selling CDs (or helping to publicize a movie, Akeelah and the Bee, for which the producers of the film paid Starbucks) endlessly fascinating and gave the company reams of publicity for what were essentially marketing agreements.How this was any more interesting than Orville Redenbacher, for example, setting up a popcorn kiosk at a Blockbuster, except less intuitive, was never clear.

Dueling stories on the new Wal-Mart exclusivity deals in the WSJ ($) and the NYT today. Unfortunately for the Times, the Journal is ahead of the curve on the story on two counts:

Veteran rockers AC/DC are set to become the next major band to sell a new album only through Wal-Mart Stores Inc., according to people familiar with the matter, a move that highlights the growing music-industry clout of Wal-Mart.

The AC/DC deal, however, comes at a time when the retail giant—the largest seller of compact discs in the nation—is signaling it may rock the music world by stocking fewer CDs. Such a move is part of a trend that would further accelerate the already steep decline of CD sales as consumers make the transition to digital music.

The Times story focuses mostly on Irving Azoff’s Front Line Management; it details the boost some of the company’s artists, like the Eagles and Journey, have gotten from the retailer, and doesn’t mention AC/DC:

The deals highlight the changing dynamics of the music industry as once-powerful labels decline because of the migration to digital downloads. To fill the gap, musicians are scrambling to connect with fans, and Wal-Mart is using these exclusive deals to assume a new role: hit maker.

The Eagles’ double disc, “Long Road Out of Eden,” sold 711,000 copies in its first week and three million since its release, according to Nielsen SoundScan, impressive numbers at a time when CD sales are declining. Journey sold 45,000 albums in its first three days on sale, and Irving Azoff, founder and chief executive of Front Line Management and a music industry veteran who ran MCA Records in the ’80s, predicted that it would sell more than 80,000 copies in its first week. That is probably enough to debut in the top five, and significantly more than its last album sold in total.

As Hitsville had mentioned before, the trouble with these single-outlet deals is that they are based on novelty. The Eagles’ status is unique at this point—no one would have guessed they would sell three million copies of that dreadful Eden album—but it’s hard to believe their next release will do that well. As for Journey, well, this is probably going to be their last hurrah. (The band’s distinctive lead singer, Steve Perry, left the band some time ago and it has used fill-ins ever since.)

With Starbucks, the acts that can take advantage of its sale potential begins with your Lucindas and Elvis Costellos and Norah Joneses and starts to get thin after that. For Wal-Mart, there’s the Eagles and Fleetwood Mac, AC/DC and Steve Miller, maybe Tom Petty and Eric Clapton in a few years, and then that potential pool gets shallow as well.

The artists deserve the money—and it’s smart to make an end-run around the labels. (Though note that that’s not what AC/DC, which is still on Sony, is doing.) But in truth, these are just the sort of one-off deals bands in their twilight have always done, as the half-life of their celebrity brings them back, periodically, to public attention.

The buzz word in the music industry is branding, which is a nice way of saying “selling out.” If you have a brand, you of course monetize it.

Latest candidate: Sonic Youth, with the help of Starbucks and a host of hipster celebs not above lending their names to a cheesy collection of product for the coffee checkout line.

From a press release I just got:

Sonic Youth’s Hits Are For Squares

Beck, Dave Eggers, Chloe Sevigny, Eddie Vedder, Gus Van Sant and More Choose Their Favorite Sonic Youth Songs For Starbucks Compilation

The limited-edition CD will be available exclusively at select Starbucks locations in Boston, Chicago, Philadelphia, San Francisco, Seattle, Los Angeles, New York City and Washington, D.C.

New York, May 27, 2008 – On June 10, 2008, Universal Special Markets and Starbucks Entertainment will co-release Sonic Youth’s Hits Are For Squares. The limited-edition CD features Sonic Youth fans from music, film and literature selecting their favorite recordings from the band’s voluminous body of work that dates to 1981. It also includes a new, exclusive track from Sonic Youth, “Slow Revolution” recorded last year with longtime producer John Agnello.

Hmmm… A limited edition available in limited cities. I can’t imagine why this won’t be available in Des Moines. The celebs involved include everyone from the folks listed above to Juno screenwriter Diablo Cody and (collectively, one assumes) Radiohead and the Flaming Lips.

In Juno, you’ll recall, the Justin Bateman character, a jingle writer named Mark Loring who lived in a bland suburban manse, used to play in a band that opened for the Melvins and loved Sonic Youth, though young Juno, a Stooges fan, didn’t know who they were.

Those distinctions made no sense in the movie. (So as not to confuse viewers, the Sonic Youth song you heard in the movie was … a Carpenters cover!) This CD should be called “The Mark Loring Collection,” to capture the sheer implausibility of the yuppie embrace of a noise band that never sold any records but is in the process of cashing out its name in the twilight of its career.

The full track list, according to the press release:

1. “Bull in the Heather” selected by Catherine Keener
2. “100%” selected by Mike D
3. “Sugar Kane” selected by Beck
4. “Kool Thing” selected by Radiohead
5. “Disappearer” selected by Portia De Rossi
6. “Superstar” selected by Diablo Cody
7. “Stones” selected by Allison Anders
8. “Tuff Gnarl” selected by Dave Eggers and Mike Watt
9. “Teenage Riot” selected by Eddie Vedder
10. “Shadow of a Doubt” selected by Michelle Williams
11. “Rain on Tin” selected by Flea
12. “Tom Violence” selected by Gus Van Zant
13. “Mary-Christ” selected by David Cross
14. “World Looks Red” selected by Chloe Sevigny
15. “Expressway to Yr Skull” selected by Flaming Lips
16. “Slow Revolution” exclusive new Sonic Youth recording

The collapse of Starbucks’ plans to become a major player in the film and music industries collapsed yesterday, as the chain jettisoned its top entertainment exec and outsourced its music arm.

Wrote the Times:

As part of the changes, Starbucks said Ken Lombard, president of the entertainment unit since 2004, had departed.

Starbucks also said it would turn over management control of Hear Music, its in-house record label, to its partner in that venture, the Concord Music Group.

Thus endeth one of the silliest ongoing stories in the industry, as each time the company sent out a press release the press swooned: “Starbucks goes Hollywood!” “Starbucks signs Paul McCartney!”

It all started two years ago, when the press was abuzz with talk of Starbucks’ getting into the movie business by cutting a promotional deal with LionsGate for a film called “Akeelah and the Bee.”

The deal was announced on the front page of the Wall Street Journal, and then breathlessly followed up by the New York Times (which credited the Journal with the scoop) and the LA Times (which didn’t) . Wrote the Journal:

For Hollywood, Starbucks represents a potentially lucrative new force at a time when the industry is struggling with a steep downturn in movie attendance and flattening sales for DVDs. With pastimes like videogames stealing customers and consumers turning to the Internet and other new technologies for entertainment content, executives are rethinking how they sell movies. A key part of that effort is finding new real estate in which to grab moviegoers’ attention.

Wrote the LAT:

Lombard said Starbucks wanted to be to movies what talk-show host Oprah Winfrey’s book club was to reading. Though the company says it will not produce films, it plans to pump millions of dollars into films it chooses to promote.

“This is not a test for us,” Lombard said. “This is a firm commitment for us to expand the brand into the movies.

[…]

“They broke the mold when they decided to do music,” said Ron Paul, founder of Technomic Inc., a food market research company. “If bookstores have coffee, then why can’t a coffee store sell books and movies?”

Well, for all sorts of reasons. If you read the stories closely, you could see that the producers of the film were basically just paying the chain to promote its movie; Starbucks was given some undisclosed share of the film’s profits, along with a courtesy “presentation” credit on the film itself.

This was all basically an adult version of a Happy Meal with a Narnia figurine. The twist was that the film was paying the store for the tie-in, rather than the other way around. But even this wasn’t all that different from all of the other non-coffee crap the chain purveys from its stores. Still, Starbucks had a canny PR campaign for the deal, the WSJ bit, and the other papers followed up on the big news.

Now we can see that it was a sketchy plan all along. While Starbucks has obviously shown it can sell music and perhaps even DVDs out of its stores along with little tins of breath mints, the stories today note that the company basically hit a wall at a certain point, as per-store numbers on media sales haven’t risen lately.

The problem with the strategy is that it was predicated on novelty. With movies and CDs, after the novelty  of buying a Starbucks-approved CD wears off, folks will actually start to notice the quality of the music or movies they are being presented with each week or month.

Paul McCartney offering his new record through Starbucks is an interesting fact—for about five minutes. And Starbucks got its little blast of publicity for it.  Joni Mitchell’s doing the same thing is interesting too, but at that point the half-life phenomenon kicks in. What happens next, Elvis Costello? Maybe Van Morrison, and all of a sudden the company is out of pantheonic figures to market and has to go down a tier—to John Cougar Mellencamp, or  Stevie Winwood—and then another: I don’t know, Shawn Colvin, maybe, or Jackson Browne.

Starbucks can sell whatever it wants to in its stores, and for folks who want their music and movies mediated by a fast-food outfit it’s a good match. But as I’ve noted before, when the “how” of the selling of the product becomes the story, it’s a good bet that there’s little else to talk about.

As of today the editorial pages of both the New York Times and the Wall St. Journal have offered their thoughts on the new album by the Eagles, “Long Road Out of Eden.” (The album, you will recall, was offered for sale only at Wal-Mart; prompted a revision of the Billboard charts, which previously had excluded CDs not universally available; and ended up topping the charts that week with 710,000 copes sold.) The Times editorial, from last Sunday, discussed the prime criticism of the album—that the band, with its latter-day anthems attacking environmental despoliation and corporate greed, had gotten in bed with a big source of such problems—and ended on a cautious note:

Have the Eagles sold out? Mr. Henley says that by doing business with Wal-Mart, he has more influence and easier access to the company’s executives, including the ones responsible for trying to make the company more environmentally conscious. His argument is almost certainly bolstered by the strong sales of ”Long Road Out of Eden.”

We hope, with him, that he has the influence he suggests, otherwise this arrangement may well turn out to be nothing more than a long road to Wal-Mart.

The WSJ editorial ($), impishly hedded “Desperados,” took a much rosier view:

In cutting out the record company, the band cut itself in for a bigger share of the per-album profits. While it might have expected fewer sales from restricted availability, that doesn’t seem to be happening. Wal-Mart’s retail price of under $12 for the two-disc album has allowed smaller retailers to stock up on the album at Wal-Mart and then resell them with a markup.

The Eagles aren’t the first to try new ways to sell a record. Garth Brooks signed an exclusive deal in 2005 with Wal-Mart and has sold millions of records. Beyonce has released an exclusive DVD through the store. Joni Mitchell and Paul McCartney are selling their music through Starbucks. Billy Joel’s daughter, Alexa Ray, is trying to establish her own music career by doing an exclusive with Target.

These and others are evidence that Napster and its filesharing successors weren’t the death of the music business but a smart bomb that forced the creation of new delivery models. Apple’s iTunes is the most famous. But the Web has allowed thousands of bands to find new audiences, and even create global niche brands. Thanks to the Internet, a Norwegian metal band named Enslaved has been able to fill small town bars and auditoriums in the U.S.

The unexpected, wholly thrilling appearance of Enslaved on the WSJ ed page comes from a NYT piece on the band from a week or so ago. The editorial concluded:

We believe in property rights as much as anyone, but when technology is changing, businesses have to change too — and that includes the business of music. So let’s applaud Mr. Henley, Glenn Frey, Joe Walsh and the other Eagles for some creative capitalism, however politically incorrect.

The trouble here, as with Starbucks’ selling the latest Paul McCartney album, is that these are one-time PR events. The Eagles deal isn’t the start of something new, it’s a last gasp. Barring the band’s conjuring up some new radio hits, the next Eagles album will not be as notable, and selling it only through one retailer probably won’t make any sense. This will of course also be true for Paul McCartney and Elvis Costello and whatever other fading stars are looking for a way to call some attention to themselves when they have a new product to sell.

Financially, it probably was a smart move for the Eagles, just as the Starbucks alliance was a smart move for McCartney. They both will get more money for their crummy new album than they otherwise would. The McCartney record had a high price, as I recall; Starbuck’s strategy was to make the CD as expensive as its upscale clientele would tolerate. Wal-Mart’s audience isn’t so much downmarket as it is more suburban and rural, and carried a much-more-reasonable $12 price tag. (It’s a two-CD set, too.) In both cases, to varying degrees, the retail outlets are subsidizing the artists’ profits. Starbucks’ motivations were mostly marketing driven; they got million of dollars worth of publicity on the deal. For Wal-Mart, the deal was a more traditional loss leader, designed to get folks into its stores to buy the Eagles album and some other crap, as well.

What is down market, in the end, is these artists’ ever-more-limited options when it comes to selling actual records. (Both make kazillions touring.) I said above that selling the next Eagles CD through one retailer probably won’t make sense. When Wal-Mart inevitably passes, however, there may be another, slightly grimier outlet looking for a little buzz to liven its image: K-Mart, say, or possibly Linen ‘n’ Things, or maybe 7-Eleven. I hope I live to see the day the new Eagles album is offered for sale exclusively at the Cracker Barrel.