Fast casuals go decaf on music kiosks

Someone once said that as General Motors goes, so goes it with America. While no one is ready to compare Starbucks with the automotive giant, one should not deny the Seattle-based coffee chain its due when it comes to discerning the cultural Zeitgeist.

This may be true especially when it comes to kiosks that allow users to burn custom CDs or load a venti dose of Coldplay onto an MP3 player.

In 2004, Starbucks unveiled digital music kiosks in several of their highest-grossing stores, including numerous locations in their home city of Seattle and in Santa Monica, Calif. At the time of the launch, Starbucks had plans to expand the rollout to 2,500 stores through 2006, but after two years of testing, the company pulled the machines from 35 of the 40 stores that had them.

And while some QSRs have had success in Europe with devices that allow patrons to load up on songs and salads at the same time, attempts in the U.S. have fared no better than the Starbucks deployment.

Is it time to take music-burning kiosks off the menu?

Listening to record stores

John Timmons looks like what he is. Tall, thin, with blond hair as wild and flowing as a Jimi Hendrix riff, he fits the image of a record-store owner. His shop, ear X-tacy, on a trendy stretch of traffic jam in Louisville, Ky., is the perfect backdrop. Music dilutes the noise of CD cases being flipped by listeners scanning for titles. Mixed among the aisles are end-caps with music-themed mugs and toys, and racks with T-shirts that in some places in this conservative town would draw a scowl.

In a nod to the technology that has overtaken his passion since the days of vinyl and large, cardboard jackets, Timmons has installed a Touchsystems listening station at the front of store that lets customers sample clips of CDs. What he does not have, however, is a kiosk for those customers to download their selections for a fee to a CD or an MP3 player.

“If we put a kiosk in, we would have to sell an ungodly amount to recoup our expenses,” Timmons said. “They are very expensive, and the money we would get back for each song would not be very much. I see how money can be made with kiosks, but the financial model doesn’t work for me.”

That is the dilemma facing all potential deployers of music-download kiosks, whether their business model is fast casual or retailer. At the beginning of the decade, the kiosks promised a fun and convenient way for music fans to take advantage of the confluence of digital music, cheap burning technology and the advent of portable playing devices. Users would gain access to a vast library of songs, even those no longer being published. Deployers would have virtually unlimited, “long tail” inventory.

But the promise began to fade as fast as a Britney Spears marriage, however, when the market got a load of a new device called an iPod, and suddenly even technophobic senior citizens could take Barry Manilow MP3s with them when they went mall-walking.

Francie Mendolsohn, president of Rockville, Md.-based Summit Research Associates Inc., believes the kiosks are as out as Kevin Federline. She said that digital media kiosks have already matured to their full potential and have little room to grow.

“It doesn’t look like a terribly promising thing,” said Mendolsohn, who tests and consults on kiosks. “There was a lot of excitement for them at one point, but they won’t last all that long.”

The market for kiosks existed before iTunes began to take over the online realm, but by the time manufacturers got enough funding to ramp up deployment, Apple’s online store owned an 80 percent share in the online-retail market.

The iPod itself was not the only factor. Digital-rights management comes into play. According to Bob French, president and COO of St. Paul, Minn.-based Mix and Burn Inc., inter-operability is the biggest hurdle that the music kiosk industry faces. iTunes uses a proprietary system called FairPlay to ensure that iPods exclusively play music bought or downloaded from iTunes. Mix and Burn uses Micosoft’s Plays for Sure system which allows songs burned from their kiosk to be played on a wide range of MP3 players, but not iPods.

“Unless they can make media kiosks universal and able to work with iTunes, they don’t have a lot of life left in them,” Francie Mendolsohn said.

“iTunes did do one thing that paved the way for in-store kiosks; It showed people how to buy digital music,” French said. Mix and Burn began rolling out in-store media kiosks in 2004, around the same time as Starbucks’ deployment. Mix and Burn is partnered with Albany, N.Y.-based TransWorld Entertainment Corp., which operates FYE and Sam Goody stores nationally.

Brian Abbott is a store manager for FYE, whose parent company has parterned with Mix and Burn. His store in Lexington, Ky. uses a Mix and Burn kiosk with six tablets, or stations. Abbott says the kiosk brings in about 50 CD transactions a week.

“Do they always buy something? No. But there’s usually someone sitting over there messing around on it,” Abbott said. “So far its been great for selling singles and getting albums that are out-of-stock.”

With iTunes running the online music market and record labels constantly raising the cost their digital rights, French often is asked why Mix and Burn continues to place music kiosks in stores when people can just burn CDs at their own homes.

“Believe it or not, people actually still want to get out of their houses,” Bob French said. “To say its gone is a mistake,” French said. “Kiosks are alive and well, and there is a business here.”

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