March 16, 2004 10:18 AM PST

Starbucks, HP queue up music coffeehouses

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Starbucks is working with Hewlett-Packard to create coffee shops with a music groove, as the companies look to grow beyond their traditional businesses.

The coffee shop giant opened its first store with a digital-music service earlier this week in Santa Monica, Calif. The service allows customers to burn custom music compilations onto a CD. The first five songs burnt will cost $6.99; every subsequent song will cost 99 cents.

As expected, Starbucks customers will use HP equipment such as its Tablet PCs to choose from more than 20,000 full-length albums. A Starbucks representative said the company is currently only working with HP.

Both companies have turned to digital music in varying degrees as a way to complement their traditional businesses. Starbucks and Wi-Fi partner T-Mobile USA offer music downloads over a wireless network. And earlier this year, HP, which has been making a broad expansion into consumer electronics, said it would team with Apple Computer to resell iPod portable digital audio players.

HP is expected to start preinstalling Apple's iTunes on its PCs and reselling iPods by this summer. And the Starbucks-HP partnership is set to remain separate from the companies' respective relationships with T-Mobile and Apple.

Starting in the spring, the companies will make the service available in 10 stores in the Seattle area. The company will gather customer feedback on its current Hear Music Coffeehouse to determine how it will open similar stores.


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