Newspapers Balk At Starbucks’ Demands

By: Lucia Moses

Coffee and newspapers — they seem like a perfect match.

Some papers, however, find their relationship with the Starbucks Corp. growing bitter: They face being booted from Starbucks coffeehouses unless they meet new demands, including one for advertising space and another that several newspaper executives contend would have them pull their products out of competing single-copy-sales outlets.

Starbucks, with more than 3,000 stores in North America, wants each regional newspaper involved to swap ad space for the privilege of being the exclusive local paper sold in its region. The effort is a variation of Starbucks’ year-old pact with The New York Times, which made the Times the only national newspaper sold in Starbucks.

Individual stores in the chain are now permitted to sell local newspapers of their choosing, but the company eventually wants each store in a given market to offer the same newspaper selection. The goal is to make its customers’ experience consistent, said Mark Sacks, Starbucks’ publications product manager. Starbucks has found that, for most customers, a choice of three papers suffices, he said. It is asking about 30 major dailies to propose ads-for-exclusivity barters.

For dailies in competitive newspaper markets, the chance to be exclusive to a retailer can be irresistible. Boston Starbucks have sold The Boston Globe for years, while the Boston Herald has to sell papers outside. “We’d love to get together with Starbucks,” said John Hoarty, vice president of circulation for the Herald. “Anytime you’re the only local newspaper that’s available, you’ve got an edge.”

In some noncompetitive daily markets, however, papers wonder what’s in the Starbucks proposal for them and balk at the idea of forking over ad space to keep the in-store position they already have.

In Houston, where there are relatively few Starbucks locations, the Houston Chronicle doesn’t sell enough copies at Starbucks to justify the newspaper real estate the coffee company seems to expect, said Chronicle Circulation Director Rocky Mills.

The Dallas Morning News also sees little benefit in Starbucks’ proposal. Kelly Roberts, consumer sales manager for the Morning News, said it doesn’t barter for ads and can’t see pulling out of Starbucks’ competitors, as he says the company demanded. Starbucks isn’t even one of the paper’s top 20 generators of retail sales, he said, even though the News is sold in about 70 Starbucks locations. “The benefits don’t quite outweigh the costs at this point,” he said, adding that, although the News declined to respond to Starbucks’ request for a proposal, the two sides are expected to talk soon.

And not all competitive dailies are hot on exclusivity. Mark Hornung, the Chicago Sun-Times‘ vice president of circulation, said Starbucks risks alienating customers and hurting newspaper competition if it chooses to sell only the Sun-Times or the Chicago Tribune, both now sold in local Starbucks.

Partnerships in which newspapers trade promotional space for a position in a retail establishment have increased in recent years, said John Murray, vice president of circulation marketing for the Newspaper Association of America. The paper gets the chance to reach occasional readers while the retailer gets in-paper real estate, a benefit far more valuable than the small profit they make from the sale of papers, he said. Murray said he hasn’t heard of a promotional partnership that requires the newspaper to give up advertising space for branding purposes or be exclusive to a retail category, as some papers say Starbucks wants. “Our mission is to have [the paper] available at as many places as possible,” he said.

In Seattle, where Starbucks originated, the joint-operating agreement between The Seattle Times and Seattle Post-Intelligencer further muddies the proposal. Both papers are now sold in local Starbucks and won’t compete for exclusivity, said Mei-Mei Chan, vice president of circulation at the Times, which handles business operations for both papers. “We’re not going to play that game,” she said. “If worse comes to worse, we’ll put racks out on the sidewalks, and their customers will be less served.”

Starbucks’ Sacks wouldn’t discuss the details of the offer, citing confidentiality. He maintained that the company isn’t requiring that papers stop selling to competitors, although “we would prefer it if you weren’t here or there.” Sacks said most of the papers contacted have responded with proposals, although he conceded that some said they’d like to maintain the status quo. Starbucks had hoped to ink exclusivity deals with 10 papers by the new year. To get them, it may have to sweeten the deal.

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