Starbucks reportedly to offer music burning service in up to 2,500 stores: The system will allow customers to have CDs burned while they wait; eventually, it will also allow downloads of music over Wi-Fi, the article in BusinessWeek says.

Starbucks demanded a T-1 (1.544 Mbps in each direction) digital service infrastructure from its first hotspot partner, MobileStar, as well as its second, T-Mobile. I've speculated for a while on how this high-speed network could be used to cache material in each Starbucks, like movie and music downloads.

This latest project sounds somewhat misguided for the reason cited by the Forrester analyst in the article: Your typical barista may be great at making espresso but is not in a position to fix the broken CD burner.

My cousin Steven was involved almost 20 years ago with a company called Personics. The company had worked out a catalog licensing deal with more than 70 labels from the largest down to some independents to allow them to offer custom mix tapes for about a buck a song. This was a reasonable price in those days. The system had a few thousand songs mastered onto CD-ROMs stored in a special employee-operated CD-ROM changer behind the counter. An employee would punch in your choices, and the system created a high-speed cassette tape dub.

The company failed for two primary reasons: the hardware was proprietary, meaning that engineers had to fly around the country to fix it when it inevitably had glitches; and the catalog they offered too small because labels balked at including their most popular stuff for fear of cannibalizing pre-recorded CD and tape sales. (Price, my cousin reports, was not a problem: many customers were willing to pay even more, he noted to me after this item was originally posted.)

If Starbucks creates the expectation of an easy process that's always available and then isn't available even part of the time at any given store, they lose their audience. Starbucks makes its money from processing a high volume of custom drinks--you don't want to distract from that. CD burners aren't that difficult to keep operating, but a failure rate that's a fraction of that experienced by typical home and business users could be a dramatic problem in a high-expectation retail environment.

The article says the price is comparable to Apple and other download services. Two problems with that comparison. First, it's not. It's $7 for five songs, or 40 percent, or $13 for an album, or 30 percent higher. That's a significantly different price when you're dealing with price sensitivity. It's comparable to a mass-produced discounted audio CD.

Second, you're receiving an audio CD, not digital music per se, which could be a turnoff for the audience that might be interested in a fast, in-store music service. (However, since HP is the partner, and is reselling their own version of the iPod, it's possible that the ultimate digital delivery system will be a version of the iTunes Music Store.)

This is the latest incarnation of Compaq-cum-Hewlett Packard's attempts to capitalize on their relationship as a supplier to Starbucks. In January 2001, when the MobileStar deal was announced for installing hotspots, Starbucks made a big deal about Microsoft and Compaq's participation. Compaq wasn't a partner, though; Starbucks had signed a $100 million, five-year deal to buy equipment and services. Microsoft was a partner, and it never seemed to amount to anything that saw the light of day.

In the years since this deal, Compaq and then HP have reaped advertising benefits, appearing in full-page newspaper advertisements as part of the Starbucks hotspot system, even though they had nothing to do with MobileStar and T-Mobile's deployment. At one point, Starbucks had Compaq iPaq's available for customers to play with, and those disappeared, too.

It's this fumbling that's I originally noted was uncharacteristic of Starbucks until my cousin reminded me of Starbucks dalliance with the Internet. They invested in Cooking.com, Living.com, and Talk City, and had an enormous investor backlash. They then made a deal with Kozmo, of course. My cousin's conclusion: Burning CDs is hardly their first tech-intensive misstep. [link via PaidContent]