24 April 2008 - Starbucks Corp. said Thursday it plans to overhaul its entertainment business as it tries to refocus the company on coffee.
The news came after Starbucks late on Wednesday unveiled a weaker-than-expected estimate of fiscal second-quarter earnings and lowered its forecast for the year. In reaction, Starbucks shares tumbled 10.4% Thursday, to close at $15.99 in 4 p.m. trading on the Nasdaq. It was the stock's lowest level in four years.
The Seattle company said Thursday that Ken Lombard, senior vice president and president of Starbucks Entertainment, has left the company. Chris Bruzzo, chief technology officer, will now lead the company's entertainment segment. Starbucks also will hand over management of its Hear Music record label to Concord Music Group.
Entertainment had been one of the company's biggest pushes in recent years and was the pet project of Chairman Howard Schultz. Starbucks wanted to expand its brand beyond the four walls of its stores by marketing films and books. But some analysts say entertainment ended up being a distraction for the company and helped it lose focus on coffee. While its music venture was successful, the two films it marketed had meager returns at the box office.
Starbucks said it will continue its relationship with the William Morris Agency to identify book projects that it can offer in its stores. Earlier this year Mr. Schultz said Starbucks doesn't have any current plans to market movies again.