Starbucks (SBUX) Dumping CDs

Starbucks, which has been scaling back its once-grand ambitions to turn itself into an entertainment hub, is about to shrink its plans yet again. We hear that by September, the chain will have dumped almost all of its in-store music retail offerings.

That means no more "spinner" racks offering multiple CD choices to latte-buyers. And that also means no more gift cards and promotional giveaways for Apples iTunes (AAPL).* Instead, we're told, the coffee chain will offer just four CD "slots" per store. But it will also continue to offer free Wi-fi access to Apple's online music store and may continue to try to sell entertainment online.

*Our source was off on the iTunes info. Starbucks tells the Seattle Times that it's still going to sell the iTunes cards "elsewhere" in its stores.

The move shouldn't be a huge shock: Starbucks has been rethinking its forays into entertainment this year while it tries to restart growth in its core business. And its efforts to sell music in particular have come under heavy scrutiny: In March, a scathing New York Times article reported that the chain was selling just two CDs per store per day. A month later, Ken Lombard, the head of the chain's entertainment business, was bounced out, and the company handed management of its Hear Music label, which had just started releasing its own CDs, over to Concord Music Group.

But the pullback is still going to be bad news for the music industry, which doesn't need any more bad news. The industry had once hoped that the coffee chain could help replace the dying music store business. And even though it was foundering, Starbucks says its music unit was selling more than 4 million CDs a year.

See Also: Who's Making Money In Music? Not Starbucks
XM, Starbucks Splitting Up