Starbucks, Oxygen Media to Offer a New Blend

Starbucks’ e-commerce plans have been the source of much speculation ever since news of the company’s possible e-commerce and portal plans began to circulate last month. Things became a little more clear on Thursday, when the specialty coffee retailer announced a strategic alliance with Oxygen Media, a high-profile media company that publishes a network of Web sites for women and is working to develop a cable channel.

The companies say Starbucks will likely sell its products through Oxygen’s Web site, while the companies will team up to build content and community and cross promote their Web sites.

“It gives us the opportunity to lower the cost of customer acquisition by fully leveraging the convergence that is now occurring within the Internet, cable and other media channels,” said Howard Schultz, chairman and CEO of Starbucks. “We have 10 million customers who visit our locations weekly, and with 70 percent of these customers already online, we have an extremely loyal and Internet-savvy customer base.”

There are also plans to promote Starbucks on Oxygen’s cable television and promote Oxygen in Starbuck’s more than 2,000 coffee shops.

Allen Invests in Oxygen

Oxygen Media, which has America Online, ABC, Oprah Winfrey and the TV production team of Marcy Carsey and Tom Werner as investors, got another boost on Thursday when Paul Allen’s Vulcan Ventures announced that it has invested $100 million in Oxygen.

This could be a major boost for Oxygen, because Allen’s other major investments include the Go2Net Network, which could drive a large amount of traffic to Oxygen’s sites. Raising awareness of Oxygen’s Web sites are crucial as the company tries to play catch up with leading women’s sites, including iVillage and Women.com. Meanwhile, the forthcoming Oxygen cable network will attempt to compete with cable mainstays like Lifetime, and Allen’s presence will be vital here, as well.

Oxygen will enter into an carriage agreement with Allen’s Charter Communications under which Charter’s cable systems intend to distribute the network to Charter’s subscribers. Charter’s systems currently have 2.3 million subscribers and it has entered into agreements to acquire systems with an additional 3.6 million subscribers. Oxygen, which will launch on in February of 2000, already has reached carriage agreements with TCI and MediaOne.

Oxygen’s cable network will be integrated with Oxygen’s sites which include Thrive, Moms Online, Electra and Ka-Ching. Oprah Online will join the network in August.

Starbucks, meanwhile, could also get a nice payoff from its Internet deals soon. The company owns 4.2 percent stake of online community Talk City, which is scheduled to go public in July.

About the Companies

Starbucks has retail locations in North America, the United Kingdom, the Pacific Rim, and the Middle East and sells whole bean coffees through its specialty sales group, direct response business, supermarkets and online.

Oxygen, founded last year by Geraldine Laybourne, aims to create a media brand that serves modern women by combining the best qualities of the Internet and television. Since its inception, Oxygen has acquired and developed several online sites, entered agreements with America Online, and partnered with others, including Oprah Winfrey, to develop and launch a new cable network.