Fast Company: Why did you decide to buy Hear Music five years ago?

Howard Schultz: If you think about what occurs within a Starbucks store, I think we've known for a long time now that Starbucks is more than just a wonderful cup of coffee. It's the experience. And the experience is defined by what we have characterized for a long time as Starbucks really becoming this "Third Place" between home and work -- an extension of people's front porch, or people's home office. As a result of that, we realized early on that we had an opportunity to leverage the equity of the experience and the trust that our consumers have in the brand and in our people, to other products and services.

Music was a natural evolution because we had been playing music in our stores for almost 30 years. For a long time, our customers have actually stopped our people and asked, what is that song? When I saw Hear Music the first time, it was clear that they had cracked the code on the sense of discovery that music should have. We never dreamed that we'd be sitting on the unique opportunity we're sitting on now. We just saw that they were doing for music what we had done for coffee. It was this very respectful way of presenting music that, in a way, had become a lost art.

FC: What was your goal when you originally reached out to them?

Schultz: It was to integrate Hear Music's understanding of the music industry and their acumen as it related to their sense of editorial voice with Starbucks in a complementary way. And in doing so, to also examine whether there was an opportunity to expand Hear Music into other forms of channel distribution or new stores. But at a time when the retail record industry was going through such a very very difficult period, it became a complementary component to the existing Starbucks stores.

FC: Tell me how you found out about them. With all the different record chains out there, why Hear Music for this experiment?

Schultz: At our core, we're merchants. That means we travel the world all the time, looking at and examining the best retailers and merchants, whatever they might be. We're always looking for new ideas and to examine other ways in which people are doing things. In this case, we walked into a Hear Music store.

FC: Do you remember which one it was?

Schultz: The one I walked into is in the Stanford Shopping Center, but our people had also seen one in New England, I think. Then we met Don [MacKinnon], and clearly Don has just an unbelievable sense of quality and integrity in terms of the music industry. The group of people that he brought to Starbucks brought an expertise and a competency that we didn't have on our own. Sometimes I think when you make an acquisition like this, it's not necessarily for what you're thinking of today; it's something you're going to learn and incubate into the company. And here we are with a very, very significant opportunity as a result of that acquisition! We're pretty excited about it.

FC: Why did it take five years to get from acquisition to deciding to roll out this combination store? What happened in those intervening years?