What Starbucks Can Learn From the Movie Palace

Here is an interesting article from the New York Times.

What Starbucks Can Learn From the Movie Palace By RANDALL STROSS

WI-FI service is quickly becoming the air-conditioning of the Internet age, enticing customers into restaurants and other public spaces in the same way that cold “advertising air” deliberately blasted out the open doors of air-conditioned theaters in the early 20th century to help sell tickets.

Today, hotspots are the new cold spots.

Starbucks became the most visible Wi-Fi-equipped national chain when it began offering the service in 2002. Now, at more than 5,100 stores, Starbucks offers Internet access “from the comfort of your favorite cozy chair.”

Before you pop open your laptop, however, you need to pull out your credit card. Starbucks and its partner, T-Mobile, charge $6 an hour for the “pay as you go” plan. Day passes or monthly subscriptions are available but can be used only at Starbucks stores and other T-Mobile partners like Borders bookstores.

McDonald’s offers Wi-Fi in more than 8,000 of its 13,700 stores in the United States, giving it wider reach than even Starbucks, and it also charges for access. McDonald’s doesn’t charge as much: it asks $2.95 for two hours. You can’t apply your T-Mobile subscription there, however, because McDonald’s works with other partners.

Metering and charging for a service, of course, is the prerogative of any business owner in a free market. One will always find entrepreneurs willing to try new ways to profit by erecting tollbooths in front of facilities that had been freely accessible.

In the past, this took the form of coin-operated locks on bathroom stalls. (You may have first encountered these at a moment when you were least ready to praise the inventor’s ingenuity.)

Today, the outer frontier of pricing innovation can be found at the Dallas-Fort Worth International Airport, where some electrical outlets are accompanied by a small sign: “To Activate Pay $2 at Kiosk.” This is an experimental service, “Power Up My Portable,” which provides chairs and outlets for laptops; $2 buys 20 minutes of juice.

But what about the many other wall outlets scattered around the terminals and originally installed for vacuum cleaners? Zenola Campbell, the airport vice president who oversees concessions, demurred last week when asked whether travelers could always count on having free access to those outlets. “I can’t tell you where we’re going to be in the future,” she said.

When Starbucks and McDonald’s decided to exact a toll from their customers as they set up their in-store Wi-Fi networks, they created a confusion of conflicting signals: how welcome can one feel when staring at a meter that is running?

The restaurants’ predecessors, the movie theater owners of almost a century ago, understood that not every amenity, every service, every offering must have a separate price tag attached. The owners and the architects sought to give theatergoers an environment that was pleasing in all aspects. Marcus Loew, the head of a nationwide chain, once said, “We sell tickets to theaters, not movies.”

Panera Bread, which has more than 900 Wi-Fi-equipped sandwich and bakery stores, has set itself apart from its contemporaries by upholding the old-fashioned spirit of those bygone theater owners who never stinted in their efforts to make public space inviting.

The grand movie palaces did not have to show the revenue-enhancing potential of an ornamental gold cornice or plaster pilaster. So, too, at Panera Bread, where its fireplaces do not have to demonstrate a monetary payback to justify their place in the stores.

Neither does Wi-Fi. Neil Yanofsky, Panera’s president, said that no cost accounting had been done on its service, which is free. The rationale relates to ambience: “We want our customers to stay and linger.”

A Panera cafe does half of its business at lunchtime — there is little lingering then. But before and after the lunch rush, the restaurant addresses what it refers to internally as “the chill-out business,” which constitutes a not-insignificant 15 to 20 percent of its rev enue.

Panera has no interest in rushing these customers out — the longer they stay, the greater the likelihood that resistance to the aroma of freshly baked muffins will crumble. Free, unmetered Wi-Fi is one way the restaurant sends an unambiguous signal: Stay as long as you like.

Of course, Mr. Yanofsky is the first to point out that he is in a position to be much more welcoming than the competition across the street at Starbucks. The average Panera store has 120 seats and does about two and a half times as much business as the average Starbucks store.

Mr. Yanofsky said he could not see why Starbucks, given its more limited seating, would drop access charges so that it could match Panera’s Wi-Fi offering. “Why make it free?” he said. “They’re already full.”

Each Panera cafe averages 220 connect hours a week; Starbucks and McDonald’s declined to provide similar information about the use of their services.

In the 1920s, when air-conditioning began to be installed in movie theaters, owners had to spend a sizable sum — $50,000 (roughly equivalent to $570,000 today) — to transform the property into a “cold spot.” But it was worth it. Before the “refrigeratory process” came along, theaters could not draw customers during the summer because of the unbearable heat in confined space. With air-conditioning, patronage increased so sharply that even the largest investments were quickly repaid.

Wi-Fi does not address a similar problem of seasonal attendance. Nor will it produce a multifold increase in patronage. But, then again, it’s not nearly as costly to introduce as the cooling plants of the 1920s.

The access charges assessed at Starbucks and McDonald’s suggest that behind the scenes, their service providers have had to make huge infrastructure investments and carry burdensome operational costs. But if the stores already have business-class broadband connections for their own operations, the addition of a Wi-Fi access point is trivial.

Schlotzsky’s Deli, w hich offers free Wi-Fi in 82 of its restaurants, uses Internet connections that were already in place, just as Panera Bread did. And Val King, Schlotzsky’s director of information technology, said the technical demands of remotely overseeing a wireless network were minimal. “It doesn’t take rocket science to run these things,” he said.

Customers need feel no shame, however, if they need help configuring their laptops, and sandwich makers and baristas are not necessarily the ones who can solve their technical problems quickly.

A Starbucks spokeswoman, Sonja Gould, explained that her company’s Wi-Fi customers receive, in exchange for their access fees, “excellent customer service help from T-Mobile.” It should be added that businesses offering free Wi-Fi also contract with tech-support companies to help customers. One such company, HotPoint Wireless, says its network now handles five times as many sessions originating from businesses offering free access as those that charge fees.

Getting connected is one thing, but keeping one’s e-mail private is another. Wi-Fi signals, by their nature, are notoriously susceptible to electronic eavesdropping. Wi-Fi services you pay for are no better protected than free services. As T-Mobile informs customers on its support Web page, all wireless service is “inherently insecure.”

Its recommendation should be heeded by users of Wi-Fi hotspots everywhere: use a virtual private network, which provides secure industrial-strength encryption. If your employer does not provide a V.P.N. server, consider using a commercial service, like JiWire, which charges $30 a year for a V.P.N., personal firewall and other services, including a hotspot directory that can be used offline.

STARBUCKS, which has rolled out a plenitude of stores, follows the same design concept that is behind the modern multiplex: for interior space, small is beautiful. It’s unfortunate that the grand architecture of early movie theaters no longer exists to put today’s microscale retail architecture to shame.

Gail Cooper, a professor of history at Lehigh University who has written about the introduction of air-conditioning, said: “In the movie palaces, one-third of the space was devoted to the lobby so people could come and ‘promenade’ — today we would say ‘hang out.’ Welcome was built into the space, and air-conditioning was one part.”

The movie palaces are long gone, and so, too, is the novelty of air-conditioning. We now step into public space less to be chilled than to chill. The palace’s spiritual successor is the cafe that sends out a welcoming blast of free, unlimited Wi-Fi.

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