Anyone Remember Columbia House?

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I remember reading magazines and always seeing Columbia House and BMG advertisements all the time. All those offers for like 10 CDs for a penny each or 5 DVDs for a quarter each and I wondered, naively, how those companies made any of their money. Now, many many years older and quite a bit wiser, I quickly realized that the profit margins of many products that we see is significantly higher than what we would originally anticipate and that the whole instant gratification concept was roaring strong even back in the 80s.

Take for example, the standard offer from Columbia House these days (who is still around, much to my surprise). You get 5 DVDs for $0.49 each with free shipping with an obligation of 5 DVDs over the next two years. The DVDs at regular price are $19.95 a pop plus shipping and “processing.” That puts the total price at $102.20 plus S&P, which makes the price around $10.22 a DVD plus shipping and handling. There are special offers and stuff but ultimately you’re paying about twelve bucks I bet after all is said and done for each DVD at the minimum. How much do you think those DVDs cost Columbia House? Probably a few dollars at most considering you can get them at bargain basement Wal-Mart for a few bucks too and they have skinny profit margins.

The big thing here isn’t so much how much they make, but how little they make it seem that you’ll be spending. Five DVDs at $0.49 cents… you get five DVDs now with the obligation of only five more over the next two years. Does this sound like anything else? Yeah, it sounds like every other consumeristic thing out there getting you to obligate your money now for a great deal that turns into an average deal later on. Credit cards? Check. Payday loans? Check.

Considering Columbia House celebrated their 50th anniversay in 2005, I guess the whole instant gratification thing isn’t an entirely new concept. (And BMG, the one with the 50 CDs for five duckets ads way back when, now actually owns Columbia House)

{ 12 comments, please add your thoughts now! }

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12 Responses to “Anyone Remember Columbia House?”

  1. Joseph says:

    All very good points.

    I think many of us (the “fine print” readers) knew this shenenagans right when we saw it.

  2. Amber says:

    After BMG bought them they opened up again as which is a subscription service that for $6.99 you automatically get one cd a month with the option to buy more if you want for $6.99 each. I’m sorta over the whole cd thing, not that I just buy mp3s or anything I just….don’t care anymore about owning music.

  3. KMC says:

    I think Columbia House is a great example of a marketer that uses ‘inertia’ to sell product. Once you get someone to take an action and begin something, it’s not hard to keep the action going. It takes another conscious action by the person to stop. Any kind of subscription is a good example (be it magazines or a housekeeper).

  4. Dustin says:

    Funny you should say all this, I got one of these in the mail a few weeks back and thought I was on the way-back machine.

    • jim says:

      Hahaha, I only thought of it because I was checking my spam folders in Gmail and saw it, I was surprised to see CH even still existed… let alone was spamming me. 🙂

  5. Patrick says:

    About 10 years ago I belonged to BMG. I got the ’12 for the price of one’ deal and had to buy 3 more within 2 years. It averaged out well for me, but they make their money off people who neglect to decline the CD of the Month. If you don’t decline – they automatically ship it at full price (close to $20 bucks).

    I recently got a coupon from a class action lawsuit because they overcharged for shipping. The coupon is 3 CDs at 80% off regular price and no shipping. It’s a decent deal, but I don’t know if I will do it. I have a ton of CDs already.

  6. Amanda says:

    Gosh – I haven’t thought about Columbia House in years. However, I do remember being 14 and BEGGING my parents to let me order some of those new CD thingys! They obviously said “No”…

  7. Scott says:

    Columbia House, BMG, etc. just buy a master copy license of a CD or DVD and then create their own – so the cost is only the penny price of blank CDs or DVDs plus the license fee. That’s why all the CDs and DVDs they sell have their little logo on the front – they actually create them.

  8. Hey productive spam, very nice. Compared to the $16 I used to pay for a CD at Tower Records, this was a great deal back then. If you worked it out just right, you could stack it so you could by one, get two free and have that one count towards your obligation. By the time I was done, I think my average was $6 – quite a bit better than Tower Records.

  9. JLP says:

    I have been a member of BMG since January 1994 and have actually done quite well with them. The run buy 1 get 4 free fairly often and that works out to about $7.50 per disc, which is reasonable.

    FYI – If you receive a disc that you forgot to decline, all you have to do is write “rejected” on the box and stick it back in the mail. BMG doesn’t like it, but it’s okay if you only do it every once in a while.

    I never was a fan of Columbia House.

  10. MoneyDummy says:

    We LOVE BMG! Their current offer is buy one CD, get eleven more free, with no further obligation.

    Mr. MoneyDummy has been a member for years, and he holds out for their once-yearly buy-one-at-full-price, get unlimited for .99/ea. Then he orders enough to hit the bottom of the “curve,” which is about 5.25/CD. It wouldn’t be a good deal for me, since I’m not much of a music fan, but for someone like Mr. MD, who’s CRAZY about music but doesn’t believe in copying or downloading songs for free, and can tell the quality difference in the .88/per song WalMart downloads, it’s great!

  11. Georga says:

    @ JLP: I did that but was sent to a collections agency. Hardnosed Indian guy trying to force me to give him my credit card info over the phone. I called BMG and they took care of it.

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