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Anyone Remember Columbia House?

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)