I Want My Penny Back: Columbia House’s Bankruptcy and the Death of Record Clubs

CH 1

It’s not so much that we didn’t see it coming; it’s more, “Whoah, I didn’t even know they were still in business!”

BY FRED MILLS

In the news, and unexpectedly so: venerable music subscription service/mail order outlet Columbia House, neé Columbia Record Club, which began life in 1955 and adopted the Columbia House name in the ‘70s when cassettes were firmly part of the consumer equation. Rolling Stone reports that parent company Filmed Entertainment Inc. filed for Chapter 11 bankruptcy protection yesterday in New York.

As RS notes, “In 1996, Columbia House’s profits peaked at $1.4 billion; by comparison, the company only managed $17 million in revenue in 2014.” That long, steady decline was of course largely the result of the digital revolution. As company director Glenn Landberg wrote in the filing, “This decline is directly attributable to a confluence of market factors that substantially altered the manner in which consumers purchase and listen to music, as well as the way consumers purchase and watch movies and television series at home.”

Recall that in 2010, when Columbia House was faced with the stark reality of massively declining physical media sales, it tried to remain afloat by shifting to DVDs and Blu-rays. But soon enough, with the penetration of broadband and the resulting streaming movie revolution, the DVD market began dying as well. Rolling Stone estimates that while in 2000 the music industry was moving $13 billion per year in CDs, by 2014 it was a meager $1.85 billion, while DVD sales “have plummeted by 50 percent between 2006 and 2014.”

Columbia House has gone out with a whimper, not a bang.

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Millennials probably have no firsthand knowledge of Columbia House (or, for that matter, competitors the Record Club of America, which went out of business in the mid ‘70s, and the RCA Record Club, which became the BMG Music Service and was ultimately owned and operated by BMG Direct Marketing, which in turn would eventually wind up purchasing Columbia House to consolidate everything under a single roof). The angle was pretty savvy back during the day: you’d encounter a full-page ad in a magazine such as Rolling Stone or even more mainstream non-music publications such as Time or Newsweek, and it would be showing maybe 75-100 album titles, most of them current hits, although enduring deep catalog titles or best-ofs were staples of the selection as well. You’d pick something like 13 albums or 8-track tapes (or, eventually, cassettes) from the list, add in a nominal fee, like $1 to $3 bucks, and in 4-6 weeks they’d show up in the mail. Sweet, eh? (Below: a typical ad for Columbia House. Note the 8-tracks.)

CH 4

But there were a couple of catches. The first was that by signing up you pledged to purchase a minimum number of albums over the course of the next two years—say, eight of ‘em. No biggie, right? Ah, but you’d be paying full list price, which steadily rose over the years to close in on $15.98. AND you’d be paying for shipping, which by any estimates was excessive, adding as much as $6 to your tally. $22 for a single album doesn’t sound so sweet now, eh?

PLUS, let’s say that a year later you were nearing the end of your contract term, realized you had to play catch-up, having not yet made your quota, and had to make a bulk order: they would ship every friggin’ title separately in order to bank as many shipping charges as possible! This was not a coincidence. Remember that initial shipment of 13 recs for a buck? You also pledged to pay the shipping, and yes, you guessed it: those 13 were typically broken up into several packages, sometimes due to chance if they happened to be out of some of your selections, but also just as a matter of course.

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The second catch was a bit more insidious. In that initial shipment, and arriving in the mail for each month thereafter, was a little card in which you would make your next purchase in order to fulfill the terms of the agreement. You could either select a title from the handy little mini-catalog that accompanied the card, mark a box saying “please do not send anything this month” or allow them to ship you a pre-selected title of their choosing (it would be listed on the card). And if you opted for the latter, to make it, er, easy on you there was no need to return the card in the mail; it would be sent automatically! Fair enough in theory, but in practice a LOT of people would forget to do anything—stoned hippies can’t be bothered with little details like finding a stamp to put on a postcard or driving to the nearest mailbox—which would result in a LOT of people having that pre-selected title show up out of the blue in a couple of weeks, along with a bill for the cost + shipping, natch.

Aside: My first foray into mail order LPs was with the aforementioned Record Club of America, which my mom signed me up for as I was only 11 or 12 – I still own a number of them with the company’s name inscribed on the album sleeve and record label, because these companies had their product manufactured specially for them. Later, as a college student I signed up with Columbia House at least a couple of times; why, I cannot recall. Interestingly, it turns out that on the rare occasion those bespoke titles actually went on to have some collectible value; I once sold a copy of Led Zeppelin II to a completist who had been desperately looking for the Record Club of America version! (Below: an ad for Record Club of America)

Record Club

The CD era didn’t bring any significant changes in the way the companies operated other than the quantity of titles you could select and, often, the fee: “8 CDs for a penny” was a common hook. It did usher in changes in consumer behavior, however. In particular, the rate of so-called “default” skyrocketed when folks realized they were paying $18.98 for one disc plus shipping; they would often sign up then take the CDs and “disappear” without ever intending on fulfilling the terms of the agreement. (Signing up under a fake or former roommate’s name was not uncommon.) There may have been vague intimations of someone having their credit score ruined if they tried to scam Columbia House but I never heard of that actually happening, much less a CD repo man showing up at their doorstep. (Below: that may or may not have been true if you stiffed ’em on the turntable, though!)

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The other thing that became widespread peaked in the mid and late ‘90s: folks sitting at their mailboxes, patiently awaiting their shipments, then hotfooting it down to the local used record store and either selling the CDs (say, at $4 to $7 per, since they were sealed and therefore pristine) or trading them in for the shit they really wanted but was not offered by Columbia House. I worked at a record store in Arizona throughout the ‘90s and this went down constantly, to the point where we’d be seeing the same Columbia House titles over and over (because Columbia House was offering all those ubiquitous mega-sellers of the ‘90s) and had to start turning a lot of them down; we just didn’t need 15 copies of that Live, Soundgarden or Hootie album, y’know? I got tired of dealing with all the junkies bringing in their Columbia House CDs as well. (Below: In the eyes of Columbia House, grunge and hair metal co-existed peacefully.)

CH 5

Incidentally, circling back to my comment above about how the records, tapes and CDs that Columbia House offered were company-specific pressings, over the years there have been minor controversies surrounding that. To this day you can easily spot them because they will have the name of the service printed somewhere on the back cover, and when UPC codes became standard, they displayed a generic record service UPC in place of the official stock UPC for the title. The remainder of the graphics, however, was identical to the standard commercial release.

The actual music on the discs is another matter, though. In 1994 Stereophile magazine published a story entitled “The Great Record-Club CD Conspiracy?” in which the audiophile publication examined whether or not the sound quality of the record club editions differed from the original commercial editions. This had been debated endlessly among collectors, audio gear devotees and just plain music geeks. And the subjective conclusion was, yes, in a number of instances, the listeners’ ears did indeed detect differences in such details as compression, stereo channel reversing, etc. But when putting the CDs to a comparison test involving actual frequency analysis, peak levels and more using measurement devices, no differences were found. Still, the subjective listening experience is what we call “the real life test” so this particular controversy was never really put to rest. It was even revived a few years ago at the popular Steve Hoffman music forums. Go HERE to read the original Stereophile report.

The other controversy involved the fact that all those records sold via the services— and at its peak Columbia House was moving huge amounts—were not generating standard royalty payments to the artists. In a 2011 article published by MentalFloss.com “It’s a Steal! How Columbia House Made Money Giving Away Music,” one of the key points raised read thusly:

“Columbia House and BMG had some fairly clever ways to save cash, though. Until 2006, the record companies had never actually secured written licenses to distribute the records they sent to club members. Instead, the clubs saved the hassle (and the expense) by paying most publishers 75% of the standard royalties set by copyright law. The clubs argued that since the publishers were cashing their discounted checks, they were submitting to ‘implied’ licenses.

“Music publishers didn’t love this arrangement, but for decades it was pretty tough to fight back against the mail-order clubs. As some of the biggest pre-Internet retailers, the clubs held enormous power over the music market. According to a 2006 Billboard article, if a publisher complained, the clubs would simply stop carrying their records.

“On top of that, the clubs generally weren’t buying their records from labels and then selling them. Instead, the clubs would acquire the master tapes of records and press their own copies on the cheap. Moreover, remember those ‘bonus’ or ‘free’ records you got for signing up for the clubs? The clubs generally didn’t pay any royalties at all on those, which further slashed their costs.”

If memory serves, this detail about royalties wasn’t widely known for a long time, more like a “dirty little secret” between the labels and the clubs, and it wasn’t until some of the artists’ lawyers and managers got wise and started raising a stink that it was addressed publicly and artists were able to start negotiating contracts that specified proper accounting and royalty payments for record club sales. (Question: let’s say you’re Bruce Springsteen and your albums come out on Columbia Records, and your contract with Columbia specifies that you earn royalties on album sales. Meanwhile, Columbia House, which is in the same corporate house as Columbia Records, is pressing its own Springsteen albums but not paying royalties to either Columbia or Springsteen. Is this a recipe for a legal mess, or what?)

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All in all, it’s been a fascinating run for Columbia House. If you’re like me, you probably didn’t even realize it was still around in any form. I don’t think it’s going to be missed too much, however. By 2010, when it got out of the CD business and shifted to DVD and Blu-ray (note the above ad), CD sales were already in the toilet, and if someone even bothered to buy an album as opposed to downloading it from iTunes or grabbing it for free off the internet, they were probably mail ordering it for rock-bottom prices at Amazon an eBay or, if they were highly motivated, driving to the local record store and getting a used copy for just a few bucks (if in fact there was even a local record store to drive to at that point). That whole notion of taking the Columbia House penny-swag and trading it in at said store? By 2010 you were probably lucky to GET a penny in trade credit for a CD, such was the devaluation of physical media.

One wonders what would have happened if Columbia House had gotten back into the LP business, given the ongoing surge in vinyl sales nationwide. Oh wait, someone is already working the old C.H. angle! They’re called VNYL (read our story, “Love Will Find A Way: The VNYL Subscription Service Blows It?,” about it and its attendant woes HERE) and Vinyl Me Please. Probably other similar services exist by now as well.

Too little, too late… here lies Columbia House, R.I.P…

CH 7

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Bonus reading: “Four Columbia House insiders explain the shady math behind “8 CDs for a penny,” published in June at the A.V. Club, which touches on a lot of what I’ve already discussed above but is massively informative and, at times, downright hilarious. Definitely essential to read.

 

Fred Mills is the editor of BLURT. He can be contacted at BlurtEditor (at) Gmail.

 

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