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Are those bum deals for the artists, too? Now the clubs are long gone and services like Spotify and Apple Music have taken their place with access to almost any song you could want for $10 a month. Matt: So no money, but you might wind up with a pretty big trophy. Larry: However, the sale of the records did count in the calculation of gold and platinum and chart position.
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Matt: Most of the artists and writers didn't get paid anything on any of the free albums. They were only paid on the purchased goods, and even so it was at three-quarters of the regular rate that they would have been paid had you bought it in a regular record store. It's still unclear today exactly how many of those royalties were paid through to recording artists.
Larry: The records that you would get for a penny counted as free goods and that there were no royalties on free goods. Matt: However, that 1.5 billion wasn't really going to everybody. Larry: As it turns out, that was plenty of margin to operate these businesses which together were generating about a billion and a half dollars of revenue, or about 15% of US record industry volume at the peak, which was around 1996 or so for the record clubs. Even accounting for all the free albums they sent out. Matt: By pressing their own albums, the clubs were able to make about $5 to $6 on each unit they actually sold.
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In many cases, inferior pressings on vinyl and CD and you wouldn't get maybe the full lyrics and you wouldn't get the nice inserts and stuff and even the little booklets that were included in the CD were not quite as nice as the ones that you would get in the store very often. And they would be able to manufacture these records at a cost of about $1.50 or so each.
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Larry: They would license the actual master tapes and the production files for the physical media from the major music companies. This still doesn't seem sustainable, especially when retail shops were selling CDs for $14 and up. But you still only paid a few bucks shipping on 11 other albums. Matt: Forget to send the card back and you'd owe the club about $22 for a CD you may not even want. If you didn't do that in time, or if you just forgot, you would be shipped that record and of course you would be billed for it. And that for every catalog, you would need to send back a postcard within ten days of your receipt of that catalog indicating that you didn't want the selection of the month.
Actually it was a little bit more often and in some cases they were shipping 21 different catalogs every month. Larry: The way that the clubs offered music to consumers was through a catalog roughly every month. Columbia House, BMG Music, and other clubs utilized a practice called negative option billing. Matt: Those prices and the shipping costs were key to the club's success.
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Larry: The regular price of the CDs that you would buy was the suggested retail price, which was 17.98, 18.98, 19.98 plus shipping and handling for those CDs. He's an NYU professor and music industry vet with a podcast about the industry, Musonomics. Larry Miller: You could join these things for a penny, get a bunch of music for almost free as long as you promised to buy a certain amount of music over the next year or so at regular club prices. Sounds too good to be true, right? How could something like this make money?Ĭommercial: Remember, it's our secret, so watch your mail for this package from Columbia. About eight CDs at almost no cost to you, then just buy one more at full retail price and you get three more for free. Matt: Columbia House and the BMG Music Service both offered amazing deals. Matt Stuart: Ever get a whole bunch of CDs for a penny, or even free?Ĭommercial: Columbia House, big enough to bring you all the best in entertainment Account icon An icon in the shape of a person's head and shoulders.
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