Columbia House Improbably Still Exists, Files For Bankruptcy Protection

Image courtesy of (Ed and Eddie)

You might have the same reaction that we did to news that the company that owns Columbia House filed for Chapter 11 bankruptcy today: astonishment that it’s still in business at all. Our younger readers are probably just wondering what a “Columbia House” is. Yet the company still exists, and business isn’t quite where it was at the company’s peak in 1996.

Here is how music and movie clubs worked in their heyday: to entice new members, they would promise an armful of albums or movies as a promotion to sign up new members, which were the “8 CDs for 1¢!” ads that readers over 30 or so may remember. Every month, you would receive an order form with the club’s selection for your favorite genre of music, which you could decline if it didn’t interest you, and a curated catalog of media that you could buy if they did interest you.

Members were obligated to buy a certain number of albums at full price. Columbia House licensed albums and manufactured LPs, 8-tracks, tapes, and CDs itself instead of buying them from normal distribution channels. Their video business worked the same way.

The current owner’s name is Filmed Entertainment Inc., which makes sense when you remember that the DVD club is the only surviving part of the business. However, the Wall Street Journal reports that business isn’t that great anymore: FEI says in its bankruptcy filing that it took in only $17 million last year.

In the understatement of the decade, the company’s director explains:

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.

Yep. Columbia House ditched their CD business back in 2010, and actually had no more employees in their DVD distribution business. The manufacture and shipping of DVDs is all outsourced.

The company has about $63 million in debt, almost half of which is pension liabilities. The company is looking for a buyer for its core business, since $17 million is a respectable income and there are clearly people who still enjoy owning DVDs. The business has been sold three times in the last ten years, and they report having a few interested potential buyers already.

If you’ve ever wondered about the inner workings of Columbia House, you should check out the documentary The Target Shoots First, Chris Wilcha’s chronicle of his time working at Columbia House in the ’90s, released shortly before the CD business model imploded. He’s made it available to view for free on Vimeo, and we’ve embedded it below in case you have the next hour and a half or so free. He worked there at a key time in music industry history: marketing CDs to young adults right before young adults began downloading MP3s in massive quantities.

Fat Lady Sings for Columbia House [Wall Street Journal]

Four Columbia House insiders explain the shady math behind “8 CDs for a penny” [The A.V. Club]

The Target Shoots First from Chris Wilcha on Vimeo.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.