The rise and fall of the Columbia House record club — and how we learned to steal music

Send no money
By DANIEL BROCKMAN AND JASON W. SMITH/The Phoenix.com|11/11/17

On June 29, 2011, the last remnant of what was once Columbia House — the mightiest mail-order record club company that ever existed — quietly shuttered for good. Other defunct facets of the 20th-century music business have been properly eulogized, but it seems that nary a tear was shed for the record club. Perhaps no one noticed its demise. After all, by the end, Columbia House was no longer Columbia House; it had folded into its main competitor and become an online-only entity years before.

A more likely explanation, though, is that a new generation of music fans who had never known a world without the Internet couldn’t grasp the marvel that was the record club in its heyday. From roughly 1955 until 2000, getting music for free meant taping a penny to a paper card and mailing it off for 12 free records — along with membership and the promise of future purchasing.

The allure of the record club was simple: you put almost nothing down, signed a simple piece of paper, picked out some records, and voila! — a stack of vinyl arrived at your doorstep. By 1963, Columbia House was the flagship of the record-club armada, with 24 million records shipped. By 1994, they had shipped more than a billion records, accounted for 15 percent of all CD sales, and had become a $500-million-a-year behemoth that employed thousands at its Terre Haute, Indiana, manufacturing and shipping facility (see sidebar).

Of course, most of the record clubs’ two million customers failed to read the fine print, obligating them to purchase a certain number of monthly selections at exorbitant prices and even more exorbitant shipping costs. At the same time, consumers plotted to sign up multiple accounts under assumed names, in order to keep getting those 12-for-a-penny deals as often as possible. Record clubs may have introduced several generations of America’s youth to the concept of collection agencies — and the concept of stealing music, decades before the advent of the Internet.

THE PROMISES MEN LIVE BY

The architects of the record-club concept were two men named Maxwell Sackheim and Harry Scherman, who in 1926 had come up with a little thing they called the Book of the Month Club. The genius of the book club wasn’t just the idea of selling books through the mail, thus penetrating untapped rural markets; Sackheim and Scherman’s real prize was devising what would come to be known as “negative option billing.” This meant that instead of waiting for people to actually order books by mail, the club would send you books every month, unless you expressly told them not to. The concept presumes that a lack of response was a “yes.” It was wildly successful. By the 1950s, the Book of the Month Club was a multimillion-dollar business.

Scherman wasn’t just an ad man and entrepreneur — his true love was economics, and in 1938 he collected his staunch anti-Keynesian rants into a tome entitled The Promises Men Live By. The book’s central premise is that a capitalist society is only as solid as the promises (or in economic terms, “credit”) kept honorably amongst its members. “When men’s promises cease to be good,” Scherman wrote, “trade and production are hampered, credit collapses, people cannot buy, sellers cannot sell, chaos and social degeneration inevitably follow.”

There is a certain irony in a man partially responsible for one of the more dishonest and predatory marketing devices of the 20th century lecturing on the sacred honesty of the promise at the core of capitalism. The “promises men live by” seemed to involve a fair amount of fine print.

In 1948, Columbia Records introduced the long-playing microgroove 33-1/3 rpm record album, or LP, creating a standard format for recorded music that would last until the advent of the compact disc. One of the LP’s main advantages, besides sounding great, was that it was lightweight and relatively unbreakable, perfect for shipping through the mail. Soon after, Columbia successfully tested its Family Record Club in the Ohio market, modeling their plan after the Book of the Month Club system.

Seeing Columbia’s success, Scherman and BOTM started their own Music Appreciation Record Club in 1955 — one of their first free records, given as an incentive to members, was a recording of Debussy’s “La Mer” conducted by Scherman’s son, Thomas.

It wasn’t long before Columbia and the BOTM joined forces. The heads of Columbia could certainly sense that Sackheim and Scherman had a flair for getting subscriptions — Sackheim, now considered one of the all-time advertising greats, always knew how to attract attention with simple statements. The Book-of-the-Month Club may have never gotten off the ground, for example, without his insistence that early ads boldly state “SEND NO MONEY!” at the top.

In his autobiography, My First 65 Years In Advertising, Sackheim details the clandestine meetings he held with the heads of Columbia Records: “They had watched with concern or envy (or both) the success of other of-the-month clubs and were eager to ‘do something about it.’ We were to prepare the plan on our terms, but we were warned that every detail must be kept secret, even from our own employees.”

The secrecy was well-founded, as Columbia was planning to use the club to aggressively market the LP (and the players the discs required) to a public that didn’t know it needed them. The record club was a loss leader, and Americans were soon hooked on buying vinyl. A new consumer addiction was born, with Columbia and its record club at the forefront.

However, Columbia House Record Club didn’t truly go supernova until the mid-1960s, when Les Wunderman took over the account and shaped it into the form that we’re familiar with. Wunderman, considered the father of direct marketing (a phrase that he himself coined), is credited with pioneering such now-standard concepts as the database, the 1-800 number, the magazine subscription card, and the credit-card customer rewards program; his ideas for Columbia were equally epochal.

First, he devised the now-famous “12-for-a-penny” concept; then, he created the post-paid insert card, allowing subscribers to order records with no upfront cost, not even the cost of a stamp.

But perhaps his most ingenious promotion was the Gold Box — a “buried treasure” in the company’s advertising that offered free records to subscribers who found them, filled them in, and mailed them back. It rewarded obsessive behavior, identifying record-club subscribers as geeky fanatics willing to spend hours combing through the company’s advertising if they thought they might get a free record out of the deal. In a famous (to advertising junkies) speech he gave at MIT a full 25 years before the Internet was conceived, Wunderman described the sales relationship of the future as “interactive.”

In a pre-Web world, his interactive Columbia House concepts led millions to mail in their pennies. There was nothing like the elation of getting that first shipment of records for essentially nothing — but that ecstasy was quickly offset by the anxiety of finding out that you owed $34.74 for those Sir Mix-A-Lot and Crash Test Dummies discs you never asked for. Now you were on the hook: either you could fulfill your obligation, or start ducking collection agencies.

Unless, of course, you could find a way to cheat the system. For a large contingent of the record-club membership, scheming a way to get more free records — usually through fake accounts and multiple addresses — was the ultimate caper. Everyone had a friend of a friend who had supposedly done it: signing up using a false name, or having the records sent to a conspirator’s address. After all, in the pre-supercomputer age, it wasn’t hard to stay one step ahead of Columbia House’s detectives.

The patron saint of the records-club schemers would probably be Joseph Parvin. In 2000, the 60-year-old was prosecuted for having received, between 1993 and 1998, nearly 27,000 CDs, using over 2000 fake accounts and 16 P.O. boxes. All told, he bilked Columbia House (and rival BMG) out of $425,000 of product, selling them at flea markets. For anyone who was paying attention when his arrest made headlines at the time, it was kind of like finding out that Paul Bunyan is real — someone actually was able to cheat the system the way everyone dreams of.

END OF AN ERA

In many ways, though, the real victim of the clubs wasn’t the consumer, but the recording artist. As record clubs’ popularity mushroomed, the introductory incentive deals became more and more important to the success of the whole system. Since these incentive records were considered “giveaways” by both the clubs and the labels, artists were not paid royalties on them. Additionally, artists’ royalties on even normal record-club purchases were typically far below the industry standard. The artists’ financial losses became more noticeable in the CD era: for one, record clubs began to account for huge percentages of overall sales of certain blockbuster albums. On top of that, the cost of manufacturing a compact disc dropped to a fraction of what it had previously been to create vinyl.

It’s important to understand that record clubs not only sold and distributed their records, they pressed them as well. What this meant to an artist during the 1990s CD boom was that while they were losing royalties hand over fist, the clubs were netting a fortune from low costs, high sales, and minuscule royalties.

For example, Cracked Rear View, Hootie & The Blowfish’s 1994 debut smash, owed a whopping three million of its 13 million sales to record clubs — and yet the band received little to no royalties for any of them. Pearl Jam claimed to have lost royalties on a million “free” copies of its 1993 sophomore outing, Vs., and in 1995, Meat Loaf sued Sony over unpaid royalties from a million record-club sales of his 1977 classic, Bat Out Of Hell.

Of course, very few successful ventures can continue making money forever. The record clubs’ ongoing battles with traditional music retail outlets (who, on average, paid $5-$6 wholesale more per CD than the clubs) eventually resulted in litigation that closed many of the licensing loopholes that had been so integral to the clubs’ bread and butter. By that time, though, many labels had already jumped ship, leaving the clubs with fewer artists’ catalogs to draw from.

Both clubs and traditional brick-and-mortar music stores also suffered as big-box, nontraditional conglomerates like Barnes & Noble, Best Buy, and WalMart took on a greater market presence. Oh, and there was the small matter of this little thing called the Internet, too.

Columbia House was bought in 2005 by its main competitor, BMG Music Service — a move precipitated in part by the 2004 merger of Sony Music Entertainment and Bertelsmann Music Group. This wagons-circling move also spoke to the decline of the vitality of the club business, which had been in a tailspin for the previous decade. By 2008, BMG Music Service was folded into yourmusic.com, which still required the purchase of a CD a month, but no longer offered the introductory incentive deals associated with the record-club salad days. Yourmusic.com hobbled along for a few years, but the gravy train was over. Earlier this summer, it was dissolved by parent company Direct Brands, Inc. (DBI), which also owns other mail-order direct-marketing services such as Doubleday Book Club.

That wasn’t quite the last we would hear of the record club, though. In August of this year, a nationwide class-action lawsuit was filed against DBI, seeking monetary damages and an injunction stopping them from alleged unauthorized credit card charges, inability to cancel, unwanted products being mailed, overcharging, and other abuses (which might explain DBI’s unwillingness to go on record for this piece). When former club members, who’d had no account activity for years, began receiving notices in their mailboxes suggesting they had not fulfilled their membership obligations, these individuals received not only a dubiously conceived threat to their credit, but also a last-gasp reminder from a fading business, crying out: “Remember us, the once-almighty and popular record club?”

It is, perhaps, a fittingly ignoble end to a sketchy business that scammed consumers and artists alike while anticipating and facilitating the inevitable fracturing of the traditional music-business model.

And yet, the record club was one of the most ingenious marketing ploys of the 20th century, perhaps right up there with rock and roll itself. It introduced the notion of getting music for free — which may have ultimately led to its own destruction, when people stopped buying even CDs. But those of us who remember it in its prime find pause when pillaging a torrent site or googling for the .rar file of a new album, and remember the halcyon era when checking off which records to get for “free” with an introductory signup to the club felt like the sweetest deal in the universe.

RECORDLANDIA: THE TOWN THAT COLUMBIA HOUSE BUILT

Up until the end of the 1990s, children grew up corresponding with two seemingly fantastical postal addresses: little kids sent letters to Santa at the North Pole, and teenagers joined Columbia House and sent letters to Terre Haute, Indiana. Specifically, a magical building on North Fruitridge Street. When you joined, you picked out your eight records or 10 tapes or 12 compact discs or whatever the promotion was that year, and you mailed that sucker off to North Fruitridge, where Columbia House’s elves would read over your list, see if you’d been naughty or nice, and reward you with your XTC and Jethro Tull cassettes that you so desperately wanted.

The Santa-like aura faded, of course, once you started having to send those magical packages back when the club tried to make you pay for Record of the Month selections you never ordered — but many of us still wondered what this fabled land of records must be like.

Sorry to disappoint you: the real Terre Haute, Indiana, is a company town that rode the boom-and-bust roller-coaster fortunes of a massive corporation. In the 1950s, Terre Haute was chosen by what would eventually become Columbia House Record Club as the perfect town: already the site of a CBS Records vinyl plant, it was perched at an important juncture of several key train lines, making nationwide record distribution easy.

The rest, as they say, is history: generations of families put food on the table by punching in at a massive manufacturing and shipping factory built on North Fruitridge. The complex eventually sprawled across more than a million square feet of Terre Haute’s south side; in the mid-1960s, it took over a converted supermarket on Lafayette Avenue to handle the manufacturing of 8-tracks, then cassettes.

Even in boom years, record manufacturing was hot, loud, and noxious with the fumes of molten black vinyl. And that was when there was work. In the late 1970s and early 1980s, as the music industry slumped, thousands of employees were pink-slipped. In 1986, the dawn of the CD age revived the town; by 1999, some 3500 Terre Haute employees fulfilled the CD- and video-club orders of a staggering 16 million club members worldwide.

We all know what happened next, as the shrinking of the music industry in the 2000s gutted not only Columbia House but its Indianapolis-based rival, BMG Music Service. The two consolidated in 2005, at which point the combined workforce still plugging away in Terre Haute was reduced to a mere 500 — and on and on until the plant’s 2009 shuttering.

Terre Haute is still a hub for CD manufacturing — though at a drastically reduced scale. These days it’s home to the only Sony CD-manufacturing plant east of the Mississippi, where 150 employees labor — a shadow of the thousands who pressed wax here for generations.

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4 Responses to “The rise and fall of the Columbia House record club — and how we learned to steal music”

  1. melvia Boyd Says:

    Say it’s not so!!!!!!!!!!!!!!!! I was a faithful member of the record club for many years off and on. Now I’m a sixty-three year old womam, retired and loving music more then ever. What a shame for those of us who are computer nerds and wouldn’t steal a thing if we could.

  2. Patty Dunstan Says:

    I did my first data entry at Columbia Records on Fruitridge Ave in Terre Haute, IN in the mid 70’s

  3. Juan Rock Says:

    I worked at their call center in Panama, central america. I also visited their fascility in Terre Haute. It was huge!.. What a shame it d to shut, but it’s now all in my memory.

  4. Can You Tape a Penny to a Website? | Plannerben | Marketing Strategist Says:

    […] Yes, one of the founding fathers of direct marketing also invented interactivity way back in the mid-1960s. […]

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