A relic of the 70s and 80s that somehow managed survive until 2015 is no more:
The owner of onetime mail-order music giant Columbia House filed for chapter 11 bankruptcy protection Monday, seeking to sell what remains of its business after almost two decades of declining revenue.
Filmed Entertainment Inc. filed for chapter 11 at the U.S. Bankruptcy Court in Manhattan, citing the advent of digital music and dramatic changes in technology that are threatening to render CDs and DVDs obsolete.
Since peaking in 1996 at about $1.4 billion, revenue has declined almost every year since, according to FEI director Glenn Langberg. Last year, net revenue was just $17 million.
“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,” Mr. Langberg said in court papers.
Columbia House was founded in 1955 as a division of CBS Inc. Historically, it was most active in the music industry, offering stacks of CDs or cassettes for as little as a penny. But Columbia House ended that business in 2010, leaving DVDs as its only remaining product line. Today, the DVD club has 110,000 members, according to court papers. Columbia House has licensing agreements with major film studios as well as smaller independent studios, court papers show. Those licenses, however, included only physical DVDs and not digital formats.
Now in bankruptcy, Columbia House’s parent has asked for bankruptcy judge’s permission to maintain its operations, supporting itself with existing cash. Currently, the company’s remaining DVD business has no employees and relies on third parties to carry out its operations.
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Columbia House has been something of a hot potato in the digital age, changing hands rapidly. Bertelsmann AG bought it in 2005, but sold it in 2008, along with Book-of-the-Month Club and other U.S. direct-marketing businesses, to Najafi Cos., a Phoenix-based investment company, for an undisclosed sum. FEI’s current owner, Pride Tree Holdings Inc., bought the business in 2012. Pride Tree, a New York-based media and consumer technology investor, didn’t seek bankruptcy protection Monday.
Columbia House joins other CD retailers that have closed down or sought bankruptcy protection over the past decade, including Tower Records, Sam Goody and Musicland in 2006, Circuit City in 2008 and Virgin Megastore US in 2009.
“The thing I remember most is their unwillingness to change with the times,” said Mark Rubenstein, a former art director at Columbia House. “The writing was on the wall,” he said. “They either didn’t see the writing or didn’t want to read it.”
In all honesty, the most surprising part of this news is the fact that Columbia House still exists. Like many people I think, I had assumed that it just faded away years ago as the music industry made its change from physical media to digital downloads. In retrospect, of course, moving the business into the DVD area was a smart move since that was still an area where physical media dominated even up until less than ten years ago, but even there the writing was on the wall. At this point, I would imagine, more people think of Netflix as a streaming video service than the DVD rental business that it started out as so many years ago. Unlike Netflix, though, it doesn’t seems as though Columbia House even attempted to find a way to adapt its business model to a rapidly changing industry. In the end, I’m not sure that there was anything they could have done to adapt unless they ended up trying to out Netflix Netflix, which probably would not have gone too well. The fact that they still had 100,000 subscribers at this point is a good measure of how far things had fallen, especially since its unlikely that all of those subscribers were big revenue generators.
I’m sure I’m not alone in being one of the many people who was part of the Columbia House world when I was younger. In my case, it was probably early in my teen years and, like many others, I got sucked in by the whole “10 records or tapes for one penny” deal. On balance, it allowed me to get access to a lot of music easily but it also got my in trouble a few times when I was too lazy or forgetful to return the card you had fill out if you didn’t want their selection of the month. Not surprisingly, parents are none too pleased to pay for something when that happens. I didn’t say part of the “club” for very long, though. Certainly, I wasn’t getting stuff from them by the time I graduated high school and certainly wasn’t buying anything from the by the time Compact Discs were the big thing. In any case, it was apparently during that era that Columbia House actually saw its greatest sales, with the mid-1990s being among its best years in terms of revenue. They mastered the change of format back then, of course, but the switch to digital made this kind of business untenable.
