Who Pays for “Free” Stuff?
(Spoiler Alert) You Do!I just read a great article from Annie Zaleski on avclub.com entitled, “Four Columbia House insiders explain the shady math behind ‘8 CDs for a penny.’” It’s well worth reading from start to finish. If you’re old enough to remember, there was a day when our magazines and mailboxes were filled with too-good-to-be-true offers from Columbia House, a music club that sold records, cassettes, and CDs. The ads and direct mail were filled with offers like this, “Get 8 CDs for the Price of 1 - with Nothing More to Buy, Ever!”
How many of you think this was a good deal?
Central to this scheme was the “negative option,” which meant that Columbia House automatically sent you the new record/cassette/CD of the month - marked up, plus shipping, unless you told them otherwise. Every single month. Forever.
Just to keep it interesting, Columbia House added incomprehensible pricing. Zaleski quotes:
… They were always [trying to] squeeze an extra dollar out of everyone. It would be like, “2 for $3.99 gets you 4 for $4.99 and then a free CD on top of your $8.99.” You would look at these things, and nobody could rationally decode these deals. They were so gothic and complicated.
And then there was the whole drive to get customers to abandon their vinyl records for CDs. Zaleski continues
[A] very famous, huge record executive [said to me] in a very, very hilarious way. … “You know what this is? This right here? It’s stupid money. It’s CD money. That’s the kind of money that made dumb people feel smart.” You have the biggest f***ing markup in retail history, and somehow in one winter, the music business … said, “Hey, that $7.99 album you love? Guess what? Your lucky day: You get to buy it for $18.99, it’s going to sound worse, and you have to buy f***ing pieces of equipment.” And everyone said, “Great, I’d like to buy more of them please.”
What You Must Know
In business as in life, somebody is paying, and you better make sure it’s not you.
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