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TK's MORNING BUZZ: Now it's the Mail-Order Houses' Turn to Cry -- and Video Retailers Won't Be Shedding Any Tears

5 Apr, 2001 By: Thomas K. Arnold

I, for one, am not mourning the swift downturn in Columbia House's fortunes.

The onetime mail-order giant, you might have heard, is closing two distribution facilities and pink-slipping as many as 500 employees.

Mail-order in general and Columbia House in particular have long been sworn enemies of video retailers. I still remember in the middle 1990s, when video retailers were trying desperately to get a foot in the door of the then-burgeoning VHS sellthrough market, they were frustrated beyond belief by the rampant discounting of the mass merchants, who were selling product for less than the wholesalers were charging.

But this frustration was nothing compared to the anger they directed toward Columbia House and the other mail-order giants, who were pumping ads into consumer magazines and newspapers all over the country promising "10 videos for a penny" -- with the stipulation, of course, that signers-up buy a certain number of videos a year for a specificied amount of time.

At the time, Columbia House had little sympathy for the retailers its loss-leader tactics were hurting. It was fair game, its executives said; they were simply trying to carve out a share of the sellthrough market for themselves, just as they had done years before in music, and they were doing so the best way they knew how.

Now, it's the mail-order houses that are coming undone, thanks to the Internet. It's easy to understand why: If consumers can now instantly buy any video they choose with the click of their mouse, why sign up for a tedious program in which, sure, they get a batch of videos up front, essentially for free, but then find themselves locked into a program where they get sent a video every month and billed for it, regardless of whether they want it? The only way out is to send the video back, which is a hassle -- and it is this "hassle factor" that the mail-order houses banked on to make their profits.

Well, now it's their turn to cry. And I don't think too many video retailers will be shedding a tear in sympathy. What goes around, comes around, I believe the saying goes.

Comments? Contact TK directly at:TKArnold@aol.com

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