- Join, Fulfill, Quit, Repeat
Some readers have questioned whether its ethical to use the
"join, fulfill, quit, repeat" algorithm, and some have even
questioned whether its ethical to publish information about it.
While you will of course have to decide for yourself, my view is
that it is OK: if the clubs did not want us to do it, they would
put a stop to it. BMG has already specifically restricted the
use of the algorithm by limiting membership to one, per person,
- Economics of club offers
We make this offer simply
because experience has shown that it is a sound, economical way
to acquire new friends for the BMG Music Service. Many of our
members continue with us for three, five, even ten years. We
make a fair profit while you keep on saving.
- Oren Testa, BMG vice president (circa ?),
on the super deals
I would contend that the clubs make money, or at least
break-even, on all deals, except the historical "12 CDs for 1
penny" offer from BMG. Here is an analysis of club CD Costs:
|Pressing||$ 0.60||$ 0.60|
|Royalties - Normal||0.00||1.60-4.00|
|Royalties - Mechanical||0.26-0.52||0.26-0.52|
The above figures, while not necessarily accurate, do have some
basis in reality:
- Pressing costs
Comes from a BMG press release in which the CEO of BMG Entertainment
Storage Media, Uwe Swientek, states the existing cost to its customers
for a CD is sixty cents ($0.60).
- Artwork cost is a plug figure
$1.00 seems to be the going rate for large press runs of finished CDs
- Royalty costs come from an article in "Billboard"
("Record Clubs: An Inside Look At An Evolving Enterprise", 30 March 1996.)
- Shipping costs
Come from the USPS's Postal Rate Guide for "Special Standard
Mail"; the clubs might have contracted for a lower price.
- Advertising cost is a guesstimate
Sales of $1.15 billion divided by average price of $5 per CD equals
230 million club sales; industry estimated advertising of $150 million
divided by 230 million sales equals $0.65 per CD.
- Overhead costs
The costs of servicing the membership accounts (monthly mailings,
staffing, warehouse facilities, web site, etc) -- is another
guesstimate. As it is unlikely the clubs are losing money on their
'buy 1, get 3 free' offers, the average CD cost to the clubs needs
to be less than $6.61 ((16.99+2.49+2.39+2.29+2.29)/4).
- Royalty payments to artists
Artists do not receive full royalty payments for CDs sold through
the clubs. While the percentage of his/her royalty an artist
receives on club sales is dependent on the artist's contract with
its label, generally an artist will receive no royalties for CDs
sold as "free or bonus" selections and only one-half their
normal royalty rate for CDs sold as full priced selections. (see
Shemel, Syndey. "This Business of Music". 1990. 61)
An artist, if successful and unhappy with the "club
clause" of his/her contract, can renegotiate his/her contract
with his/her label to either restrict (certain albums not available
or longer time between street and club release) the artists offerings
in the clubs or eliminate the artists offerings in the clubs all
- Direct Mail Marketing
The clubs make money by selling member's addresses to various
junk ... direct mail marketing companies. They call this a
"benefit" - giving you the opportunity to order all sorts of neat
stuff. To remove your name from the sold lists, contact the
club's customer service center and request to be removed from
their direct mail list.