Looping the Hen

One of the things I organize and buy for my job is fulfillment and distribution of parcels. (thousands of them weekly) The cost of the packaging and postage for a company BMG's size is in the neighborhood of $.15 per CD for packaging, and in the neighborhood of $.60 for postage. (in their onesy package) The fulfillment (distribution) cost runs probably another quarter. So for single CD shipments, BMG is out at most $1.00. For the 7 CD shipment, the total is probably in the neighborhood of $3.70. ($1.40 for handling, $.30 for packaging, and maybe $2.00 for shipping; the shipping cost depends on whether they use USPS or an expedited carrier) Thus, for what are actually shipping and handling costs of $4.00 at the high end, they have smacked you for over 20 bucks.

Still, 20 bucks for 7 cd's is good right? Yep, it sure is, and BMG wouldn't make any money selling $3 cd's, so do you think that's the end of it? Next comes the 1 CD you have to buy. That generally runs $17.98-$19.98, plus an additional $2.97 for shipping and handling. One CD in my in-basket at BMG currently is Anna Nalick's Wreck of the Day at $17.90. (total of 20.87 with shipping) That's funny, I saw the same thing at Amazon for $10.99.

Heck, at $10.99 I could buy CD's from Amazon, mark them up to $16 bucks, ship them for max $1.42 media mail rate (and I think I've done it for considerably less first class), and undercut BMG by more than 3 bucks while still making a $5 profit! (Or more precisely, around 45% gross margin, pretty good in most industries, and great in my industry) And anyone with no buying power can do it for this price (assuming they use Amazon's free shipping for orders over $25). I don't know anything about the music industry, but I would guess BMG gets them wholesale for more like $4-$6 (or less if it is one of their stable).

Still, everyone is in business to make money, so what their profit margin is is no nevermind to me...the misrepresentation of 12 for the price of 1 is, plus the excessive 'shipping and handling'. When all is said and done, your 12 CD's have actually cost $53.60 or more, or almost $4.50 per CD. If, and I say if, you cancel your membership at this point, you will have done pretty well for yourself. At Amazon I could probably get 5 equivalent CD's for the same price (or a little more). The problem is, BMG's business model is based on the fact that most people won't quit while they are ahead.

Many of you know what I am talking about. This last BMG episode of mine, I received the Killers Hot Fuss in the mail because I forgot to cancel that selection, and it is unlikely it will ever find its way out of the package. 10 years ago, I used to get 3 or 4 CD's before I managed to get them to close my account. At that time in my life, fighting over it was not something I wanted to spend my time on and I'd eventually fork over the $100 or so to the BMG collection folks. I must admit it is true that it is easier than it used to be to cancel your selections if you use their website. They also do all sorts of promotions like buy 1 get 2 'free' to keep you coming back. Of course, that is more marketing. (Your one cd in this case costs $26.73, and your average cost per cd is around 9 bucks)

Your best bet is to just pick a cd you want and cough up the $21, get your 4 free, and cancel your account. I go one step farther (further?) and sell back 5 or 6 CD's on Ebay to recoup the $53.60 I ponied up for my free CD's, and I keep the other 6 with a net of $0 out of my pocket.

The nice thing, the good folks at BMG send me a new packet 4-6 months after I cancel, and I get to do it again. If they actually had an open (and I almost want to use the term 'honest') business model, I would be more likely to patronize them regularly as I do Amazon. Charge me 10 bucks a CD, and I'll buy a whole slew. Charge me $53.60 a CD, and I have a problem trusting you.

But maybe that's just me.