HOW CD CLUBS MAKE MONEY So, if clubs like BMG are able to sell CDs so cheaply, how do they make money?
One part of the answer to this question is “direct marketing.” That is, by selling the CDs directly to you, BMG cuts out the middle-tier retailer. This reduces the amount that the CDs need to cost in order to bring in a profit. The other part of the answer lies in both the “hidden charges” and those convoluted contracts that you enter into when you sign up. It all starts with the introductory offer. Everyone is familiar with the “Buy 12 CDs for 1 cent” deal — this is the bait that clubs like BMG use to reel you in. If you read the fine print, though, you realize that you will get those 12 CDs for a penny provided that you (1) pay for shipping and handling, (2) agree to buy some number of “full priced” CDs within the next year or two, and (3) agree to respond to a “featured selection” offering each month or end up having it shipped to you automatically. Since these three things are a huge basis for a CD club’s profitability, we should examine them a little more closely. (1) The shippin
