While Netflix innovated to remain relevant in the age of streaming media, music and DVD mail-order service Columbia House didn’t — and the company just paid the ultimate price. In a long-overdue move, the enterprise that brought home $1.4 billion in profits in 1996 has filed for bankruptcy according to the Wall Street Journal.
While building a business based on physical CD and DVD orders made Columbia House a fortune in the ’90s, the company has (unsurprisingly) fallen in the age of iTunes, Spotify, and Apple Music.
“This decline is directly attributable to a confluence of market factors that substantially altered the manner in which the consumers purchase and listen to music, as well as the way consumers purchase and watch movies and television series at home,” said Mr. Langberg in court documents obtained by the Wall Street Journal.
Columbia House was essentially the precursor to streaming music services, sending its subscribers 13 CDs for $1 as an introductory package. Then, subscribers were forced to buy a specific number of albums at full price. The service, as mentioned, hit its peaked at around 8 million customers in the mid ’90s according to Forbes. It transitioned to a DVD mail order business, ala the Netflix of old, in 2010 and had 110,000 by the time of the bankruptcy filing.
As sales of CDs and DVDs dropped dramatically in the 21st century Columbia House execs were unwilling, or unable to make the transition to a streaming media service. And, it seems, the company may have been doomed even before the streaming age. “The parent company was slow to get into the digital era because they wanted to protect the cash flow. They weren’t fast enough,” said an unnamed source to Forbes. “Competitors like Amazon were far more adept at software development. It got ‘Amazoned.’ It got hammered first by e-commerce and then iTunes and it would have gotten zapped by streaming.”
Columbia House’s trajectory is a stark reminder that competitors need to innovate to stay relevant — another cautionary tale in the ever-evolving digital age.
