disambiguation . columbia house type private industry direct to consumer distributor of dvds and blu ray discs founded 1955 founder columbia records headquarters new york ny area served united states canada until december 2010 products movies music formerly owner filmed entertainment incorporated parent pride tree holdings inc. website columbiahouse.com the columbia house brand was introduced in the early 1970s by the columbia records division of cbs inc. as an umbrella for its mail order music clubs the primary incarnation of which was the columbia record club established in 1955 . it had a significant market presence in the 1980s and early 1990s . in 2005 longtime competitor bmg direct marketing inc. formerly the rca music service or rca record club purchased columbia house and consolidated operations . in 2008 the company as well as book club operator bookspan was acquired by private investment group najafi companies and its name was changed to direct brands inc. although direct brands shut down music mail order operations in mid 2009 it continued to use the columbia house brand to market videos in the u.s. and canada selling dvds and blu ray discs via the controversial practice of negative option billing . db media s canadian assets ceased operating on december 9 2010 and all staff were dismissed 1 while u.s. operations continue as usual . in december 2012 the company was sold to pride tree holdings inc. in 2013 the company changed its name to filmed entertainment inc. 2 the sale of the dvd division at bankruptcy auction was announced august 10 2015 . 3 contents 1 history 1.1 rapid growth 1.2 controversial licensing 1.3 new formats and the rise of the columbia house brand 1.4 market decline 1.5 security breach 1.6 consolidation and downsizing 1.7 bankruptcy 1.8 return to music sales 2 business practices 2.1 membership 2.2 fun cash and dividend dollars and bonus points 2.3 other clubs 2.4 negative option billing practice 2.5 alleged fraudulent sale of debt 2.6 class action suit 3 better business bureau rating 4 references 5 external links history edit rapid growth edit columbia record club was formed in 1955 by cbs columbia records as an experiment to market music directly by mail 4 spurring sales to rural consumers and heading off competition from mail order companies from outside the record industry . 5 new members to the club were enticed with a free record just for joining . 4 to appease brick and mortar retailers titles in the club s catalog were only made available six months later three months after retail release and retailers that helped recruit members got a 20 % commission . by the end of that year the club had 125 175 members who had purchased 700 000 records 4 1.174 million net . the operation grew so quickly that in 1956 it was moved from new york city to a new home base a distribution center in terre haute indiana a railway accessible city where columbia had recently opened a manufacturing facility . 4 within a year the club had 687 652 members and had sold 7 million records 4 14.888 million net and by 1963 it commanded 10 % of the recorded music retail market . 5 controversial licensing edit in the late 1950s both rca and capitol began licensing programs of their own but the three record clubs rarely allowed any of their own labels releases to be marketed by rivals . for example cbs recordings were not available from the rca record club and rca recordings were unavailable through the columbia record club . in 1958 facing the loss of members who wanted a wider variety of records the club began manufacturing and marketing records for certain competing labels including verve mercury warner bros. kapp vanguard united artists and liberty . 5 rival clubs operated by rca and capitol offered only their own labels products at the time . licensors were guaranteed a minimum number of sales but were held to exclusive restrictive contracts which led to price fixing allegations against the club in 1962 followed by 7 years of mostly ineffective litigation . 5 the licensing program continued and expanded in the 1960s as the music industry grew and changed . 5 new formats and the rise of the columbia house brand edit the columbia record club began marketing stereo records and equipment in 1959 reel to reel recordings via the columbia reel to reel club in 1960 8 track cartridges via the columbia cartridge club in 1966 and cassettes via the columbia cassette club in 1969 . 4 the columbia record club was also notable in continuing to issue product in formats no longer available on the commercial market . after the major record labels quit releasing albums on reel to reel tape format columbia still continued to make select new titles available on reel tape up until 1984 . 1982 was the approximate year the 8 track tape disappeared from record stores yet columbia continued to release new titles in the format until 1988 and finally after the major record labels abandoned the vinyl lp format in 1989 columbia issued select new titles on vinyl until 1992 . in all three cases the new releases on the abandoned formats were usually limited to the new selection of the month title although the country music selection of the month had never been available on reel tape unless the album had possible crossover appeal to the pop rock or easy listening club members . by the early 1970s columbia house had become an overarching brand for the various divisions led by the columbia record club later renamed the columbia record & tape club . citation needed by 1975 membership was over 3 million . 4 in 1982 the cbs video club which had formed the previous year as the cbs video library became part of the columbia house family . 4 also during that same time period columbia house and the cannon group founded the uk exclusive mail order vhs distribution service videolog . sony acquired cbs records including columbia house in 1988 then at 6 million members . bertelsmann music group acquired rca that same year and renamed columbia house s only surviving rival rca music service formerly rca record club to bmg music service . in 1991 cbs records was renamed sony music entertainment and sony sold half of columbia house to time warner and merged in time life s video and music clubs . 4 membership was over 10 million at the end of that year . 4 the influence of columbia house and other music clubs reached its peak in 1994 accounting for 15.1 percent of all cd sales . 6 in 1996 club membership was at 16 million . that year the columbia house website was launched . 4 meanwhile a parallel club the columbia record club of canada was operated by the canadian branch of cbs records from the late 1950s until membership and financial problems led to its apparent demise in 1977 . 7 it was relaunched in 1979 as the canadian music club attracting 100 000 members by the end of that year . 4 market decline edit in mid 1999 a merger was announced between columbia house and struggling online retailer cdnow an independent publicly owned company that had funding and other partnerships with columbia house and its owners sony and time warner . the merger was abandoned in early 2000 with columbia house s poor finances and stiff competition from online giant amazon.com cited as factors . 8 9 10 within months cdnow was purchased by bertelsmann which partially merged it with bmg direct into a venture called bemusic . cdnow was taken over and merged into amazon the following year . by 2001 music clubs accounted for less than eight percent of all cd sales coinciding with the ascent of internet shops and retail outlets such as amazon and wal mart which offered music at similar discounts without subscriptions . security breach edit in 2001 a security breach in the columbia house website exposed thousands of customer names addresses and portions of credit card numbers leaving private information about customers vulnerable to exploitation . 11 the issue involved a particular section of the website which could easily be accessed by deleting a portion of the website address in the address bar discovered by customer mark alway . upon the discovery of the breach he emailed the columbia house staff who were quick to respond to the problem . this event gave rise to concerns over the website s capability of keeping private information secure from hackers or devastating scams . although no information was reportedly obtained from the temporary breach according to columbia house industry professionals were quick to point out that the simple error was the consequence of negligent handling of customer information . consolidation and downsizing edit in 2002 sony and time warner sold 85 % of columbia house to the blackstone group l.p. a new york based investment firm . the next year the possibility of a merger of columbia house and blockbuster inc. was reported in the wall street journal associated press reports and trade publications . although the owners were said to be in talks the merger never materialized . in 2005 longtime competitor bmg direct marketing inc. then the current owners of bmg music service acquired columbia house renamed the merged company bmg columbia house inc. and consolidated operations under the bmg music service name . 12 13 in 2008 the company including its canadian branch 14 was acquired from sony bmg by investment firm jmck corp. a najafi group company based in phoenix arizona and the name was changed to direct brands inc. 12 13 direct brands consolidated the remaining facilities and shut down music mail order operations on june 30 2009 . however direct brands continued to operate a dvd and blu ray disc club under the columbia house brand in both the u.s. and canada . 13 the columbia house name is still owned by sony music entertainment and is used under license . in december 2010 the canadian branch went into bankruptcy and its websites began redirecting visitors to a letter of explanation from the companies trustees in bankruptcy . 15 16 bankruptcy edit the parent of the columbia house music and dvd clubs announced on august 10 2015 that it plans to sell its columbia house dvd club business which sells recorded movies and tv series directly to consumers through a bankruptcy auction . 3 return to music sales edit in december 2015 columbia house s owner john lippman announced his intention to begin a vinyl subscription service that will allow subscribers the ability to choose which records and genres of music they receive . 17 18 19 business practices edit following the sale of columbia house to bmg and continuing after the sale to direct brands columbia house has attracted criticism for its business practices some of which are outlined here membership edit membership constitute an agreement whereby the customer agree to purchase a minimum number of movies at regular list price . to join or enter a legal obligation the customer agree to purchase one discounted movie at the beginning which is sent out as part of a welcome package . over the term of the agreement the minimum number of list price movies must be bought . twenty one times per year the company informs each customer of the director s selection movie . the customer is asked to respond within 10 days whether or not he or she wants to buy this movie which is offered at a discount provided that the response is received by columbia house within the specified time . failure to respond results in having that movie shipped at full list price . if the customer responds negatively but in time the idea is that the movie is not sent or charged to the customer s account