The Power of a Penny

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Who can forget that offer from Columbia House? Get 12 CDs - or albums, if you can remember that far back - for a penny. I did some searching and asked around but couldn't track down who came up with this promotion (If anyone knows, please e-mail me at and I'll give recognition where recognition's due.). However, I did come across a few online references saying that Columbia House changed its original offer of 10 records for $1.99 plus free shipping and handling to 10 records for a penny, plus $1.98 shipping and handling, and saw its response rate jump 30 percent.

Thanks to Apple's iPod and iTunes, I can't think of the last CD I bought, and the last time I was in a record store was before the holidays last year. But all that is passé when reading the latest news from Yahoo. Though the BMG Direct-Columbia House merger made headlines last week, it was pushed aside by Yahoo's announcement that it will offer a subscription service from a library of 1 million songs for $6.99 a month. Users can transfer songs from their PCs to portable devices or share music with friends through Yahoo Messenger. They get to keep access to their music libraries as long as they pay the subscription fee.

Yahoo also has started selling songs for 99 cents each to go after the Apple/iTunes market, which sells music by the song instead of a subscription service. Not to be left out, cell phone makers are looking to cash in on the digital music player market and offer phones with built-in music players and features that let users download music to their handsets. Thanks to the ubiquitous cell phone, this is probably the application to beat.

My guess is that Apple's bloom will fade in time as young people head down the rental route instead of buying. An iPod can't be the "it" item forever - and if you can have access to any music, anytime, anywhere, why buy it one song at a time? Remember, attention spans are getting shorter, and my CDs are collecting a lot of dust. If the developers at Apple were smart, they already would be working on the next big thing in that regard. I'll bet they are.

JupiterResearch expects the online subscription market to surpass buy-to-own music in four years, when revenues will reach $900 million and $800 million, respectively. Still, together they will make up only 12 percent of the $13.5 billion music market in 2009. Sounds like many people will be buying CDs for years to come. It will be interesting to see how BMG adapts to the digital world.

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