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Columbia House Restructures for CDNow Merger

Music and video direct marketer The Columbia House Co., New York, on Monday announced a reorganization intended to facilitate the transition of more of its business to the Internet as it completes its merger with CDNow Inc., Jenkintown, PA. The company also said that Richard Wolter, a 34-year Columbia House veteran who, for the past seven years served as chairman/CEO, will retire.

The new company will have three divisions: columbiahouse.com, which will offer online membership clubs for music and video products; Columbia House, which will offer the company’s traditional offline membership clubs; and CDNow, an online retailer of recorded music.

Scott Flanders, who in September was named chairman/CEO at the new company, named two presidents to oversee the online and offline divisions of Columbia House.

Bill Ostroff was most recently vice president at Columbia House Interactive and will be president of columbiahouse.com, and Brian Wood, who most recently was executive vice president at the company’s video division, will be president at Columbia House.

Wood, who launched Columbia House’s video club business in 1981, said offline mailings would continue to drive the overall membership-club business.

“We will use our print media to heavily drive people to the Web,” he said.

Columbia House has about 16 million members, about 3 million of whom have conducted some interactions with the company through the Internet. The Internet is a much more cost-effective way for the company to do business with its customers, Wood said. One report pegged the company’s annual spending on postage to be in the neighborhood of $200 million.

Wood said the move to the Internet is not only being driven by the desire to reduce costs, but also by customer preference.

“We can improve the value of membership with things we can do online,” said Wood. “We can offer them much better access to product and much better access to information than we can in the offline environment.”

However, he noted that some customers will still want to communicate with the company via phone and via postal mail, and Columbia House will continue to offer its traditional clubs for those people.

The company also sees the potential for synergy with CDNow by directing customers back and forth between the two entities and by sharing some warehousing and shipping facilities.

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