Hello, I’m new to the Straight Dope in general (and especially the forums), and I don’t know if this has been covered before, but bear with me.
My question is (and I’ve been wondering this for a long time, too): How do those CD/Tape/Record Clubs that offer the “15 albums for 1 penny” deals (Columbia House, BMG, etc) actually make money? I’d assume they recoup a lot of it from charging ridiculously inflated prices for shipping and later the CDs themselves, but also, how do the artists make money off of these CD deals?
I do know a thing or two about retail and record contracts, and I am aware that CDs cost less than $2 to make and that artists usually only make about $1 for each copy of the album actually sold, but is there an actual scheme here, or is it just business? Are the clubs run by the record labels themselves? What gives?
I’ve tried searching tSD for this, but nothing helpful comes up. Thanks a lot guys!