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Columbia House Files For Bankruptcy

LOS ANGELES (CelebrityAccess) — Columbia House, the mail order music service that built a billion dollar business on the back of 'Eight CDs for a penny,' has filed for bankruptcy protection.

According to the Los Angeles Times, Columbia House parent Filmed Entertainment Inc., filed for Chapter 11 Bankruptcy Court protection from creditors Monday, claiming that changes in music distribution had left it with little hope of returning to profit.

The company worked on a negative option marketing model, offering an attractive introductory deal like eight CDs for a penny. After that, the company sends a new album in the mail regularly and the customer is on the hook for the full price, or responsible for sending the albums back, until a certain number of albums had been purchased, allowing the consumer to slip free from Columbia Houses' noose.

Glenn Langberg, a director on Filmed Entertainment's board, revealed in the bankruptcy filing that at its peak, the company was generating revenue of approximately $1.4 billion, but that has dwindled in recent years, with the company producing just $17 million last year.

According to the bankruptcy filing, Filmed Entertainment has total assets worth $1 million to $10 million, and total liabilities of $50 million to $100 million with more than 250 listed creditors.

"This decline is directly attributable to a confluence of market factors that substantially altered the manner in which consumers purchase and listen to music, as well as the way consumers purchase and watch movies and television series at home," Langberg said. – Staff Writers