Ooh, Interesting! - How Much Did it Cost AOL to Distribute All those CDs in the 1990s?

January 08, 2016


Here at Sternberg Clarke, we love entertainment. And when browsing the internet for an interesting blog post, we started thinking about music and how it’s all changed since we first recorded the top 40 onto a cassette tape each Sunday. Then it was CDs and—Wait, do you remember the pre-internet days when there were AOL CDs everywhere? 30 free hours here, 40 free hours there… Those CDs were everywhere – magazines, cinemas, restaurants - and are still popping up in student art projects now. But how much did AOL spend on distributing them? And how many were there?

The short answer is $300 million.

The long answer, which explains why, is a lot more interesting simply because of the various facts and figures that get flown about by the former AOL employees at that time. We use internet for events and entertainment all the time but how did it all start? Writing on Quora, the people in charge of AOL in the 1990s all waded in to offer their anecdotes of that time; the co-founder and former CEO of the company, Steve Case, notes that each subscriber stuck with AOL on average for two years bringing in $350 to the company. He reasoned that the company would spend roughly 10% of that to bring in a new user so by that margin, there was $35 to play with to hook in each and every new subscriber. The solution? CDs and lots of them.

The company’s former Chief Marketing Officer Jan Brandt – describing herself as the carpet bombing Queen in an apparent not to just how wasteful (but effective) this campaign was – wades into the discussion with a fact that seems too good to be true. “At one point, 50% of the CDs produced worldwide had an AOL logo on it.” If true, that is staggering!

But here’s one more fact for you lucky readers today! Spending $300 million on CDs between 1993 and 1998 got you an awful lot of CDs for your money. With inflation, that’s just under half a billion dollars today. A few months after the direct marketing programme ended, PC World estimated that AOL had sent out over a billion CDs over the course of the 13 year campaign. But how does one even account for that many CDs being produced? It’s fine to have the money to pay for it but surely that’d take up an awful lot of manufacturing space?

Yep.

According to Reggie Fairchild on the very same Quora post – who was himself a product manager at the time of AOL 4.0’s release in 1998 – there was a point in 1998 where “AOL used ALL of the worldwide CD production for several weeks. Think of that. Not a single music CD or Microsoft CD was produced during those weeks.” That seems incredibly unlikely but is still fascinating to think about.

Incidentally, if you’re wondering whether the campaign worked, it most certainly did. Before AOL 4.0 there were roughly 8 million subscribers. A year later there were 16 million and the company was logging new subscribers at a rate of one every six seconds. Crazy.

Feel free to think about all this the next time you look at a CD. 

 

 





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By Henry Fosdike