Tower Records victim of iPod era

[gldstwmn]

http://articles.moneycentral.msn.com....aspx?GT1=8618

A music icon will begin shutting its doors as a last-ditch bid to save the retailer and its 3,000 jobs fails.

Industry insiders blame iconic music retailer Tower Records' demise on its failure to compete with the Internet and big-box discount stores, and its decision to keep opening new stores in the face of a consumer switch toward online music downloads.

Great American Group's purchase of the chain, which has 89 stores in 20 states, was approved Friday by a federal bankruptcy judge. Great American plans to liquidate the chain, and going-out-of-business sales are under way. About 3,000 Tower employees will eventually lose their jobs.

After almost 30 hours of what attorneys described as "robust" and "vigorous" bidding, Great American won with a bid of $134.3 million, beating Trans World Entertainment, which had hoped to continue operating at least some Tower stores, by a single bid increment of $500,000. Peter Gurfein, an attorney representing Tower, said the company will be sold for an aggregate of $150 million, including the sale of leases and properties. Among them is the company's signature store on Sunset Boulevard in Los Angeles, which is expected to fetch $12 million.

"It's a sad day for the music business, and I feel badly for all Tower employees," Jim Urie, the president of Universal Music Group Distribution, told Billboard.biz. "Tower was probably the greatest brand that will ever exist in music retail."

Tower founder Russ Solomon starting selling records out of his father's Sacramento drugstore in the 1940s and opened his first store in that city in 1960. It was a new way of doing business, said Sacramento musician Mick Martin, a former Tower employee.

"There were no stores devoted to music at the time that Russ Solomon came along," Martin told The Sacramento Bee. "You went to Woolworth's."

Tower was known for stocking hard-to-find records and was a popular hangout for music fans.

"I heard a lot of things for the first time there, hanging around," Martin said. "On Friday and Saturday nights, the hippest place to be was Tower."

Industry changes caught up with company
In 1968, Solomon expanded the company beyond Sacramento, opening a store on Fisherman's Wharf in San Francisco. The Sunset Boulevard store opened a couple of years later, and the chain continued to expand over the decades. The company started selling videos, too, and eventually had more than 200 stores in the U.S. and overseas. Annual sales reached $1 billion by the mid-1990s.

Profits started to plunge, however, when stores such as Borders, Best Buy and Wal-Mart got heavily into the music-sales business, and the rise of Amazon.com and online music downloads sped up Tower's downfall. According to statements filed with the U.S. Securities and Exchange Commission, Tower's profits peaked at $17.3 million in 1994 and plummeted to $3.5 million by 1997. The company began losing money in 1999.

Solomon, however, contended the online businesses weren't a major threat, and the company went further into debt to add new retail outlets. It added $80 million in debt between 1998 and 2000 to open a dozen more stores.

Online companies "have been giving stuff away to create sales," Solomon told The Bee in 2000. The Internet "is certainly never going to take the place of stores."

Reality eventually set in, though. When Tower filed for Chapter 11 reorganization in August, the company acknowledged that it had been hurt by music downloads and competition from big-box stores, as well as an industrywide decline in music sales.

The filing came two years after an initial bankruptcy reorganization that resulted in bondholders forgiving millions of dollars in debt but taking an 85% stake in the company, leaving Solomon and his family with 15%.

Michael Bloom, an attorney representing Tower's secured trade creditors, urged bankruptcy Judge Brendan Shannon to consider the closeness of the bids and the effect that liquidation would have before deciding whether to approve the sale.

'Model doesn't work anymore'
"We can save this company or we can liquidate it," Bloom argued. "... Sometimes, the highest bid is not the best bid. In this case, your honor, we believe the best bid is the Trans World bid."

Trans World, which has about 1,100 mostly mall-based stores nationwide, has recently acquired other music retailers such as Sam Goody and Wherehouse Music, consolidating most of its acquisitions under the FYE name, which stands for For Your Entertainment. Analyst George Whalin of Retail Management Consultants said Trans World, the parent of struggling FYE and Sam Goody, wouldn't have been able to make a go of Tower.

"The model doesn't work anymore," he said. "I'm 62, and I have an iPod."

Billboard.biz reported that the Tower Records brand might live on via Tower.com. Norton LLC, part of Great American, is putting up $3.8 million to buy Tower.com and Tower's Pulse Magazine.

Solomon, now 81, told employees in an e-mail: "The fat lady has sung. ... She was off-key. Thank You, Thank You, Thank You."

[JazmenFlowers]

I knew the iPod and iTunes were going to make a big splash because I used to be a music store junkie. I was always in there for no apparent reason. once I started using iTunes and realized I hadn't been in a store in months I was like damn. and double damn that I didn't think of it first.

I wonder tho how this will adversely effect everything else. I mean, will Apple become a monopoly in a way? I guess it is great for consumers like me and most on this board, but what about others?

[bikerchic]

Originally Posted by JazmenFlowers

but what about others?

They are others?

[JazmenFlowers]

Originally Posted by bikerchic

They are others?

I know, right. believe it or not, there are some who refuse to even have an iPod. I guess I can understand. well, no, I really can't, but evs.

[BlackWidow]

I am not surprised!

[strandinthewind]

The one about a block from my house is closing. Sad to me because it is the end of an era. I remember buying TISL at Tower and listening to it in my car in the parking lot. Five years later - it is no more. It was a really cool one because Elton John would go in the morning of the new CD releases and buy them.

[Wild_Heart03]

I don't know about anyone else, but despite having an iPod I still buy my music at the music store, on regular CD (and sometimes vinyl for the hell of it). I would rather have the hard copy of the CD than pay for mp3s, just because I prefer it.

[estranged4life]

Originally Posted by Wild_Heart03

I don't know about anyone else, but despite having an iPod I still buy my music at the music store, on regular CD (and sometimes vinyl for the hell of it). I would rather have the hard copy of the CD than pay for mp3s, just because I prefer it.

have a disc in my hand over an iPod (Nothing against an iPod, but considering the amount of music I have there will never be an iPod with enough storage to hold every single release I own). Call me old fashioned, but I want nice packaging/bonus disc/bonus DVD with a new album release instead of just a digital download.

I still purchase music in stores, be it new releases or used releases. Just the excitement of finding a rare release in the used bins is more my style than any digital download could give me.

There's no Tower Records in Oklahoma, but we had Peaches Records & Tapes years ago and I remember when those stores closed, it was a very sad day (But I do own a few of their record crates/cassette crates so I will have the memory always).

[carrie721]

Originally Posted by estranged4life

have a disc in my hand over an iPod (Nothing against an iPod, but considering the amount of music I have there will never be an iPod with enough storage to hold every single release I own). Call me old fashioned, but I want nice packaging/bonus disc/bonus DVD with a new album release instead of just a digital download.

me too. i have an ipod, but i still like buying cd's more than downloading. my ipod only holds 4 gigs, and that is not nearly enough for my music collection. even if i got the 80 gig ipod, i would still have to pick and choose what goes on it.

CD companies need to quit bitching and get with the times. people do not want to pay $16 for an album! $10 is the magic number. they will still cut a profit, and i bet sales will go up.

[wetcamelfood]

Same here, I want a hard copy product with their packaging etc. I probably have been buying CD's more online instead of in stores over the last few years but that's more because the stores in my area simply don't stock the albums I want to buy or if they do it's months later & I want to get it the minute it comes out.

I know you can make your own CD-R's from mp3s you buy, make your own artwork, etc. but how do you get the info that comes in CD booklets to include in your own packaing if you just buy mp3's? So I'm dreading the day when you can't buy hard copy CD's anymore.

I guess I'm old fashioned too. Anyways, I know Tower used to charge more than other stores but that was OK with me as long as it meant that they had what I wanted which they generally did, so I'll miss them.

John

[markolas]

I stopped going to record stores once I got Internet access. For one thing, the stores mainly carry Top 40 rock/pop/hip-hop, and that's not really what I listen to, mostly. There was a Wherehouse Music in Shreveport that I used to go to that did have a halfway decent selection of jazz/blues CDs, but once I got ahold of the Internet, it was just easier to get them through Amazon.com, and I could find pretty much whatever I was looking for there; I remember having to have Wherehouse Music special order CDs for me before that, which was a pain.

We had a Tower Records here in Austin that closed a couple of years ago. I only went once or twice. I didn't think it was anything special. Pretty much the only times I go to a store to buy a CD is when I want something that has just come out and don't want to wait for Amazon to deliver it, and I know the store will have it, as in the case of Under the Skin, which I got from Best Buy.

[markolas]

My issue with iPod is that they're so damned expensive. If I were to get one, I would want one big enough to store all my CDs, plus have room for expansion. Which means I'd have to break for the 80 GB, which is $350. But the idea of being able to carry my entire music collection with me and never have to fumble with CDs is soooo appealing, that I'll likely break down and get one as soon as I have the money for such a purchase.

[GODDESS6]

i have an original bag from tower records, i am so glad i kept it!!!~

[estranged4life]

Originally Posted by wetcamelfood

Same here, I want a hard copy product with their packaging etc. I probably have been buying CD's more online instead of in stores over the last few years but that's more because the stores in my area simply don't stock the albums I want to buy or if they do it's months later & I want to get it the minute it comes out.

it's a bit of both, I pre-order new discs usually online if there's a sale (ie-Amon Amarth's newest release was $12.87 at B&N.com, which is a great price for the limited edition 2 disc version.) or if the disc wont be widely available due to the group/artist not being mainstream.

Also if I see a bargain online for a used item (By one of the many musical artists/groups I like), I wont pass it up. Just paid $17.99 for the Deluxe version of Rush's "R30" 2005 release (2 DVD/2 CD/guitar picks/etc.) on eBay last week.

I know you can make your own CD-R's from mp3s you buy, make your own artwork, etc. but how do you get the info that comes in CD booklets to include in your own packaing if you just buy mp3's? So I'm dreading the day when you can't buy hard copy CD's anymore.

Exactly about the CD booklets, I have to have the info provided in the liner notes that you cannot get via digital download.

I dont think there will be a day when hard copy CD's wont be available, Too many people still prefer to purchase the albums the same way we have. Hell, I still see new releases being made on vinyl!!!

[DavidMn]

Thats too bad. I never got the chance to get into one.