Tower Records

[ghost of miles]

A Broken Record Store

Industry icon Tower is bankrupt and on the block

by Yuki Noguchi

Washington Post, August 23, 2006

Tower Records, the iconic chain where generations of music lovers have gone to

lose themselves in record-store reveries, is up for sale in bankruptcy court,

forsaken by consumers who favor digital music and discounts at big-box

superstores.

Tower represents a time when music had a different cultural status than it does

today, as songs vie for attention with newer pastimes such as video games,

Internet surfing and instant messaging. Its financial faltering -- this is its

second bankruptcy filing since 2004 -- signals not only corporate problems but

also a shift in how people shop and think about music in their lives.

Tower's operations started in the back of a California drugstore in the late

1950s, and its founder, Russ Solomon, cultivated its reputation as a communal

place for hanging out to train and trade musical tastes. Its huge yellow-and-red

stores became part of the record album culture. Stores hosted live concerts, and

employees were hired for their knowledge of musical arcana.

But over the past decade, as such larger retailers as Wal-Mart Stores Inc., Best

Buy Co. and Target Corp. undercut record-store prices and combined shopping for

music with shopping for a variety of other consumer products, the music-focused

stores started to die. Although Tower began selling music downloads on its site

in June, digital music sales through such services as iTunes and Amazon.com have

also taken a bite.

In 1991, there were roughly 9,500 chain music stores in the United States,

compared with about 2,000 now, according to Billboard magazine. Although many

independent stores continue to have loyal followings, those, too, are on the

decline.

Tower's parent company, MTS Inc., filed for bankruptcy protection Sunday night

in Delaware, putting its 89 stores on the block. The company hopes to complete a

sale within 60 days. Tower's brand is used by 144 international stores, but

those licensees will not be affected by the bankruptcy process.

"It's a sad day for music," said Dave DelVecchio, 20, who bought five

alternative rock albums from the Tower Records store in Foggy Bottom yesterday.

DelVecchio said he was on tour in Baltimore with his band. "I used to download

online for free a lot, but now I just buy CDs. Being in a band myself, I know

what it's like" to lose income to illegal online file-sharing.

Lisa Amore, a spokeswoman for the Sacramento-based Tower, said the company hopes

to keep the brand alive. "As of today, we have no intention of closing any

stores," she said. The company has two interested buyers, according to Bloomberg

News.

Many other music stores have already fallen to similar financial pressures.

Chains such as National Record Mart and Musicland have gone away or been

acquired by conglomerates like Trans World Entertainment Corp., which now

controls more than 1,100 retail stores under the Sam Goody, F.Y.E., Strawberries

and Wherehouse brands.

"Tower is an icon. In my mind, it represented our whole musical culture," said

Russ Crupnick, an entertainment analyst with NPD Group Inc., a consumer research

firm. "The challenge has been that the whole retail environment has changed"

because people shop less at specialty retail stores, he said.

Randall Henderson spends some of his lunch breaks browsing at the Foggy Bottom

store, near George Washington University Hospital, where he works.

"I don't even know how to download music," said Henderson, who prefers instead

to browse the selection at Tower every other week for anything from gospel to

R&B records. "The selection is very good -- exceptional," he said, but if Tower

were to shut down, he might be forced to shop digitally. "I would have no other

choice. There aren't too many record stores."

Henderson would be following a broader music industry trend. CD sales last year

totaled more than 705 million, compared with 13.6 million albums sold online,

according to the most recent figures from the Recording Industry Association of

America. But CD sales declined 8 percent last year, compared with online album

sales growth of 199 percent.

"They're going to force you to going online now; it's like forcing you to ride

the subway," said Ernest Feaster, 50, who lives in Northeast Washington and

yesterday shopped at Tower for albums by Luther Vandross, Weather Report and the

Dramatics. "It's the last of an icon around here," Feaster said. "At Circuit

City and Best Buy, they're just throwing whatever up on the shelves. Here the

selection is wide."

Tower's popularity extends beyond its customer base, said Geoff Mayfield, an

analyst with Billboard.

"The industry wants it to survive," he said. It got a standing ovation from the

crowd when it recently won retailer of the year from the major recording

merchandisers' trade group, he said.

Perhaps, like some other stores, it could diversify by selling shoes, posters,

games and other goods that would appeal to its audience, Mayfield said. "It

needs to become a destination," he said. "Otherwise, people will just pass it

by."

_____

Staff researcher Richard Drezen and staff writer Chris Kirkham contributed to

this report.

[trane_fanatic]

I got this in my e-mail today:

August 23, 2006

A message from our C.E.O.

A message from the CEO of Tower Records:

I’d like to personally update you on what’s happening at Tower and why this is such good news for you.

As the CEO of Tower, I announced Sunday night that Tower is filing Chapter 11 reorganization. That might not sound like good news, but for the over 3,000 employees of Tower and Tower.com, as well as for our millions of loyal customers, it’s actually very good news. Here’s why:

We have the financing in place to continue operations as usual and have the product you have come to expect in our stores. And if we don’t, we can get it for you. It also means that we are now positioned to sell our company within the next 60 days or so, in time to have even more product for the holiday season. Most importantly, as usual, Tower gift cards are still good in any of our stores or on Tower.com.

And now the best news of all: take advantage of our "Buy 4 Get 5," in store promotion and, when you bring this email in to any store between now and September 4, we’ll give you an additional $5.00 "CEO Discount" as a token of our appreciation for your loyalty. More savings for you!

Russ Solomon, the founder of Tower Records, recognized the need to cater to you, the music and movie junkie, by opening the world’s first music superstore in 1960. Today Tower is still the industry leader, thanks to you, our customer.

So come by and see what’s new in our stores and we’ll continue to keep you posted on our progress.

Joe D’Amico, CEO

[Chuck Nessa]

Too bad Joe didn't extend some offer for his online customers. That's where his future resides, if there is one. I do think it's fine to reward store customers but I have to drive 200 miles to get to one, so I buy online. In fact I made a purchase last night and received shipping confirmation today.

[trane_fanatic]

Too bad Joe didn't extend some offer for his online customers. That's where his future resides, if there is one. I do think it's fine to reward store customers but I have to drive 200 miles to get to one, so I buy online. In fact I made a purchase last night and received shipping confirmation today.

I had purchased your Art Ensemble box there a while back, Chuck.

[Chuck Nessa]

Too bad Joe didn't extend some offer for his online customers. That's where his future resides, if there is one. I do think it's fine to reward store customers but I have to drive 200 miles to get to one, so I buy online. In fact I made a purchase last night and received shipping confirmation today.

I had purchased your Art Ensemble box there a while back, Chuck.

You da man.

[trane_fanatic]

Too bad Joe didn't extend some offer for his online customers. That's where his future resides, if there is one. I do think it's fine to reward store customers but I have to drive 200 miles to get to one, so I buy online. In fact I made a purchase last night and received shipping confirmation today.

I had purchased your Art Ensemble box there a while back, Chuck.

You da man.

Tell me something I don't know. Loved the AE set, BTW.

Phillip Wilson is a revelation on the tracks he is featured on.

[Chuck Nessa]

Phillip is why I started my company - to record him with Roscoe.

[Aggie87]

And now the best news of all: take advantage of our "Buy 4 Get 5," in store promotion and,

Does that mean 9 for the price of 4?

[Hardbopjazz]

More on the demise of Tower

Demise of Tower Records sign of new digital agestory

by Rob Lever

Sun Aug 27, 6:02 PM ET

WASHINGTON (AFP) - Who killed Tower Records?

ADVERTISEMENT

The Internet seems to be the prime suspect in the demise of the pioneering music retailer, which filed for bankruptcy earlier this month for the second time in two years for its US stores.

But analysts say the rise in digital music downloads is only one of several factors in the failure of Tower, which started music superstores in California in the 1960s and expanded to global markets.

Tower, whose non-US operations are not affected by the bankruptcy filing, failed to keep up with a fast-moving landscape involving online retailers such as Amazon.com and discounters like Wal-Mart, as well as a move to digital music, say analysts.

The collapse of Tower "is a sign of the evolution of music," said Phil Leigh, senior analyst at Inside Digital Media, a market research firm.

"It's pretty clear that recorded music is going to Internet distribution and right behind it will be video entertainment."

Global sales of music CDs fell 6.0 percent in 2005, according to the London-based International Federation of the Phonographic Industry, while digital sales rose 188 percent. This trend has been similar for the past few years.

But digital music downloads made up only about five percent of overall music sales, the data showed.

David Card, analyst at technology firm Jupiter Research, said blaming downloads from Apple's iTunes and others for Tower's demise is "just ridiculous."

"The transition to digital music has not happened by any stretch of the imagination," Card said.

"Music sales have been declining steadily since 1999, for a number of reasons, such as competition with DVDs and video games, aging baby boomers, maybe a bit of file-sharing, and only very recently digital downloads. Digital music is chump change compared with sales of CDs."

Card said he and other music fans still enjoy music CDs, which have several advantages over digital downloads because they have better quality, can often be copied without restriction and backed up.

"If I want to buy something cheap or try a new band, maybe I'll go for the cheapest which is digital, but all else being equal I'd rather have the physical product, and I'll pay a few dollars extra for it."

Among the problems facing Tower and other retailers are shrinking sales of music and thin profit margins.

Wal-Mart probably hurt Tower by slashing prices on music CDs, using this as a "loss leader" to get customers in stores, said Card.

At the same time, Apple has dominated the online music business with a price per song of 99 cents, of which 70 cents goes to record labels, said Leigh. Even though this generates little profit, Apple uses this to promote sales of its iPod music players.

Still, the analysts say there may be ways to make money in music retailing for companies like Tower, which hopes to find a buyer for its US operations.

Card said a company like Tower needs to marry the advantages of stores for promotions and appearances with the convenience of online sales and digital delivery.

"If you have physical stores and digital service I think you can do things," Card said.

"A store is a place where you can show things, make an entertainment experience. I believe music retail can make it if someone can put together a one-two punch with digital stores and physical products. For example, you could buy an album online and pick it up in the store."

Leigh said Tower "could have done a better job of leveraging their brand in cyberspace," to compete with Amazon.

Overall, he said the lesson is that companies must adapt to changing market conditions.

"Tower was one of the biggest, and if evolution has taught us anything, it's not the biggest of the species that survives, it's the species most adaptable to change," he said.

[JohnJ]

I'd say things do look bad for Tower Records in the US, but I happened to be in Tokyo this week, and I stopped in at the one in Shibuya. It was hopping, and well stocked. So perhaps there will be a liquidation of the US stores and a spin off of the international ones. Who knows...

Anyway, the prices were a little bit better than typical Tower Record prices, but I tried to refrain from going crazy. I'm trying to only get Japanese pressings where there is a significant savings. Perhaps the coolest thing is that a fair number of the Blue Note TOCJs in the 1500 series are being sold for 1500 Yen, which is a bit under $15. I picked up three Duke Pearsons which don't appear to be widely available. That was it, though I was tempted by a few other things, including some hard to find Archie Shepps. I may still go back.

Tower Japan is a separate operation from US Tower with completely different ownership. Apparently they are doing very well and an IPO is planned in the near future.

By the way, did you check out the Disk Union in Shibuya? They have several of the TOCJ 1500 series on sale at 1000 Yen. HMV Shibuya also was selling them at 20% off recently. This series seems to be widely discounted.

[ejp626]

I'd say things do look bad for Tower Records in the US, but I happened to be in Tokyo this week, and I stopped in at the one in Shibuya. It was hopping, and well stocked. So perhaps there will be a liquidation of the US stores and a spin off of the international ones. Who knows...

Tower Japan is a separate operation from US Tower with completely different ownership. Apparently they are doing very well and an IPO is planned in the near future.

By the way, did you check out the Disk Union in Shibuya? They have several of the TOCJ 1500 series on sale at 1000 Yen. HMV Shibuya also was selling them at 20% off recently. This series seems to be widely discounted.

I had a few hours on my last day to do some more CD shopping. I tried to find one of the CD stores in Shinjuku but a lousy map and bad directions did me in. I made it to the Shibuya Disc Union about 15 minutes before they shut and did pick up 3 of the TOCJ 1500 series for 1000 Yen (yes, quite a bargain) and a few used CDs, including Freddie Roach's Down to Earth and Shepp's Deja Vu. What I found quite odd was that artists are alphabetized by their first name, which took some mental energy on my part to find things.

I wish I had had more time, but I think I did pretty well for two days, filling in some gaps in my BN collection, mostly Duke Pearson, Lou Donaldson, Freddie Roach's Down to Earth and Baby Face Willette's Stop and Listen.

Best of all, work paid for most of the trip (not the CDs though).

[wulfman]

Nice to see a sale on at Disk Union, I am Japan-bound this Friday for a couple of weeks, will leave some room in the luggage to load up!

[Big Al]

More on the demise of Tower

Demise of Tower Records sign of new digital age

by Rob Lever

The Internet seems to be the prime suspect in the demise of the pioneering music retailer...

Oh, and yes, the fact that the prices are out the roof! may have something to do with it too.

And I'm sure the overall quality of popular music has nothing to do with it whatsoever as well.....

[bertrand]

Are they saying a going out of business sale starts TOMORROW?

I don't want to sound like a vulture - I'm sorry this is happening. On the other hand, it's not my fault. God knows I spent enough money there

Bertrand.

[bertrand]

Yeah, I read that too - it might still go the other way.

The website is mum, of course.

Prices were definitely an issue. When they had good sales it was OK, but that went away.

As I posted elsewhere, if you tweak the Borders' coupons, you can get pretty decent prices. I've managed to get some $11.99 CDs for only $6 and change.

Bertrand.

[Tom 1960]

Firstly, I find it sad that Tower looks to be headed towards liquidation. Nothing to me including the internet, replaces the excitement of going through the bins and looking at the many different selections. You see, in my area with very few exceptions, music stores basically stock the same crap. If you're interested in music outside the major releases, forget about it. Slim pickens to say the least. I've always looked forward to traveling to Tower. The place always made me feel like a kid in a candy store. I could easily spend 2 hrs. there. I'm gonna miss that experience. I know some of you guys may feel differently, since many of you live in or close by major cities. Maybe it's not that big of a deal, since you have many more alternatives. I don't really. It's pretty much the internet for me these days. It's just not the same experience.

[Eric]

Firstly, I find it sad that Tower looks to be headed towards liquidation. Nothing to me including the internet, replaces the excitement of going through the bins and looking at the many different selections. You see, in my area with very few exceptions, music stores basically stock the same crap. If you're interested in music outside the major releases, forget about it. Slim pickens to say the least. I've always looked forward to traveling to Tower. The place always made me feel like a kid in a candy store. I could easily spend 2 hrs. there. I'm gonna miss that experience. I know some of you guys may feel differently, since many of you live in or close by major cities. Maybe it's not that big of a deal, since you have many more alternatives. I don't really. It's pretty much the internet for me these days. It's just not the same experience.

I agree, although frankly it has been a number of years since even Tower provided that experience.

[Tom 1960]

I hear ya Eric. Judging by the responses here, Tower was(is?) just a shadow of it's former self. Still to me, that was awhole heck of alot better than the alternatives I have. Things are pretty pathetic in my neck of the woods.

[bertrand]

I agree with the above posts - going to Tower used to be an amazing experience that the internet could not duplicate. However, that was years ago, back when they would have tons of TOCJ and you could buy them at reasonable prices during the clearance sale.

Just called the Rockville, MD, Tower - what they know so far is that the smaller, less profitable stores are closing. The sale starting today is 30% off on CDs (and DVDs I guess), so it's like a clearnace sale. When the Tower in Annapolis closed, it was everything half-price. By the time I got there, they were cleaned out.

Bertrand.

Edited October 7, 2006 by bertrand

[Eric]

I agree with the above posts - going to Tower used to be an amazing experience that the internet could not duplicate. However, that was years ago, back when they would have tons of TOCJ and you could buy them at reasonable prices during the clearance sale.

Just called the Rockville, MD, Tower - what they know so far is that the smaller, less profitable stores are closing. The sale starting today is 30% off on CDs (and DVDs I guess), so it's like a clearnace sale. When the Tower in Annapolis closed, it was everything half-price. By the time I got there, they were cleaned out.

Bertrand.

Yes Bertrand, I remember going to Tower in the Village in the mid-90s on business trips and dropping one or two hundred each time (hauling away many TOCJs). Same for the Jazz Record Mart in Chicago and Jazz Record Center in NY. And Amoeba & Rasputin in Berkeley. Fortunatley these large independents are still with us (I think). Ironically (and wonderfully), they seem to be the winners in all of this, plus the used record stores (although they too are becoming scarce).

On the flip side, between Amazon, Gemm & ebay, there is almost nothing I cannot find in a matter of minutes (if you want to pay the price). But I completely agree that the experience is nowhere near the "off line" version.

PS - I cannot remember the last time I visited a KC record store - maybe early in the summer. Aside from a great used store in nearby Lawrence, there is nothing here of interest (in a 1.5 million metro area with a decent jazz background).

Edited October 7, 2006 by Eric

[Stefan Wood]

I was there for Tower's grand opening on 4th and Broadway, many years ago. When I was in grad school in NYC, I would go to the outlet store a block away on Saturday mornings. I loved that store. It has been years since Tower was a must shop store though. I am sorry to see them go, but it has been cheaper to get stuff online. Bertrand, if any store is going to close I bet it would be the one in DC, near GW. They have cut down on their stock so much it is barely a music store anymore. That was the flagship store in the DC area.

[7/4]

Still, Mode discs are at $18.98 - same with most new ECMs...

yr a Mode man, Rotasi? why haven't we met before, hmmmmmm...

Wouldn't it make more sense to get 'em direct?

I have a bunch of Mode recordings, mostly of the Xenakis, Feldman, Cage, NewBand type.

I already miss the old Tower, when it was so well stocked. Those were the days.

[ejp626]

From what I have heard, all Tower Record stores everywhere will be liquidated, which seems kind of crazy. I really think the Manhattan and SF stores in particular could survive, and perhaps they will be converted to some other record chain. But like most people here, I found them too expensive with too few sales to justify going in on a regular basis (and the Chicago stores were never really anything to write home about).

[7/4]

Wouldn't it make more sense to get 'em direct?

Yup, I've got over a hundred of them - including the early LPs.

Brian's got em for a good price, but that's my point really.

You're a mad man Rod!

[Tom 1960]

I was thinking of driving to the Paramus, New Jersey store on Monday being Columbus Day and a holiday for me and checking things out. Does anyone know if the 30% sale Bertrand mentions, good at all Tower stores? Perhaps a phone call might be warranted before heading out for the 1hr+ drive down.

Edited October 8, 2006 by Tom 1960