Tower Records Declares Bankruptcy

from the industry-fallout dept

While the RIAA and the music labels make for a good target to attract (for some very good reasons), people like Kevin Laws have been saying that a big part of the problem with the music industry not figuring out how to update their business was the music retailers who saw any attempt at online distribution as channel conflict and threatened to cause problems. Considering how much business is still done through retailers, giving that all up to take a risk on online distribution is a call no one’s going to make. In fact, he believes that the labels have a much better understanding on online music than we’ve given them credit for – but don’t want to piss off their channel. Well, it looks like that channel is continuing to struggle. Tower Records’ parent company has declared bankruptcy. They’re not planning on closing many stores, but it might be time for them to look at other ways to reinvent their business. Of course, this is almost exactly a year after Wherehouse Music filed for bankruptcy with a long rant blaming music downloaders. The thing that’s amazed me is that, as just about every company seems to be offering their own digital download store, the brick-and-mortar retailers still haven’t made a big push in that direction. Virgin Music has toyed around with it, but it seems that most of the retailers really are afraid of eating away at their core business. Of course, what’s happening is that others are now eating away at their core business. Update: Meanwhile, it looks like more bands are “getting it”. According to Slashdot, a German band is selling their new CD along with a bonus DVD and two blank CD-Rs with the album lable on them so that fans can make two copies of the CD. Adding more value and letting the consumer do what they want with the music, while increasing the promotional value of their music. What will they think of next?

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Comments on “Tower Records Declares Bankruptcy”

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Oliver Wendell Jones (profile) says:

Re: I don't get it.

If you give two blank, pre-labelled CDs you’re acknowledging that your customers are going to copy your music and that you support it. Kind of a hey, buy our CD and make copies for your friends – here’s two blanks to get you started.

Giving 3 copies of the original pressed CD isn’t quite the same thing. That sends a message of hey, buy our CD and give copies to only two of your friends – if you have more friends, buy more copies.

Gregory Kennedy (user link) says:

Virgin Beat Tower Hands Down

I used to love to hang out at Tower Records since I was 12 years old. For a long time they were the only game in town. Then Virgin entered the market. They were able to get better locations, provide more choices, better service, and just have an overall more interesting brand then Tower.

Downloading music had very little to do with Tower Records demise. Virgin just does a better job at retailing to style conscious young people.

Sprocket says:

Online stores are the competition, not downloading

When I moved to the US 6 years ago, I was amazed that I could not find many good record stores. I went to places like Tower Records a couple of times and then decided that they are just not worth going to. I was used to stores that have comfortable corners with CD players where you can listen to tracks of any CD in the store. At places like Tower (at least the stores I went to) that was not possible, and the store atmosphere was anything but inviting. I started to use online shops like Amazon or cheap-cds simply because they let me listen to at least a few seconds of a track. I subsequently discovered a few small specialty music stores that are more inviting and have listening stations and knowledgbale staff, but most of my CDs I order online these days.

On another note, I do download music from time to time. Overall, the downloading has increased my CD purchases. If I like something that I download, I usually end up buying the CD, because of the better sound quality and the CD booklet.

Beck says:

Label Protection

The record labels protected retail stores like Tower Records, to their own detriment. I remember when Napster was picking up steam. There were several attempts to get the record labels to license their catalogs for paid downloads. The labels refused because they wanted to protect the retailers.

Well, people were going to download music, there was no stopping it. Since the record labels refused to provide a source of legal downloads, people used the only outlet available to satisfy the demand for downloaded music – the peer-to-peer networks.

Millions of people got in the habit of free music. Finally the record labels granted licenses for paid downloads, but it’s probably too late.

Naz says:

Re: Label Protection

i purchased from tower online. they said that credit card wont be charged till items shipped. then they cancelled my order cos the shipping and billing address are different. Yet they still charged my card for something i never received. Emailed their customer service twice but no reply.

with such horrible service and stealing of my money, not wonder they filed for bankruptcy. Idiots

dubtafari says:

tower records

Here’s the real deal on a Tower Records outlet in the Southern NJ area.
When ever I would order a Reggae CD, three or four weeks later, when I had to check on its wherabouts, I was then informed that the CD was an import and could not be purchased in the States.
This happened on numerous occasions.
When I inquired online, I was met with a hurl of online insults as if I was annoying them.
Once, while in the store, after purchasing a CD and returning it, Tower Records actually called the Police on me, a customer, because I refused to give them an I.D. My reason being, I did not need an I.D. to purchase the CD.
In their promotionals, Tower Records would deliberatley, place the Trojan records and Island records reggae promotional T-shirts and CD samplers in the jazz and classical records section as opposed to the reggae section where they belonged.
Furthermore, they would then, make the claim that the purchasers of reggae music were not buying the music, so they gave out the promotionals to purchasers of rock music while the reggae buyers received absolutley nothing. Pure indifference. Although they despised reggae, whenever there was a promotional advertisement, when I would sign up for the poster once the sale over, the staff took everything and left nothing for the customers who purchaed and supported the artist.s. The customers had to search in the rash for what the store discarded.
This store showed its personal disdain and bias towards reggae music and treated the reggae buyers and all other music genres which wasn’t rock with complete contempt.
Oh this could go on forever. I hated that store and am glad , and can see why it has gotten the fate it deserves.
I mean $21 buckls for a CD that cost $13 bucks across the bridge in Philadelphia’s independent music stores.
( Shout out to A.K.A. music on 2nd & Market Streets.)
Almost every request I inquired about, they ordered it.

Shout out to all reggae massive who no longer have to go to Towerrecords for music- except for their now bancruptcy discounts.

John Rock says:

Re: tower records

Let me cry for you for a moment since they didn’t give you precious, promotional reggae material.

In addition, maybe you should learn how to write. You typed (and I quote) “This store showed its personal disdain and bias towards reggae music…”

First, you should say “toward” not “towards.” Second, if they had a bias TOWARD raggae music (and its buyers) than you would have no complaint. What you likely meant to say was that they had a bias AGAINST raggae music (and its buyers).

Apparently, the raggae music (not to mention all the pot you smoke) has fried your brain. Don’t come back until you learn how to speak this language.

P.S. Learn how to spell BANKRUPTCY

TMI Austin says:

No You Don't Get It

You don’t get it and neither do the “brick-and-morter” stores. Word of mouth is one of the best forms of marketing with those consumers who have the most expendalbe (non-responsible) income – late teens & early 20’s. Providing extra CDs is pure advertisement! FREE! If they are going to make coppies – might as well have the label on it! As for Tower and other stores like it – they are so far behind the times, they’ve aced themselves right out of business. The way they present their product is no longer the way consumers shop. Although their loss is due mainly in part to their lack of ability to keep up with the times, it is greatly dissapointing to see the disintigration of an icon in the music world.

Groovologist says:


I know this conversation is very old, but I ran across it looking for something and couldn’t help but respond. It’s something I actually know something about.

The reason Tower went out of business is multi-faceted. CDs available everywhere, from Target to Walmart, sold at no margin to generate traffic; Napster and other peer-to-peer downloading sites, coupled with ubiquitous copying capabilities with every PC; over-investment in foreign countries with questionable partners; rising prices of leases in urban areas for the large footprint necessary for their big inventory; an aging workforce and resulting use of health and retirement benefits which were actually quite generous at Tower until the last five years or so; a laissez-faire management style which was more suited to the ’60s and ’70s before business school types started making the rules in the record business; a company limited by its private ownership having to borrow its capital from banks while going up against deep-pocketed public companies — and much more.

Actually, Tower tried very hard to drive a reasonable online and digital agenda. They were the first major retailer with online database shopping, on AOL in 1994 and on their website in 1995. They were also among the first retailers to offer digital file sales and even in-store burning of custom compilations. One of the biggest barriers to success in digital sales was licenses. No major label was willing to license good content at all in the beginning. In the late ’90s they wanted to, but to protect their copyrights, wrapped the tracks with burdensome and proprietary drms which made buying digital music a nightmare for consumers. It wasn’t until Apple convinced most labels that draconian copy protection was counter-productive did any digital sales effort get traction. And if it weren’t for the fact that the iPod revolutionized personal music consumption, that wouldn’t have happened, either.

The problems were many, and industry-wide. These were compounded by some enlightened labels (and if you are familiar with the nuance of the business the enlightenment often came from unexpected places. The record business used to have many intelligent, forward-thinking men and women who were marginalized in the new all-corporate atmosphere) who couldn’t convince their distribution partners that online and digital sales, while painful, were essential to healthy long-term growth. Physical distribution companies had lots of power and absolutely no upside to digital distribution. It was the perfect storm. A large, entrenched industry whose focus on short-term profit was driven by multi-national and multi-product corporations who now owned the stores, the labels and the distribution companies. And the executives at those companies were not typically music people, per se. Selling mass-produced art is an art in itself and lacking the visionary label chiefs who created the business in the ’60s made it very difficult to change course meaningfully.

And to make matters worse, radio and concert promotion had consolidated dramatically under Clear Channel, which was strictly about quarterly profit and as a result ended up in financial hot water. But by then, it was too late to go back. Radio has been a mess for actual music lovers for decades, but that sealed it.

You’re always going to find anecdotal stories about bad service or rude clerks, but Tower’s website and 1800 call center (one of the only ones in the country) was one of the best performing according to Bizrate and I always got intelligent and decent service at Tower retail having shopped there for decades myself. Yes, a good, small indie retailer is going to take good care of you and a large corporate one will by its nature be less inclined or empowered to do some of those little things. But in the end, the loss of Tower was a major blow to virtually every genre of recorded sound, especially breaking bands. No one reason — just the culmination of many factors over which Tower itself had limited control.

All that said, music itself is stronger than ever. Bands are now self-contained creators and marketers. I think over time, a new generation of agents — people whose expertise in sales, marketing, advertising, etc. — will emerge to free bands to simply create and tour. It’s already happening. One really good result will be that bad bands just won’t get the traction because there will not be rigged channels like radio and retail payola running the show and the fans will be king, supporting the bands they love and ignoring the posers. That’s assuming, of course, that corporate snakes like Newscorp don’t succeed in co-opting big traffic communities like MySpace, and that’s a pretty dicey assumption. We all need to stand up for net neutrality and exercise our personal power to influence legislators to maintain an open Internet.

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