Tower Records Is Bankrupt… Again. Is It The End Of The Pure Play Music Retailer?

from the so-much-for-those-new-plans dept

It really was just a little over two years ago that we talked about Tower Records declaring bankruptcy, hoping that with music retailers having less of a say about distribution methods, the recording industry would become much more open to new means of distribution. Of course, Tower Records came back from bankruptcy with big new plans, and just a few months ago we were writing about their slightly odd idea of reinventing the music store with free music podcasts. Apparently, that plan wasn’t shaping up as particularly successful as the company has declared bankruptcy again, and it’s not clear if it’ll come back this time around. The most likely scenario is that someone ends up buying the brand, ditching the brick and mortar stores and using the brand somewhere else (either online or as part of something else). This, of course, shouldn’t come as a shock. Just last year we noted that all of the top music sellers simply used the music as a loss leader to sell some other type of product. While some people still like to pretend otherwise, it’s time to recognize that this is the future of music. It will continue to act as a loss leader or promotional item for some other product. That’s not a bad thing, as it’s likely to increase the amount of music available — but it does change how people should look at music as a product.


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Comments on “Tower Records Is Bankrupt… Again. Is It The End Of The Pure Play Music Retailer?”

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41 Comments
Mousky (user link) says:

Re: Hmmm...

What other brick and mortar music retailers? There still may be a market for small independent music retailers but the era of a nationwide chain music retailer is over. There is too much competition from other retailers who use music as a loss leader.

I have seen the same thing happen with a garden center chain here in Canada. It went bankrupt because every grocery store and department store had their own garden center. That’s how the free market works. You either adapt or you call it quits. Quitting or failing should not necessarily be seen as a negative or bad thing.

ibeetle says:

Re: Hmmm...How are they doing?

Mike–

You wonder how the other guys are doing. Not very well. CompUSA has all but shut down their CD/DVD/Video Games section; Musicland inc. (Sam Goody’s, Suncoast, Media Play) is gone. Folded earlier this year. Transworld (FYE, Coconuts) is unofficially reorganizing its debut. And Best Buy and Walmart have made no secret they they sell new release CD’s and DVD’s as loss leaders just to get people to come in.

I do not think there is any one reason why Brick-and-Mortar stores are closing. Mismanagement? Pricing of product? Changes in taste how media is purchased? Who knows? All of these. Maybe none of these.

The two Tower Record stores I have been in recently were smelly, grungy pits. Poorly managed with expensive general stocked media. Full retail for a DVD is crazy when one can go to the companies own website and get it for 40 percent of that price.

Bob says:

Failed Model

I think this is a result of poor music, not Tower. If you listen to music CD’s, the rule now is about 2 good songs to the CD, and the rest of it sucks. Why pay $20. for the entire CD? Go online, download the two songs you like for a buck a piece, and you have saved $18. Until the music industry realizes their 50 year old model no longer works, this will continue. Only discount stores such as Wal-Mart will sell music, because they do not have to make ther profits on it.

Matt says:

Triple Hmmm...

What the article is saying is that Tower failed because they DIDN’T use music as a loss leader similar to stores such as Best Buy or Wal-Mart. Mike, your question of an isolated case of mismanagement is completely off. The corporate strategy at Tower was completely off, not just an isolated case here. Furthermore, any store (brick and mortar or otherwise) that is simply trying to keep the lights on by profiting on CD’s will go under because they will be undersold by the big boys (Best Buy) who can bring you into the store for a $9.99 CD (much smaller margin than what would support the success of a music only store) and then sell them a $2000 TV. Tower Records apparently is walking around with blinders on these days….

Jakeu1701 says:

"Wall to wall mini-tunes, you used to call them co

If music becomes a “Give Away” or “Promotional Only” for somoething else, the quality of music is going to decrease dramatically. Degenerating a once loved institution into a distasteful jingle of the week.

I would rather that the companies continued with the online market, priced their CDs better, eliminated a good deal of overhead and paid the artists what they should.

That would drive up sales, quality and a genuine interest from the customer base.

Louis says:

Re: "Wall to wall mini-tunes, you used to call the

“the quality of music is going to decrease dramatically. Degenerating a once loved institution into a distasteful jingle of the week. ”

That boat has long since left the harbor and is halfway to India already. Most if not all of the songs that are getting prime radio time are 3 minute jingles written for 14 yr old cellphone owners.

Don’t kid yourself, money doesn’t make art better.

Topher3105 (profile) says:

How many times does it take to learn

That selling CD’s for $20 – $25 a piece DOESN’T WORK.

I mean, even Best Buy and Wal-mart and other big box stores sell CD’s consistently for 9.99 – 15.99, and the upper end of the price range is usually for CD’s that come with bonus material or DVD’s. Amazon.com is slashing prices from 18.99 to under 9.99. I would much rather pay $11.99 for a CD at a big box store then to go to iTunes and buy it for $9.99.

Tower, HMV, all these dedicated music stores stores consistently are selling music way over priced and I avoid them. They sell DVD’s too like 35 – 40 each.

I don’t have any compasion for a corporation selling a product for much more then competitors, and then going bankrupt. This is the second time around I have heard Tower go bankrupt, how many more times before they realize they don’t have a clue as to how to sell music.

cyen says:

overpriced

I was around buying music in my late teens early 20’s when Tower was the hotspot for finding the best new music. They had the best selection and decent prices. Then they started expanding…T-shirts, crappy jewelry, magazines, books, and the music suffered. Then they started jacking prices higher and higher. The same CD would sell at Tower for $18.99 where Best buy would be at $12.99. The selections dropped. They hired punk kids who didn’t care about the store. Seeing their downward spiral firsthand, this news does not come as a shock.

LoveAngelMusicBaby says:

Re: overpriced

they hire those punk kids because they are able to pay them minimum wage and fire them when ever they choose….If they paid their workers appropriately maybe they would care more about the store….I am actually a former employee of Tower Records, where I worked for. I loved working there and was paid practically nothing for the amount of work and responsibility that I had there. I was treated very badly by the company at the end of my employment with them which really hurt considering how much I cared about the place. They are not good to their employees. It’s karma.

chris (profile) says:

music is not loss!!!

how dare you internet hippies talk about music as a loss for some other product. music is great! music is king!

kids aren’t going to want to be rock stars if music is secondary to other products. then there will be no american idol, or britney spears!! oh noes!

/sarcasm off

seriously, when i was a teenager, i spent almost all of my money on tshirts and posters and concert tickets. some times i bought my own albums, some times i copied my friend’s stuff, especially if it was rare or imported, or on vinyl. i was way more likely to buy tapes at a show because that was often the only place you could find those artists. they damn sure weren’t available at tower records, i can tell you that.

Dam says:

It Happened In Publishing, Too

Small, local bookstores used to be a staple of every city and town. Now, when you buy a book, the majority of buyers head to Amazon.com or BN.com (Barnes & Noble). If they’re going to a brick-and-mortar store, it’s probably Wal-Mart or Costco, or one of B&N’s brick-and-mortar locations.

That this would happen to the music biz is not unexpected, but losing the human interaction of a real store and the ability to handle the product before buying and see professionally designed cover art is something I personally will miss.

I suspect the next generation will someday realize what they’re missing too, I won’t be surpprised if the opening of a stand-alone “record” or music store will become a celebrated event.

Anonymous Coward says:

Re: It Happened In Publishing, Too

it might come as a shock to you, but there is a bricks and mortar b&n as well as several other big box chains. I suspect a fair few people go to those places. And frankly, for me at least, these stores are better than junky local places. If you want esoteric oddness, which is about the only thing these stores had going for them, youre better off online anyway.

SirTimothy says:

Re: Re: It Happened In Publishing, Too

Maybe the brick-and-mortar music shops could take a cue from the brick-and-mortar bookstores. A major reason for Borders / B&N being able to stay in physical stores is because the physical stores have a great advantage over shopping online – you can check out the product fully before you pay hard earned cash for it. I’ve ben able to sit in a plush leather couches for hours reading novels at B&N without hassle from the staff – they’ve even been so kind as tto bring me other books that are similar, but that I hadn’t heard of. In short, the stores make it worth my time to go there, and they offer value above and beyond their competition. I’m willing to pay 15-25% more for that, and for the convenience of having a local bookstore to use when the mood strikes (rather than wait a week for Amazon to ship me something).

In contrast, the music stores I’ve been to treat me like some sort of criminal. If I linger by a CD for too long, but walk out without purchasing, I’ll get stopped and searched by security. If I want to listen to a CD, I get a 30 second sample of the song already on the radio – nothing of the rest of the $20 CD. If I spend more than five minutes listening (if by some miracle they acualy let me listen to more of the CD) I get an annoyed salesperson pressuring me to buy or get out (“This isn’t a library.” *scowl*). I get the impression I’m supposed to fall in reverent awe that they allow me to purchase their products, because when I don’t, I’m treated to angry stares.

Bottom line: I’m happy to shop at B&N or Borders – my wife and I occasionally make a date night of it, getting coffee and reading books together, and we usually purchase two or three at the end of the night. I refuse to shop Tower, MediaPlay, Sam Goody, etc. because they make the entire process miserable – and iTunes is wonderful.

John Q Public says:

The Towers around here are on premium land, and considering the only time I’ve ever seen it crowded is duing the holidays, I can’t see how they could pay their leases.

Book stores have a better chance probably because you can scan the whole book instead of a few pages online, but with CDs you only need to hear a snipit of the other tracks to realize the rest of the disk sucks. Most of the books at Tower are also at Borders or Guitar Center.

We all hate the cost of CDs period. I will always have at least six or more CDs in my hand, but only buy two or three, and one of them is always a classic I’ve been meaning to add to my collection (and then get home and hate one of them anyway).

Oh well, I’d go to the movies far more often if $5 would buy more than a drink or popcorn, but not both, so they suffer and raise prices to compensate, guaranteeing that I wait for the DVD.

Dillenger69 says:

No music stores any more

There used to be a tower records right near where I worked 3 years back. I’d go in and get a CD every few weeks. I’ve since changed employers a few times, now I’m back in the same building I was in 3 years ago.

The tower records was gone.

I went to the mall a few blocks away thinking there woudl be a music store … nope. Not a single music store in the mall.

There are a few retailers like Barnes and Noble or Fred Meyer (a Seattle area wal-mart-esque store) that happen to also sell music, but the selection never includes what I’m looking for.

I did a web search and the closest music store to where I work is miles away. Not worth my limited time to go out of my way for an impulse music purchase.

On-Line is the only alternative left for my music it would seem.

Annoying, but a fact of the times.

KevinG79 (profile) says:

Great...

Of course, the RIAA is going to use this as yet another example of how P2P music swapping is “killing the music biz.” I can see it now… The RIAA’s going to be interviewed about the Tower Records downfall and say “well of course you can thank online P2p, which is why we’re sueing every tom, dick, and harry who even THINKS about downloading a song…”

Erd says:

B&N

Sounds like you’ve never seen a brick and mortar Barnes & Noble. As I understand it, the one here in Philly does pretty well, seeing as it occupies prime real estate in Rittenhouse Square, has destroyed the area Borders stores and is constantly full of people. I much prefer brick and mortar Barnes & Noble to online… gives me an opportunity to sit down and read a chunk of a book I’ve heard was good before I go and buy it. Reviews can only tell you so much.

The difference is that books are almost always the same price at different stores. You can’t very well find the same book $5 cheaper at the next bookstore down the street. Everyone’s right about Tower dying out because of discounters using CDs as loss leaders. I’d also agree that the drop in the quality of music has eroded the urge to buy an album as opposed to buying or pirating the 4-6 tracks you actually like.

I prefer to buy the album, but I’ll hitch a ride to Target where it’s $8 cheaper and they’re not bending me over for a 40% profit.

Gary Higdon (user link) says:

What they really need to do.......

They do not need to do this they ounce were the giant of music and again they can be. I f a small town record store can still stay in business and not have they bank account that tower records does, it is for sure that it is the idea people working for them. You take a new idea man or women and get a idea for what music is heading for like the internet. You balance your store with a idea that everybody is using to get there music like the internet. Try making all the store become the first down load music stores faster downloads than any other anywhere at every store made for every mp3 or cumputer to use as easy as possibale. Stop the selling of products that wal-mart and big inventory buyers carry push the sales of downloads and video downloads. People would use this everytime they come to the malls and store of tower records. They can push monthly memberships for unlimited downloads only at the stores no net. This bring the mp3, laptopers, video psp’s and cd burners into the store for downloads and just like a gas station they will buy the idems on the shelfs also. There are many ways to make them great again they just need the new idea employees to take over the old one. You always have to change with the time and now the times are downloads.

jack says:

Re: What they really need to do.......

…and the money to do that comes from where?

Look, people. Tower has definitely made some poor decisions over the years: over-expansion and aquisition of debt, lack of customer service (which has dramatically improved in recent years), ego. The fact of the matter is that Tower is paying for years of mismanagement during the 80’s and 90’s. Today’s current business model is much more along the lines of how Tower operates.

As for prices, it’s not a TOWER thing that is the problem…it’s a global ability and market for expanded options. I love record-store shopping, and have done it for nearly 30 of the years I’ve been alive. That said, I don’t always have an opportunity to jump in the car and go see if a record store has what I’m thinking of at that moment. BUT…I can certainly jump online and check, and whether a good thing or bad thing, I can find a used copy of just about any record (cd) for $3 somewhere. Tower (and its constituents) don’t have the luxury of selling $3 cds. The general public blames Tower for high prices- anyone who does that is ignorant beyond reproach. The average $18 cd costs a brick an mortar store $12 to purchase (not counting any applicable discounts). Tack on shipping charges, manpower to shelve the product, and the price of that product just went up another 10-15%. Before you even begin talking about payroll and operations costs, you’re down to a measely $5 profit per cd. Factor in costs of operations (payables, salaries, etc.) and that profit is even smaller…and all that is contingent on the $18 sell price. I’d be willing to bet that 60-70% of what Tower sells is priced at sale-prices, meaning the entire scenario above needs to be gone through with a $12 cost, and $13 or $14 sell price. You do the math.

Look, blame this on whatever you will. Tower certainly has made mistakes, but they are victims of a global economy. Independent retailers are closing down at a faster rate then ever before. Hell…there is a page in the Barnes & Noble manager manual that states bonuses will be handed out if indie book stores shut down due the competition. There are many consumers who would normally be willing to pay a few dollars more for an item at a specialty store, but I said NORMALLY. In the days of $2 gas, affordable rents and liveable economics, that was doable. Today’s living demands greater care, and with $3.50 gas, $2k+ rents/mortgages, huge overall COL, people have less desire/will/ability to support retail stores that sell the same product that can be had elsewhere for nearly 1/2 price. I don’t blame this on anyone…it’s just the current state of economic development. For Tower to survive, they’d need to drastically rethink store count, and technology. Store count could certainly diminish, but to upgrade stores and make them more appealing would take more money than I bet they have. Call me pessimistic, but even with a sale of the company, I don’t see how they can operate outside of their top 20-30 stores, and their online store. Good luck to ’em…I will miss the ability to browse in a record store if they go away.

DRE says:

going to a good old record store in the 70’s was an incredible experience. you could discover new music, hang with music people. the corporate stores like Sam Goody never could capture that feeling. I have been in a few Towers that did. If they go, try to shop at a local independent record store if you are lucky enough to have one close. I live near Portland and we have Music Millenium that has stayed cool since my first visit in 1970 !!!

ian s. says:

speaking as a recent tower employee

i loved my job at tower. i got to hang out with decent folks, listen to music. receive music. let it soak into every pore in my being, and enjoy a laid back vibe in a professional atmosphere.

is there mismanagement going on? i think that is the case with most retail stores, as my experience goes. but i do like to comment that it was by far the most professional atmosphere i’ve worked in a very long time.

loss leaders killed tower. do the math…10.99 or 16.99 down the street? not a brain buster for most folks. i’m not angry. i am sad that the little guy…small label artists featured and promoted through tower are getting less opportunity than they would have elsewhere.

lastly, tower reminded me to speak my mind at every given chance.

well…we’ll see. expect the worst, hope for the best.

cheers you fucking soul-less robots reading this.

Peter says:

Tower Records used to have the best prices by far for a CD when I began buying them in the eighties. The price for new discs then was $9.99 – $11.99. They were a little more expensive than albums, but most were worth the price. For years I would spend large portions of my disposable cash on Tower Records cd’s. But then several years back, their standard price kept going up, and up ,and up, and my cd spending cash kept going down. I stopped buying cd’s from them when the prices hit about $16.99. I still go in ocassionally but the $18.99 price prohibits me from buying. I will miss them and their midnight madness sales on Monday nights.

artlife says:

tower records

i worked for tower back in the day, in sf at columbus and bay

the pay was low, but the perqs were great

it was one big family, employees could be true to themselves, lots of room for personal expression – and everyone just loved music and knew so much about it – it was a lifestyle to be in the music business back then

i was hired away by a record company and tower was my biggest account in norcal – everyone was great to work with

a few years later i moved to hawaii for 2 years, and when i came home and needed a job, the manager at the sf store hired me on the spot

it’s just too bad tower did not keep up with the times – for its day, the depth and breadth of the stock was revolutionary

Eddie says:

My warning fell on deaf ears...

I used to be a buyer for 10 years. Almost five years ago Tower started to implement cantralized purchasing-the idea that a small group of buyers are capable of making all the buying decisions for the chain as a whole. First they implemented automatic reorders based on sales trends and models, then came the automatic new release orders. Worse of all, I could not lower any numbers…I was forced to accept Zydeco music for a store whose customer base is a mix of latino and asian. Believe me, they collected dust.

If I wanted to add more to the order, I had to e-mail the buyer and EXPLAIN my decision. Did I forget to mention that my former store posted sales increases every month (we were up for the month of 9/11).

We all knew that Classical music was taking a nosedive in sales, and that more than half of the stores were losing money. As a way to help generate traffic back into the stores I proposed selling the full-price classical at just a dollar above cost. Other words, instead of $18.99, sell them for $12.00. Mid-priced Classical (Generally $12.99) for $2 off, $9.99 a dollar off, but keep the budget stuff as-is. My District Manager was not impressed, let alone the General Manager.

Tower management forgot how important it is to have local buyers speaking and listening to their customers. No two stores had the same inventory, because each individual buyer tailored his/her buying patterns on the community that supported that specific store. By removing the local buyers, they lost their ability to be proactive in their buying decisions.

Of the dozen or so (I forgot how many) stores in the Los Angeles region, only four stores were profitable throughout the end of 2003. Amazingly, the Sunset store is the one who lost the most money (double-digit) every month. Once Amoeba Records opened their store next to the Cinerama Dome, Sunsets’ losses were as high as 22-25% on top of the previous years double-digit losses to Virgin. I never signed a non-disclosure agreement, so there!

I also told my GM, RSM, and the District Manager the following: “Music+ used centralized purchasing…where are they now? Wherehouse used it as well, and so did Sam Goody’s/Musicland. Where are they now? When it comes to music retail, centralized purchasing is a failed model…unless you want all the stores to look the same.” This was back in 2001. Tower used their newfound sales model in an attempt to make the chain more lucrative to a potential buyer, but we all know what happened. Two years ago their “fix” cost them 85% of the company.

I was offered a position as Product Manager for my former store, but it was made clear that my buying decisions would be restricted. It was described more as doing inventories and sending the data back to someone else who would decide what we needed. Could you imagine someone who does not set foot in the store or makes contact with their customers making buying decisions? Instead, I refused the offer, went back to school, and got out of the retail business.

Three years ago, as I was “ousted”, I told my former co-workers that I was glad to know that nobody lost their job because of a bad buying decision on my part. Nobody.

TowerNoMore says:

Re: My warning fell on deaf ears...

Amen, brother. Everybody wants to attribute Tower’s demise to circumstances beyond its control such as the Internet and Best Buys but places like Amoeba prove that this is complete BS. I remember when Tower started to go to pot a several years ago and while I wasn’t on the inside, it was clear to me that whoever was running the show was simply going through the motions. The prices went through the ceiling and the selection continued to get worse to the point where many locations were just like super-sized Wherehouses. Well, Tower had been in the toilet for quite some time so I’m glad somebody came by and finally flushed. By the way, Virgin should be headed the same way and good riddance.

Eric Talbot says:

The Demise of Tower Records and Video

Monday, December 18, 2006

I live in Chicago, Illinois, where until very recently we had two Tower Records stores, one downtown in the Loop, the other on the North Side in Lincoln Park (on Clark Street at Fullerton Ave.). Both were nice stores with loads of inventory of every musical description which put the usual mall-store and big-box retailers (such as WalMart and Best Buy) to shame.

Tower also offered an amazingly wide selection of otherwise hard-to-find periodicals and magazines from all over the world.

Now (as of Saturday, December 16, 2006) the downtown store has closed and the one in Lincoln Park is shutting its doors this coming Thursday the 21st..

Farewell to Tower Records !!

From reading all the other postings above, it is clear to me that many things have changed in the business and retail worlds since Tower reigned supreme, as well as the evident fact that its top management made some fundamentally bad business-model decisions – and as for me, for the past two years, every time I passed by a Tower store, I found myself always wondering if I would find it closed. My premonitions were correct: that Tower Records would be history sooner rather than later.

The best Tower Records store IMO was the one in New York City on Broadway (66th Street near Lincoln Center for the Performing Arts and the Juilliard School of Music) where the classical music selection was second to none, and there was plenty of choice in every other genre of music as well.

Here in Chicago we still do have Virgin Records, but its music selection is nowhere near as comprehensive as Tower’s was.

The demise of Tower Records is a sad day indeed in many respects, although in recent years, as noted above, a number of their stores had become dirty and seriously mismanaged.

Somehow, however, despite the price advantages offered by today’s technology and the Internet, downloading mp3 files onto our i-pods will never quite measure up to the rewardingly satisfying feel we get from holding in our hands a well-produced CD complete with its printed program booklet and cover art.

Who knows? Maybe some day we might get to see the revival (to some extent anyway) of the brick-store approach to music retailing – if it’s done right and done well.

Eric.

al says:

unfriendly service

Back in sacramento we had a tower records & video store well any way one of the stores here never asked if i needed any help even when i was near one of the employees, if a white male or female came in later and was next to me looking or just browsing for certain items that employee would go to these people and ask if he would help them out, Which means they are trained or catered to ignore certain race of individual and just help certain range of people- mostly whites. Thats why im glad Tower record went under I don’t care if management or employee lost their jobs they are just racist I wish whenever i went to their stores I I had 20/20 abc news conduct a hidden news story about how they treat one customer different from another

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