Lessons To Be Learned From Tower Records: When The Market Shifts, You Need To Shift With It

from the end-of-an-era dept

Two months ago, in noting that Tower Records had filed for bankruptcy for the second time in about two years, we wondered if it was the final word on the pure play music retailer. After all, selling music is almost universally recognized as being a good loss leader, not as a pure business. It looks like the folks at Tower were too late to figure this out. While there had been some hope of keeping the company going, in an auction late last week, the winner has decided to liquidate the business, selling off the inventory, shutting down the stores and laying off the people. The company’s hometown paper, the Sacramento Bee has a sentimental obituary for the company, noting that the executives at Tower (and plenty of other retailers) never really believed the internet would impact their business. In the end, as sad as it is for those of us who used to spend plenty of extra time (and money) at various Tower Records’ stores, it should be a case study for those who don’t understand when the market is shifting around them. While other record stores began to recognize that that they needed to completely revamp their business — from becoming combination music/dance clubs and stores to starting their own record labels or becoming “destinations” rather than just stores — Tower Records leadership insisted that the web “is certainly never going to take the place of stores.”

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mike says:

I don't think...

I don’t think internet killed tower I think it was more likely the combination of cheap music at wal-mart and the internet becouse you can get the popular music at wal -mart for less then go online and find the obscure stuff and either order a CD online or buy the mp3. tower lost ot niche becouse its prices always seem to high when its cheaper on the web

nonuser says:

Re: I don't think...

Tower’s slogan used to be “the difference is selection”. Then Amazon took that away, and the no-brainer strategy of locating superstores next to college campuses stopped working when kids started downloading their music for free.

It’s a tough business for those guys to be in. Barnes and Noble, Target, and Wal-Mart not only cream-skim the most popular titles, but they are also probably killing Tower and the other dedicated stores on shipping costs and other overhead. You hear all of the criticisms about not adapting, but it’s not that easy. Tower and their competitors did make a major effort to move into video, magazines, even alt. clothing, and nothing seemed to work. Maybe they should’ve tried to become big players in selling tickets to music shows, which could’ve created some buzz/traffic at their stores.

Cleverboy (user link) says:

Tower killed Tower...

I’m a fan of Newbury Comics here in Boston. They’re website is still ASS, and they’ve outsourced online sales to some turn-key outfit apparently better suited than they. These days, they’re pushing hard with their e-mail lists and giving away free prizes for signing up. They barely do anything nice with their comics, but that’s the main reason I’ve used them.

In Burlington, MA this weekend, there was a large Tower Records next to a Newbury Comics. The Tower had street people boasting “up to” 30% Going out of Business signs, so for the second time in the 10’s of times I’ve visted the Newbury Comics next door to it… I went in. I saw that their video prices sucked, and 10% off of crappy prices, is still crappy prices. I turned to one guy and said, “Do they know they’re going out of business… with prices like these?” I saw “Remember the Titans” selling at $19.99… 10% off… why that’s only $17.99. Eeesh. Pass. I sniffed at their magazine racks (the only things really at 30% off) and walked out. I visited Newbury and left with some comics. Newbury’s DVD and Used DVD prices are fantastic. Even on new items, they seem interested in value and NOT fixated on the term “retail price” (“hey, we’re retailers… that MUST be what we should charge!”) I’ve sure their CD prices don’t suck either, considering they know their audience (sometimes the emo chicks behind the register look cute too).

Even going out of business, Tower couldn’t get any business from me. That’s gotta tell ya something. I used to like Tower back in college. They had a store in Boston on Newbury street before they moved some years back (coincidentally next to another still-in-business Newbury Comics). They were a nexus of counter-culture. I remember them being the first place to have a collection of movies like Shaft and other Blaxploitation pics. I remember they also had Star Trek on laser disc, back when I couldn’t find laser discs to save my life. They sold to Virgin Megastore, and fell out of my life. It’s clear they’ve kept falling.

Travis Zirkle says:

Re: Tower killed Tower...

I can understand how you were disappointed by the prices at Tower during liquidation. However, I do need to point out that the sale is progressive in the percentage off. Also, online sales and big box stores make very little on sales because there is little mark up. These stores, unlike Tower and Wherehouse, are not dependant on this product line to pay the bills. Those stores also are not deep catalog. You get what you pay for, if you want a great selection, guess what. Also, Tower did not sell its Boston location to Virgin. Tower’s lease was running out on the building and Virgin entered a deal with the landlord which shut Tower Records out.

Geren (user link) says:

Tower Going Out Of Business Pricing

Tower’s inventory is being liquidated by a company that specializes in liquidations. Typically, these companies will make their discounts off of “list price,” not “retail price.” The first few weeks of such a sale will generally see higher prices than what the origial retailer regularly sold merchandise for. The American people are suckers, and they just assume that because it’s a “sale,” it must be a good deal.

Yet another Anonymous Coward says:

Because they are uncool

Yes, I bought a couple of hard-to-find CD’s at Tower when I lived in SoCal. But, the place just wasn’t cool. Their crowd got divided between the glitz that went to Virgin (Isn’t it ironic that Virgin’s new Hollywood showcase is just a block from the pornography museum?), and the real music lovers that go to Amoeba Records which has live local bands, folks like Steve Jones (of the Sex Pistols) shop there, and free parking for customers.

Virgin sells on the Internet too, and has tech running out their ears. Amoeba’s biz is used CDs – considering they are fed by radical Californians, the content mix tends to be extremely varied.

I don’t want to even consider Wal-Mart – they censor EVERY CD they sell within the store. I still need to replace that one ZZ Top disk.

But still, to bad for Tower – but it was just twitching on the ground.

GunGeek says:

I used to work at Tower corporate in IT

For about a year back in 1999-2000, I worked for Tower in their corporate IT department in Sacramento.

At that time, their online store did about the same amount of business as their largest stores did. Because of that, they figured the internet was never going to be a huge thing for music sales and they should treat it just like they would any other of their big stores.

FWIW, from a corporate frugality standpoint, this company was tops. The IT people were in a building in an industrial park. From the outside, you couldn’t tell us apart from the place wholesaling oil filters. Inside, it was about as good as cubes get. Way cheaper office space than most places had. Even the bigwigs only had a very few offices in the expensive downtown office.

Unfortunately, they might also have meant that they didn’t have any fat to trim when they needed to.

Anonymous Coward says:

We had a Media Play store (I think owned by Tower) go out of business for some of the same reasons people have listed here. The prices were horrendous. A regular DVD was five dollars more than everywhere else in town. I don’t buy cds that often, but they were more expensive too. I think it was a combonation of the internet and their own horrible pricing policies that put them out of business.

:HAn. says:

It was greed more than an underestimation on onlin

Bottom line, Tower got greedy WAY before the internet was any real threat. In fact it was this kind of greed tha helped internet sales/”sales” flourish.

Rememebr when the Wiz’s average price for a CD was around $11.99? (Maybe back in 95-97). There was a court case to cut CD prices because it was so much cheaper to create CDs than it was when they were first announced. Well, it turned out that they didnt have to lower prices, in fact, they RAISED them afer the hearings by at least $2 across the board!

In fact, after this shift, Tower Records became the worst offender… charging upwards of $18 for a single CD. I remember laughing back then realizeing the course they were now destined for. And I am laughing again today.

Tower, I loved ya, but you did us wrong. Buh-bye.

Solo says:

“noting that the executives at Tower (and plenty of other retailers) never really believed the internet would impact their business.”

Those who forget history are doomed to repeat it.

Like GM and Ford never believing the Japanese could kick their butts. Or the ones in the horse business never imagining the automobile would take over. Or dismissing “talking” movies as a mere gimmick. Silent movies are here to stay.

Chose only one:
– If you don’t believe it, it is not true.
– If you don’t believe it, I know a good lawyer with reasonable fee for chapter 7 goodness.

Mort says:

tower rcds

It’s a sad day for anyone interested in classical or jazz music. Tower was one of the few places one could find back catalogue of serious music. You could find perhaps 20 different recordings of the Bach Cello Suites and actually discuss them with knowledgeable salespeople, especially at the NYC Lincoln Sq store or in the Village. Years ago (in the vinyl era) even the personnel in local Tower stores knew their music.But that changed. In recent years most Tower salespeople were simply file clerks who knew nothing about music. Recently I encountered a clerk who thought the great Bill Evans was a country singer. Music afficionados understand that online shopping will never replace the unalloyed joy of walking around a record store, chatting with other record geeks, riffling through the bins, holding and reading the album covers, savoring the artwork, and listening to Monk or Miles or Ella in one department and then in another Uchida playing Mozart or Colin Davis conducting Sibelius. On the subject of artwork: Does anyone remember the cover of Reiner’s recording of Hovaness’ Mysterious Mountain? So tell me how online comparison shopping of Beethoven’s Ninth could possibly rival the bricks and mortar experience? A few clicks and wham, you’re done.
Sad, sad, sad. I remember the day I stood in a long line outside a Sam Goody store at 9am waiting for the store to open in order to be among the first to actually hold and own The Beatles White Album. Today I could sit home and click on a website while watching the home shopping network. A week later I could have my little cd and actually read the lyrics with a magnifying glass while I listen to my digitally enhanced copy. Sam Goody the “real” record store died decades ago and now Tower is dead, dead, dead.

Mark says:

Re: Music Experts or Cashiers

One thing I really miss in any specialty store (not just music stores) is expert sales people. In the old days before WalMart, sales people knew their product line. Now, you walk in the store and the clerk doesn’t know squat about anything; they just know how to push an item through the cash register.

Russ Crow says:

Tower Records Today - Record Companies Tomorrow !

And If the record companies don’t wake up they too will go the way of Tower, and the rest. Big Honchos like Capitol, Columbia, BMG, MCA, and whoever need to digitize everything that ever existed and went through their recording studios, and get it on a website where you can download it for a decent price, otherwise the likes of itunes will take care of them next. Don’t they realize the day of the cd in the record store is over. Music is becoming a data flow from your computer to your I-Pod and back again.

Neek says:

Bad for Classical

I hadn’t even thought about it until I read Mort’s comment above but it really is a big blow for classical fans. Shopping for classical CD’s or downloads online is never as enjoyable as browing at the Lincoln Center store. I don’t know of any other physical store that has the selection Tower does in NYC.
Is it really so great to be able to get everything you want from your PC/Mac at home? I’ve come across all kinds of good stuff I didn’t know about flipping around at the store, talking with other shoppers.
Sure you can get on BBS’s and browse online but
I personally find browsing online gets old quick.
I suppose it’s an inevitable slide towards instant gratification (high speed downloads) and taking care of “needs” wihtout having to interact with other people.

Steve says:

Hmmmm. Somewhere, oh yes, on Janis Ian’s website she explained why it is nearly impossible to buy the artists CD’s at a concert: the retail stores and the record labels have a long standing agreement. If Janis Ian wanted to set up a booth to sell her own CD’s at a concert, she would have to charge more than the price the stores are charging. In fact, she would have to buy the CD’s at a price that would greatly increase the risk she would lose money on the deal.

By the way, she also mentioned that although she’s had a couple of chart hits and a few dozen lp’s released, she has never received a royalty check.

What does all this have to do with Tower? Somewhere I heard the retailers are also locked into the game. Tower may have had contracts with the record companies to sell at (or above) a certain price point for some of their stock. Did they do themselves in, or was it the ‘system.’
Because something is happening here
But you don’t know what it is
Do you, Mister Jones?

The Money Man says:

Long time comming...

There are a lot of good reasons posted here about Tower’s demise. Most of them valid, some of them, well…not.
As a former employee of tower corporate in the Finance dept., I witness first hand the slow choking of tower and the inability or more like unwillingness of the execs to make changes. First, there was nothing frugal about Tower. The spending excesses from every department seemed to be a god given right wich stemed from the original Tower culture of the ’70s. Time and time again, my department tried to force the company to cut back at the corporate and store level only to have my hand slapped with a “you don’t go there” from the owners/execs. Second, the price fixing lawsuit in the late ’90s against the major record labels had a significant impact for the entry of the discounters (i.e. walmart, target, bestbuy etc). Price fixing became PIC (politically incorect) at Tower and was then substituted by MAP (minimum advertised price), however still keeping prices over inflated. It forced Tower to increase the price of the deep catalog items to make up for discounting some on the popular music that competed directly with the discounters. Third, internet sales…I remember sitting at an exec meeting discussing the internet when the Owner and COO at the time stated that internet would never be a viable option for music distribution….WRONG. And, when they finally decided to enter the online business, it was too little too late. Finally, the company had been bleeding from bad investment decisions, unprofitable US stores, UK Tower mismanagement, Latin America fiasco and Japan Tower (which was the only profitable operation but it was sold to cover some debt) and the unwillingness to shut down non performing stores.
Bottom line, it all comes down to this: owner/execs inability to understand the changing market conditions and adjust accordingly and the unwillingness to “Stop the Bleeding”…

Jeff says:

Yeah, Tower is WAY too expensive

I didn’t know Tower was going out of business until I just happened to walk by one today. As someone mentioned, yeah, their prices are WAAYY too much. Even in a “liquidation” sale, things are much too expensive. Anybody know when the LAST DAY of their stores (at least, here in NYC) being open is? When they’ll finally be forced to have REAL sales?

Emily says:

Tower was the foundation of my youth

I remember when I used to walk to Tower Records to buy LPs. That’s “long-playing” vinyl records to you young ‘uns. I was even an employee, and it was a fun summer job. I loved it. I remember going to work one December, I didn’t even have my coat off and a customer latched onto me and begged for my assistance. Two months ago, it was empty of people and product with one register running in the entire three-level store.

I knew something was seriously wrong when I went in last summer and they did not have THE WHITE ALBUM by the Beatles. Not have THE WHITE ALBUM? That’s not good.

Yes, their CDs were expensive. Yes, they expanded internationally too fast and underestimated the internet and so on.

But back in the day when there was no internet, you would hang out at the record store, flip through the racks when all of the sudden, you came across something. You don’t just “find” something on amazon.com. Usually, you already know what you’re looking for when you purchase something online. Amazon.com can’t offer assistance when you have the “I’m looking for this CD (enter title) and I can’t remember the name of the band, and so and so was the lead and they were big in the 80s, and their one big hit was “Heart and Soul . . .”, or you heard a 15 second snippet of a song in a commercial and now you’ve got to have it.

As a clerk at Tower, I learned a lot about music, particularly classical, that I never would have learned otherwise. My colleagues and I would rest after filing away CDs and chat about music, and we noted the strong reactions from people who either loved or hated Maria Callas. We had quirky (and nutso) customers too, but that was what made the experience at Tower so wonderful.

The internet will never be able to recreate the idea of browsing through the racks. Half the CDs I own are cds I bought at Tower–things I happened across by accident.

Another thing–the internet makes you pay extra for overnight shipping when you need that item NOW. Tower–it was worth the extra 3 or 4 bucks if I needed it NOW.

And big box stores and the internet offer a lower price because they CAN. They buy enormous quantities–that’s their success story. Tower–Tower’s idea was to offer at least one CD of every title. They didn’t always succeed, but they tried. Royalties, shipping, manufacturing–these are all factored in to the retail price. In the end, the retailer (in this case, Tower) only makes something like a 10% profit. Thus, they have to price their CDs higher than Wal-mart.

I hate spending my time online, looking for CDs. I hate Virgin Records, it’s an unpleasant shopping experience. I like to browse. And Tower gave me that.

But now that Tower is to close its doors, one wonders about the music industry itself. With only big box retailers and Virgin and your small mall stores as physical walk-in options–this could mean the end of choice as a consumer.

If Barnes & Noble were to go bankrupt, well, that’s it. That means that we no longer really have a choice. MTV and VH1 have sucked for a long time now, no one shows music videos, and I don’t want to watch TV on my computer through the internet. Any media for sale is all about word of mouth, and what’s a bestseller. And I’m really sad that it’s come down to that.

Carol says:

Re: Tower was the foundation of my youth

There’s a Tower & B&N in the same area by me. I have always found B&N to be even more expensive than Tower.

I do agree with the browsing at a record store, but I have also been able to find some things online that I never would have found at a store. Those things are almost always compilations though.

vini says:

painful, but adapt

in the 80s the red and yellow plastic bag was called the “downtown briefcase”
you filled it with vinyl

it is a huge loss to me — 20+ years of visits … would the odd disc i passed up the last time have been nabbed already?

i was reminded that J&R music world still sells a lot of classical — further downtown –their web site looks quite good, haven’t been there in a while

yep, can’t poke through bins any more anytime soon — except at used houses, j&r, b&n.

have to read magazines now.. fanfare, gramophone? or play it yourself

Stuart says:

The loss of Tower Records

The closure of our beloved Tower Record stores stands, in my mind, as yet another deathblow for recorded classical music and opera. Tower Records was virtually (gee I now really hate that word!) the only chain of record stores seriously devoted to a wide array of classical music from the major record labels right down to the the very small European import labels. Tower’s disappearance will leave only the big box bookstore chains (Borders and Barnes & Nobles) as the only source left for a semi-decent chance for the seriosus classical music lover to find what he or she is looking for. Tower . . .you were the best . . .you cared . . .we cared . . .Thanks for everything!

Thomas (user link) says:

Tower Died because the right company didn't buy th

Amazon.com should have bought this chain and made it a destination store.
Their business model would have kept Tower flourishing and consumers would have had a brick and mortar representation of Amazon’s video, book and music market.
i.e. You go to the Amazon/Tower store check out a song/album/video/book and either buy it new on the spot or order it on the spot used for less and shipped to your home from wherever in the US. Which would have been a big KA-CHING for Amazon.

Savvy internet shoppers were already doing this at Tower anyway, so it would have been win/win for Amazon to own the brick/mortar store and the cheaper alternative.
Of course everyone at Tower hopefully could’ve kept their jobs and Tower’s excellent underpaid team of sullen (yet helpful) employees could still be providing customers with face to face service.

Heather says:

Falling Tower

The price tag may be cheaper but the eventual cost is higher. To keep prices low companies sell products made by low-wage workers (WalMart products are almost all made in China), or they eliminate jobs altogether (Just consider how many Tower employees lost their jobs and how few employees are needed to run the internet downloads). Naxos label sells cheap CDs because they pay musicians almost nothing. By doing some research on the product and buying it from a store that pays union workers decent wages, I hope that the job I am eventually saving is my own.

miranda says:

Music is less personal.

I am not old. I am quite young. I’m 17. I hate downloading music and I HATE iPods. I hate all of this technology that’s taking away the magic of music. The only time I download music is when it’s a live recording. Other than that I try to speak out to my dumb ass peers who think it’s cool to pirate music. I dont get how they can let something so wonderful go downhill. I wish I could have had the experience of shuffling through racks for EPs/LPs/records.I grew up pretty much seeing record and music stores go out of business. It’s a very sad thing. It makes music less personal. You no longer feel like you have FOUND it. or like IT has found you! It’s just click, read, click, search. BAM, that’s it. Why are people becoming so lazy and dull? I think it’s so fun to go to a music store. The only one I can go to is far away…Zia, I hope that doesnt crash. All I can say is that I’m really upset about where the world of music is going. It makes me even more scared to think of what it will be like in 10, 20, 30 years. =/ why dont people care?

Stephen Wright says:


So Tower retail has disappeared in the States finally as well. They vanished suddenly in the UK here about five years ago, and since I was a Salesman for a record company at that time and Tower was such a big customer of ours, the knock on effect was that I lost my job.
I am now in a completely different industry, but music is still my passion. One of the biggest problems I found when dealing with the UK arm of Tower was that although they had knowledgeable staff, they had little if any stock control. I remember going into a fairly small Tower branch many years ago to buy a Doobie Brothers album, couldn’t find the one that I was after (‘Minute By Minute’) yet found TWENTY FIVE copies of Toulouse Street in the section. I wonder how long it took them to get through all of those….. Also, you could never sell any title in to their stores without a bar code number, meaning that other stores were getting titles in before Tower had even ordered it.
Price-wise, they were never particularly cheap, but they were sometimes interesting stores to look around. At the end of the day, they just were too sluggish to change and the ‘business carpet’ was tugged from under their feet.
Sorry to see them go at street level, but I guess it was inevitable.
Steve. Kent / UK.

Bill says:

What made tower great

What made tower great was not a HOT new release that YES, one could buy at Best buy or such store for 1/2 the price.
What made tower great was the HUGE selection of music that was NOT even carried by such Best buy or like Chains.
Off course, if you don’t buy anything but what is number 1 on the charts, tower is a greedy overpriced store.
However, if you have different taste (and many times many of us like both current hits and “other” Music) the day of going to the store and finding such is gone. Anything not “American Idol” or a BIG current name will not be in stock in most stores left.
THIS is what made tower a special store even in 2006. Yes, a current smash hit could be purchased much cheaper at other stores, but for other music it was a grand place to find that music

DrMatt says:

Tower Outta business

you know, i’ve been out of California now for 5yrs and i have missed the availability of obscure hard to find music. i mean i have been introduced to a few new stores that honestly i didnt were alive. I think that the chapter 11 of Tower is just a very sad thing. i didnt even knwo it was happenning till about 2 mos ago and i was upset, shoot, i have 3 tower bags in my house that i use regurlary, one for my golf tees, one for my garbage in my car whice is the same bag i’ve had since i bought my car 7yrs ago, and one i just keep like other memorablia bags…the loosing of this store is just horrible, i ahvent been able to find the variety of music since i left sacramento. Im only 27 and have traveled all over the US, so that something to say..thats like closing the breadshop…and peopel of sacramento will udnerstand that..but its soo much larger then that. I will Tower Records and i will now take my tees out out of the bag and my golf bag and put in tmy bin of things to kep and treasure…i have missed and willl more now going to hte 16th and broadway store in sacto….

Edward Johnson says:

Tower Closing

Internet downloading definitely was Tower Records undoing. More than 50% of music purchased now is buy download. This started when Napster was free and other filesharing programs followed. Now we have iPods and other MP3 devices pushing out CD players today. The younger generation no longer value the artwork in a LP or CD they just want the music. Although I believe in buying the original composition the average 15 – 28 could really care less as long as they have the music in their MP3. No store can actually compete with the speed of a download.

MARK says:




oldschool says:

What killed tower is simple, when Solomons son took over it all went to crap, he hired all his buddies to be vps of something or other and indulged his own personal whims, things like printing a book of his photos that no one wanted at company expense. My god, so much wasted money and so many out of jobs due to his imcompetence and using the company as his toy.

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