Industry Icon Tower Is Bankrupt (again)

A Broken Record Store
Industry Icon Tower Is Bankrupt and on the Block

By Yuki Noguchi
Washington Post Staff Writer
Wednesday, August 23, 2006; D01

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.
© 2006 The Washington Post Company