Tower Records May Fall Before a Deal Is Done

Tower Records, which has been for sale for three years, may go out of business. Tower was an oasis of what was known in the trade as "catalog" - a cornucopia of back titles, imports and hard-to-find classics. It all sounds quaint today, now that music fans have virtually every album ever made at their digital fingertips.

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On Thursday, Tower Records will sell off its assets in a court supervised auction. The money will go to pay creditors of the twice bankrupt company. Tower's star has fallen quite a ways since the 1970s and ‘80s, when it was the place to buy music.

As NPR's Laura Sydell reports, Tower's troubles are signs of larger changes in the music industry.

LAURA SYDELL: It was 1968. Russ Solomon, who owned a small shop in Sacramento called Tower Records, came to San Francisco one night for a good time. The next morning while nursing a hangover, he noticed a building on the corner of Bay and Columbus Streets.

Mr. RUSS SOLOMON (Founder, Tower Records): I was trying to get well from this horrible night and looked across the street, and here was that empty building -just a beat up, old, empty building on a lot, and it had a for rent sign on it.

SYDELL: The building was more than 6,000 square feet, much larger than most record stores at the time. People told Solomon the shop would be too big, but it was the year after the summer of love. San Francisco was the center of a vibrant music scene. Solomon stocked his new Tower Records with all kinds of music.

(Soundbite of music)

Mr. SOLOMON: These kids that came in on a weekly basis to go to the Fillmore, the Avalon or just experience the Haight scene or the whole scene, they wanted to know where the music came from. They wanted to know the roots of all the music that was being created here by those bands.

(Soundbite of song, “Don't You Want Somebody to Love?”)

Ms. GRACE SLICK (Jefferson Airplane): (Singing) Don't you want somebody to love? Don't you need somebody to love? Wouldn't you love somebody to love? You better find somebody to love.

SYDELL: Solomon found customers who loved his shop's extensive collection. It was such a success that he opened another on the Sunset Strip in Los Angeles, which counted celebrities like Elton John and Michael Jackson among its clientele. Each Tower store stocked every genre of music. Not only did Tower have the latest record by The Rolling Stones, they had every album the group ever made. By the mid-1990s, Tower owned more than 200 stores and did a billion dollars in business. In 1995, it became one of the first stores to sell CDs online.

The Tower outlet in New York on the corner of 4th and Lafayette Streets in Greenwich Village is one of its best known. Keith Richards and Cher used to live upstairs. This afternoon, the store isn't very crowded. Customers like Eliot Schwartz say this is no longer the only place they shop.

(Soundbite of music)

Mr. ELIOT SCHWARTZ: I - you know, I go to Amazon, and then the sellers that don't sell quite-new material and used CDs, and some of it's, you know, it's a good buy. And Amazon, with the free shipping and everything.

SYDELL: Tower's fledging online operations were quickly eclipsed by Amazon, which had an even larger selection and sold other products. But the Internet was just one of the myriad of threats Tower faced. In the mid-1990s came the rise of Wal-Mart. The so-called big box stores, like Best Buy, lured customers in by selling CDs below cost. Then came the rise of the illegal file sharing networks.

In the last six years, traditional bricks and mortar music sales have fallen 25 percent and the number of music retailers in the U.S. has dropped by more than 3,000. Tower now has less than half as many stores as it once did. Tower's Russ Solomon points the finger at the record industry, too, for phasing out the single. Singles were cheap, says Solomon, so young customers preferred them to albums.

Mr. SOLOMON: By having singles, the kids could come in frequently because they could buy a new single every week. They'd only spend a couple of books. So there's nothing there for them to buy. So the industry lost a generation of kids. They chased the kids out of the store.

SYDELL: And then kids got another place to buy their singles, says Josh Bernoff, a senior analyst at Forrester Research.

Mr. JOSH BERNOFF (Forrester Research): A lot of the life in the music business comes from impulse purchases - people going to stores and seeing something they didn't know they wanted. Well, a lot of those impulse purchases are now taking place on iTunes. If you can't get the people into the store, you're not going to make the sale.

SYDELL: Tower's name must still be worth something. Some 15 companies have come forward to bid on Tower's assets during Thursday's auction. So there's still the possibility that record stores called Tower will survive.

Laura Sydell, NPR News, San Francisco.

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