R.I.P. Tower Records

Man, I was just in the Tower Recors on the Sunset Strip a couple months ago. What a killer store. What a piece of history. Now it is history. I had a friend that worked there for a while, and he had so many stories about this celebrity or that rock star that he had got to meet and even get to know from working there. He even got to jam with Steven Adler (ex-Gun's N Roses) a couple of times. The reason that stores like this don't make it anymore, is because stores like Wal-Mart, Target, and Best Buy undercut everybody else. Well, that's just good economics, isn't it? Not exactly. These megastores can sell CD's for less than everybody else for two reasons:

1) The major labels refuse to lower the wholesale cost of CD's, which puts at a disadvantage any store that makes music sales it's main source of income. Why?
2) The big stores have a lot of money! This allows stores like Wal-Mart, Target, and Best Buy to sell CD's below cost. That's right, they take a loss on CD's and DVD's, to get you in the door to buy other stuff.

Why is this bad? The big stores that like to undercut smaller businesses discourage shoppers from paying more at a dedicated music store. This causes music stores to go out of business, as evidenced in the article below. Then we only have the big stores to buy from. These big stores only carry a limited number of selections. You want to buy Sevendust "Animosity"? Not at Target or Wal-Mart you won't (at least Best Buy does have a decent selection). You'll be lucky to find the last Sevendust album, "Next" on their shelves. Well, we'll just go down to the local record shop and... oh yeah, this store that was carrying what I want to buy is closed. These smaller stores could afford to carry more obscurities, because the slack was picked up from the popular album sales. Target and Wal-Mart steal away consumers of popular records, and then the music stores have lost the greatest chunk of their income.

Not to mention, that less competition is ultimately bad for business in a free market system. It is the presence of choice that regulates cost. American business is out of control. Granted, we live in a capitalist society, and we are all allowed to make any amount of money we like. That's a good thing. That being said, the current greed of the corporate way of business is bad for consumers and bad for business as a whole. I'm no way in favor of wealth redistribution. That's up to each individual, how we use what we make. I just believe that smaller companies should be allowed to compete. Eliminating companies that don't operate in billions of dollars a year, but maybe hundreds of thousands, is bad for our economy. Competition is healthy. This all boils down to the major label dinosaurs, once again, fighting the trends in music consumership. Instead of embracing the digital revolution, they have fought it. Instead of pricing CD's at a fair price (what people are willing to pay for them) they overprice them and collect loads of cash from the big stores that are willing to take a loss on them. The music industry needs to be rebuilt from the ground up. R.I.P. Tower. You had a good run.

http://news.yahoo.com/s/nm/20061026/music_nm/tower_dc

Tower Records demise leaves indie labels in lurch
By Chris Morris Wed Oct 25, 8:15 PM ET

LOS ANGELES (Hollywood Reporter) - Asked what he will do to make up for the business lost in the demise of music retailer Tower Records, the head of sales at one prominent independent record label responded with an almost excruciatingly long silence.
"Man," added the executive, who declined to be identified. "I don't even know if I can answer that properly."
The closure of Tower's 89 stores, after its October 6 auction sale for $134.3 million to liquidator Great American Group, will mark the end of the country's largest deep-catalog music chain, which was traditionally indie-friendly.
Many indies said the retailer accounted for between 5%-6% of their gross business and few believed that such catalog-friendly chains as Borders Books & Music or Virgin Entertainment will pick up the slack.
"I don't see that another retailer is going to step up to make that commitment to physical goods," said Bruce Iglauer, who operates the Chicago-based blues label Alligator Records.
Now in the midst of nationwide going-out-of-business sales, Tower outlets will close their doors for good within two months, leaving many independent distributors and retailers uncertain about how they will replace a significant chunk of their sales in an already rugged business environment.
"We've just begun the conversations about where we think that (Tower) customer is going to go. Honestly, I don't have an answer for that," said Herb Agner, vp marketing and operations at Los Angeles roots label New West Records.
Others also are in wait mode. "Are we retooling? Not yet," said Mike Carden, North American president of Eagle Rock Entertainment, whose catalog features a large number of heritage hard rock and metal acts. "We better start thinking about it pretty soon ... It's not going to be good. Any time a significant section of our industry is restructured, it's not good for our industry."
Indeed, the impact of the Tower liquidation can't be underestimated, many believe. "A lot of people are going to take a hit," said Tor Hansen, a partner in Haw River, N.C.-based Redeye Distribution and its sister indie rock label Yep Roc Records. "There's one less really great record store out there, and we have to understand we're not going to sell as many records."
For Redeye and others, the short-term strategy involves an increased dependence on independent stores which, like Tower, take a chance on new releases from developing acts and stock a range of catalog titles.
"We're going back to wherever Tower had a store and repartnering (with the local indie stores) to make sure everybody understands we support those stores," Hansen said. "I still want to cover those markets on the physical side, to support the touring."
Alligator's Iglauer said he planned to work more closely with groups like the Coalition of Independent Music Stores and Music Monitor Network. "They're great stores for us, but there just aren't enough of them," he added.
Online sales continue to be a slow-rolling proposition in the industry, especially for independents, but some say they will now refocus their attention on Internet commerce.
Rob Miller, partner in the Chicago-based alternative-country label Bloodshot Records, said that online sales account for just 10%-15% of the company's business. He estimates that Tower accounted for about 5% of Bloodshot's sales.
"If it was a one-to-one trade (for lost physical sales), it'd be great, but it's not," Miller said of online sales. "It's a good bandage on a much larger hemorrhage."
New West's Agner said: "We keep doing what we've already been doing, which is (making) the experience of buying online a vital experience."
Michelle Haunold, who operates the Davis, Calif., punk label Gearhead Records, also is pushing online. "We're increasingly taking advantage of the Internet. It costs us nothing to do that," she said. "That's become absolutely essential for letting people know there's music out ... Thank God the Internet exists for people like us. If it didn't, I probably wouldn't be in business."
Touring -- and selling records at venue merchandise tables -- also now becomes an increasingly important part of the sales mix.
"We won't sign an artist now who won't sell actively and aggressively off the bandstand," Iglauer said.
Bands being able to sell on the road -- "that's kinda what's paying the bills," Haunold said.
Overall, independents agree that the immediate future, without Tower, won't be easy. "We're definitely walking into a desert," Hansen said. "I hope we can find some business on the other side of it."
Reuters/Hollywood Reporter