Group Plans to Liquidate Tower Records

By Randall Chase, AP Business Writer
Friday, October 6, 2006

After a lengthy auction stretching over two days, a federal bankruptcy judge on Friday approved the sale of California-based Tower Records to Great American Group, which plans to liquidate the music retailer.

After almost 30 hours of what attorneys described as "robust" and "vigorous" bidding, Great American won with a bid of $134.3 million, beating Trans World Entertainment, which had hoped to continue operating at least some Tower stores, by a single bid increment of $500,000.

Peter Gurfein, an attorney representing Tower Records, said the company will be sold for an aggregate of $150 million, including the sale of various leases and properties.

Gurfein said Great American plans to begin the liquidation process and going out of business sales on Saturday, which eventually will result in the elimination of the jobs of some 3,000 Tower employees.

"This is not an easy decision," said bankruptcy Judge Brendan Shannon, who nevertheless noted that the Tower debtors and other parties had agreed the bidding process was conducted fairly and in good faith.

Tower Records, which has 89 stores in 20 states and owes creditors about $200 million, filed for Chapter 11 reorganization in August. In its filing, the company said it has been hurt by an industrywide decline in music sales, downloading of online music and competition from big-box stores such as Wal-Mart.

Tower's Chapter 11 filing came two years after initial reorganization that resulted in bondholders forgiving millions of dollars in debt but taking an 85 percent stake in the company, leaving founder Russ Solomon and his family with 15 percent.

Solomon founded Tower in Sacramento, Calif., in 1960, starting by selling records out of his father's drug store and eventually opening the company's landmark store on Hollywood's Sunset Boulevard in 1969. As part of the bankruptcy auction, the Sunset property will be sold for $12 million.

Michael Bloom, an attorney representing Tower's secured trade creditors, urged Shannon to consider the closeness of the bids and the effect that liquidation would have before deciding whether to approve the sale.

"We can save this company or we can liquidate it," Bloom argued. "... Sometimes, the highest bid is not the best bid. In this case, your honor, we believe the best bid is the Trans World bid."

Trans World, which has about 1,100 mostly mall-based stores nationwide, has recently acquired other music retailers such as Sam Goody and Wherehouse Music, consolidating most of its acquisitions under the FYE name, which stands for For Your Entertainment.

Tim Pohl, an attorney representing Trans World, asked the judge whether $500,000 was "a material enough difference" to liquidate a company, as opposed to keeping thousands of people employed.

But Jay Indyke, an attorney for Great American, said Trans World and its bidding partners had discussed liquidating inventory and closing about two dozen Tower stores, and that they would not say how many stores they would continue to operate.

It's sad, but thier overpricing on product is what killed them. Both Towers near me were doing fine in the early 90's before a Best Buy opened up across the street from both of them. I used to go there to find things that I couldn't find elsewhere, such as imports. Now I find those easily online...

I used to peruse the Tower Records in Burlington, MA occasionally. I perused more than I bought due to the prices. I have gone in there only a handful of times in the last few years due to moving further north.

One of those times was last year when Jimbo came down to New England for some CD shopping. It was the also the first time I got to meet ICEr Walter P.

Tower closing is definitely the end of an era.

Some years ago my job had me traveling all over the US. Of course I'd dig into the local indie CD stores but I also made it a point to visit Tower where ever I could. My favorite ones were in Greenwich Village because it was so big(!) and San Mateo, CA because I went there a lot. Home away from home. We have a newer Tower here in Denver which was always good for a late night fix when the indies were closed.

I like their Pulse mag back in the 90's. They were way over-priced but always open. Kind of a sad day.

Very sad news. They were my primary source for CD singles for ages. Could not have done the odds & ends stuff without them.

We have a Tower right here in my home town so it was a very convenient place to shop. They've always had a great selection but (as has been posted) .. the prices...not so great. Still, I've done more than my fair share of shopping there and will be sad to see them go.

This is especially true since the choices we're left with for CD shopping (in terms of brick & mortar stores) is not fantastic. There are less and less independent stores every year, and most of the other majors are only useful if you're looking for current "Top 20" style releases.

Also, I've never been crazy about CD shopping online (it's an immediate gratification thing) so like I said...I'm sorry to see Tower go.

Sig

I was just in the Tower in my town (Cherry Hill, NJ) last night and as always bought nothing. 18.99 for a new CD? Are they serious? Great magazine section though.
I'm hoping to find out when I can binge in there when they fold-I called tonight and they said possibly within the week. I'm sure a lot of inventory will be gone and employees will get a lot, does anyone know how this will work and will the prices even be what I would call low?

It's really a shame. I used to go to the Greenwich Village (E.4 St.) store all the time to peruse their unbelievable stock. The jazz section alone was humongous. That store (I think one of the first on the East Coast) opened around the same time I moved to the Village (c.1983). It was all vinyl then.

Then again, I can't say I ever bought that much there, given the availability of used CDs in the neighborhood, as well as cheap new CDs at places like Discorama. In recent years, I only bought there during sales or from the clearance bin or CD singles.

I wonder if the liquidation sales will be any good?

Well, I sure have great memories of the beloved Tower I used to buy vinyl from back in the '70s. The one I used to go to was the one on Bascom Avenue in Campbell, CA. That place was an essential source of me keeping my sanity through my Grade School years and the first two years of High School. Now, whenever I happen to visit San Jose/Santa Clara again, it's not going to be there for me to take a peek through. It's a very weird feeling.

Sig, are you talking about the one in the shopping centre with B&N and TGIF? It's still there? (I used to live in Wantagh. )

Gurfein said Great American plans to begin the liquidation process and going out of business sales on Saturday, which eventually will result in the elimination of the jobs of some 3,000 Tower employees.


Wow! What a sad day.
I knew it was a real possibility, but I really wanted to believe Tower would somehow make it through all of this.
They are such an long-lasting music icon here in Southern California. I've been shopping there since their earliest days in L.A.
And here in Orange County, I have seven Towers within easy driving distance. When they close, I am going to be reminded no matter where I drive. I have visited them all on a regular basis. Whether you buy many releases from them or not... they will be truly missed.

A real shame, but I suppose a sign of the times.
Buying online is just not the same as walking into a well-stocked store, and "fondling" the merchandise.

I heard on tonight's late news that Tower is going to immediately offer sales on stock, beginning with 10% OFF on everything beginning today (Saturday Oct. 7).
The sale is planned to increase every week by 10% over the next 5-6 weeks.

sigh... It appears that Tower will cease to exist well before this Christmas arrives.
The Holidays won't be the same without them.

Steve

Here' s an interesting article that was posted at KCRW.com when Tower Records began having problems with suppliers in August 2006...



How to Stop Record Stores from Closing
WED AUG 9, 2006


Tower of Trouble for Traditional Music Stores
This is Celia Hirschman with On the Beat for KCRW.

Last week, the Los Angeles Times reported that Universal Music, Warner Bros Music, EMI and Sony BMG, all suspended CD shipments to the Tower Records retail chain for non-payment. Tower is an 87-store chain based in Sacramento. It's not the first time the beloved retailer was put on a purchasing hold. Financial problems have plagued the institution for years.

Last week, all the major players on the sales side of the music business got together for their annual meeting in Las Vegas. You better believe the Tower Records situation was on everyone's lips.

Some insiders think that Tower might be withholding repayments to the labels to try and negotiate a better deal. I imagine the motivation is far more necessary than strategic.

The fact is, the current business model for traditional record stores doesn't work anymore. According to the New York Times, in the last 3 years, over 900 record stores have closed in the United States, leaving only about 2700 stores intact. The reason is, the business has changed, but the model for selling music at traditional retail stores hasn't.

Major label distributors charge a wholesale price to retailers, who buy the goods with incentive discounts and lenient repayment terms, to particularly encourage stores to stock heavily on unknown artists. This means that retailers often pay for goods before they sell them. The credit driven economics of the business has worked well in the past during a thriving music market. But when the music market is highly leveraged by low-cost digital competition, and new artists rarely break through to mass media, the economics break down quickly.

In contrast, digital music sales requires no up-front buying commitment and have unlimited inventory potential. Record labels are paid on the basis of what is sold, after it is sold, and not before.

This digital model, which is a form of consignment sales, is what traditional retailers should be demanding for themselves from the labels.

In the traditional retail environment, consignment sales would mean that retailers would take whatever inventory they wanted, and when they sold the goods, they'd pay the label.

Why should traditional retail have to compete with a digital universe that is offered better terms, lower risk and no physical space limitations? Why should traditional retail finance a record labels' production and marketing expenses in advance, without sharing any of the benefits.

Change the system of how the money changes hands, and record stores will stop going out of business.

If major record labels want to slow the trend of retailers closing, they are going to have to offer something of significant value to keep traditional retailers in business. The best thing they can offer is to level the playing field for all retailers. It's only fair, and it's really about time.

This is Celia Hirschman with On The Beat for KCRW.

Just wanted to make a comment on Tower's prices and say that they were about the same as ordering online so for me they weren't really overpriced at all--just normal. Back when I got Elton John's last 5 SACD's I got 3 from the store and 2 online and with the cost of the shipping they were all around 20 bucks each for me which meant that I spent around 100 bucks for the whole lot of them. I know this is probably much more than people on here spent for them but my point is going to Tower isn't really that much different than going online so calling Tower overpriced is understandable but pretty much the norm nowadays.

The high prices bothered me less than the way their inventory contracted. I can remember going into either the Philly store or the Cherry Hill store and seeing not only the rare stuff that I read about in the specialty jazz and classical magazines but a lot of music that I did not know was out there before I walked in the store. In the last few years it has been depressing to walk in the store. The selection is not much better than a decent Border's or B&N. Few rarities, imports or small, small labels and no surprises.

I think the Tower store in Piccadilly Circus in London was the biggest CD store in the world, either that or the main HMV in Oxford Street. I loved browsing in Tower, but with US imports retailing at £17-18, I just couldn't afford to support that megastore all that much. I was always buying sale items or second-hand.

Sig, are you talking about the one in the shopping centre with B&N and TGIF? It's still there? (I used to live in Wantagh. )[/quote]



Yes....that's the one....and it's still there (at least at the moment).

Sig

Before I discovered Discorama, I was a regular at the Village Tower for years--I dropped in on opening day, and raced there the day the first batch of Beatles CDs were released in '87, on my way to work! I even remember spotting the legendary, unauthorized Japanese CD pressing of Abbey Road there--some years before I got my first CD player. They always had a good selection of import CDs. In those pre-CD vinyl days, I was there at least once a week, to wade through the latest 45 releases, checking out picture sleeves and non-lp B sides. My visits became less and less often, to the point that I may get over there once a month these days.

I'll be there for the liquidation sales, but it'll be sad to see it go.

I'll have to take a ride by the Massapequa Tower this afternoon (on the way to the gym).

Hard to believe it might be over. I bought so much stuff their I had a Tower Visa card!:D After you bought a certain amount of music, they'd send you a gift certificate. But even that perked ended so I canceled the card.

I do most of my music shopping online now or have Jimbo pick me up the hard to get stuff.

Did you get it?



Hey, I bought my first C.D. before I ever got a player - Morton Downey, Jr. Sings.

I did hedge my bets, though... I didn't open it, and kept the receipt, just in case I lost interest in Mr. Downey before I finally got a player, in which case I'd try to return it for credit. Fortunately for me, I still remain an aficionado of the late Mr. Downey.

Stopped into Tower in Denver today. All CDs were 10% off which still makes them about $3.00 too much.

sigh... Tower has removed all of the titles on sale and jacked them up to full list price.
So, that monthly group of $7.99 CDs and other assorted sale items that always greeted customers at the front of the store... are unfortunately gone now.

Makes me almost wish we had advance notice of the liquidation, so we could take advantage one last time.

In any case... the only reason to buy anything right now would be for the *selection*. You won't get any deals on price, but certain selections and choice imports will likely be gone (or pulled) before the markdowns of 10% increase each week. And buyers and scavengers will scoop up what they can... even though the prices will still be relatively high.

As the weeks go by, the long-time familiarity of Tower as we know it will be history.

Steve

from the Chicago Sun-Times--


Music shoppers mourn fall of Tower Records

October 8, 2006

BY MAUDLYNE IHEJIRIKA Staff Reporter


Nostalgia prevailed among saddened shoppers at Lincoln Park's Tower Records on Saturday.

The word had gone out, even before hired hands hit nearby corners with yellow and red signs blaring: "Tower Records Closing. Everything Must Go!" The store, at 2301 N. Clark, on Saturday began its going out of business sale.

"I heard it on the radio and immediately put it on our Saturday errands list," said Jennifer Roberts, 33, of Lincoln Park, who was bobbing her headphoned head at one of the bustling store's listening stations. "I love this place. You can find anything here. If it's music, they have it, unlike these newer places."

Chain being liquidated

She was echoed by others at what seemed a wake. Three other Illinois stores are closing too after a federal bankruptcy judge on Friday approved the sale of the California music retailer to Great American Group, which bought it at auction for $134.3 million and immediately began its liquidation.

Tower, which owes creditors about $200 million, filed for Chapter 11 reorganization in August, citing an industrywide decline in music sales, increased downloading of online music and intense competition from big-box stores like Wal-Mart as factors.

It operated 89 stores in 20 states, including stores at 214 S. Wabash and in Schaumburg and Bloomingdale.

"I can remember coming to Tower Records when I was 17 years old. We were living in Oak Park, and I'd hang out at their store at Harlem and Irving. I've been a customer for about 26 years," said Vince Porcello, 43, of Lake View.

"And this Lincoln Park store has been here for so long. I knew when Best Buy showed up it might put them out of business," Porcello said. "The selection here is a lot better than Best Buy and Circuit City. It's a shame. You won't be able to come here anymore and get the weird titles that you can't find in the mainstream."

Russ Solomon started Tower selling records from his dad's drugstore in 1960. The chain, known for deep inventory and lower prices, opened its landmark Hollywood store on Sunset Boulevard in 1969.

Somber employees declined comment Saturday. Tower's closing puts about 3,000 employees out of work.

"It's pretty sad, really. I'm always in this particular store and the one downtown," said Tammy Mercure, 29, of Humboldt Park, as she hopped on her scooter with a bagful of CDs. "Tower was the one place I could come to find any CD I'm in the mood for, even it was at 11 o'clock at night."