Elton John World News: Bad News For a Musical Giant

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One of Elton's Favourite Shops is Folding

Tuesday 10 October 2006 @ 16:20 - GMT

Tower Records, once a sign of the vitality of the US music retail market, a multinational purveyor of musical knowledge and influence, has gone under.

Two years ago the company filed for bankruptcy. It recovered and at the start of this year a new chief executive, a bankruptcy and crisis management specialist, was brought in. But on August 20 the company again filed for bankruptcy and three leading record labels stopped supplying the chain, saying that it had not paid its bills.

Tower's fate was decided last week at a Chapter 11 bankruptcy sale in Wilmington , Delaware . While 16 bidders entered the auction, the winner was an asset-stripping company called the Great American Group, based in Los Angeles , with a bid of $134.3m (£71m). The group plans to sell as much of Tower's stock as it can over the next eight weeks, with proceeds going to pay the company's creditors, who are thought to be owed $210m.

"We're going to have discounts for consumers to enjoy as they've never been seen before in the history of Tower Records," said Andy Gumaer , president of the Great American Group.

Tower's founder, Russ Solomon , told employees in an email: "The fat lady has sung ... She was off-key. Thank You, Thank You, Thank You."

The liquidation was expected to lead to the loss of 2,700 jobs in the US .

 Solomon began selling records in the 1940s from the back of his father's drugstore in the Tower Theater building in Sacramento , California . In 1960 he opened the first Tower Records and the chain spread to San Francisco and Los Angeles before expanding across the US and internationally. It opened its first store in the UK in the early 1990s, and closed its last shop there a decade later. By the mid-1990s there were more than 200 Tower stores around the world generating $1bn a year in sales. Its megastores boasted well-informed staff, extensive stock and long hours.

"Not sure who sings that song by that guy who sang that other song?" asks the website for the Sunset Boulevard store. "Our friendly and knowledgeable staff is always ready to help."

The cramped shop, one of several Tower outlets on the Sunset Strip, hosted performances by some of music's biggest names, including Prince and Elton, and Mr Solomon became one of America 's richest men.

But like the rest of the music retail industry Tower was hit by the advent of the internet, with its promise of online shopping, music downloads and piracy.

In 2004, when the group first filed for bankruptcy, the Solomon family gave up 85% of its holding. In the last fiscal year, sales dropped 10% to $430m, although only 13 of Tower's 89 American stores were thought to be losing money. Retail music sales as a whole fell 17% in the US from 2000-2005.

But despite the downturn, Tower has provided a lifeline for the independent sector, with many niche labels dependent on the retailer for selling its product in the US . "A whole bunch of smaller labels are going to disappear completely," said René Goiffon , president of the classical label Harmonia Mundi . "The smaller labels are probably going to lose 80% of their sales."

With Tower gone from Los Angeles , he said, there would only be two serious music shops to cater for a city with a population of more than 4 million. "It's the end of an era for me and many others," said Mr Goiffon . "It was the biggest name, the last name that was synonymous with music, commitment, catalogue and knowledgeable buyers. We are left with Best Buy, Target, Wal-Mart and K-Mart, which are all stores where companies like Harmonia Mundi have no presence whatsoever."

Donald Ross, who has been coming to the Tower shop on Sunset for 30 years to buy jazz, hurried down when his wife saw a news item about the closure of the chain. "My wife said: 'You'd better get down there quick and spend your gift certificates,'" he said, clutching a small yellow plastic Tower bag containing CDs by Benny Goodman and Marty Grosz.

"The staff don't look like they know that kind of music but they do, strange as it seems," he said.

The Tower store on Sunset Boulevard, one of the few properties owned by the company, was sold to a real estate company for $12m. Another company named Norton LLC bought the rights to Tower's brand name, website and other assets.



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