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Tower readies Bankruptcy filing

Posted By Barry Ritholtz On February 5, 2004 @ 10:49 am In Finance,Music | Comments Disabled

Tower.bmp [1]

Another retailer bites the dust: In a widely anticipated move, Tower Records is said to be on the verge of filing for bankruptcy today.

EXCERPT:

MTS, the parent of high-profile entertainment retailer Tower Records, plans to file soon for bankruptcy protection after failing to find a suitable buyer, people familiar with the situation told Reuters on Thursday.

A Chapter 11 filing for protection from creditors by MTS would cap a long period of financial distress for privately held Tower, a chain of nearly 100 stores located mainly in the United States that sells music and video entertainment in various formats.

The bankruptcy plan would likely switch control of the company from the founding Solomon family to creditors that include bondholders and banks, sources said.

Like other retailers in the recorded entertainment industry, Tower suffers from stiff competition from mass market retailers such as Wal-Mart Stores (WMT) and high costs from retail leases.

While some elements will surely blame Tower’s demise on downloading, I remain firmly convinced that it was high prices, poor competition, and a moribund retailing experince which did them in — not P2P.

The Reuters article quotes William Brandt, chief executive of restructuring firm Development Specialists, who asks: “How do you compete with free?”

Ask Microsoft: Their OS ($129) competes with Linux (free); MS Office ($469) competes with Star Office (free) Windows. You compete with free by offering useful, quality products at a reasonable price (tho that may argue against MS Office!).

And, MP3s are not quite free: You need a costly PC with a fat pipe that costs money; Its time consuming to download a full CD, and your time has value. That’s before we even get to the issue that MP3s suck — their sound quality is somewhere between AM and FM radio.

I have hated Tower Records for decades. There was a Tower on Broadway and 4th Street near where I went to Grad School. How could they have not stayed in business? $18 CDs sold by 17 year old pierced clerks who roll their eyes at a requests for anything other than Black Flag. Well, at least the stores were loud and disorganized.

Tower has only themselves to blame.

(I plan on discussing this in much greater detail at a later date. )

Source:
Report: Tower Records to seek Chapter 11 protection [2]
Reuters, Posted 2/5/2004 9:49 AM

http://www.usatoday.com/life/music/news/2004-02-05-tower-bankruptcy_x.htm


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[1] Image: http://www.towerrecords.com/Default.aspx

[2] Report: Tower Records to seek Chapter 11 protection : http://www.usatoday.com/life/music/news/2004-02-05-tower-bankruptcy_x.htm

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