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Tower Records Bankruptcy Heralds Industry Changes

Music chain Tower Records filed for bankruptcy for the second time on Sunday. An expert discusses how digital downloads and large-scale music distributors are changing the music industry.

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    Ladies and gentlemen, rock and roll.


    If video killed the radio star, as the '80s anthem alleged…

  • THE BUGGLES (singing):

    Video killed the radio star…


    … then it may well be the Internet that's caused another casualty 25 years later. Sunday night, Tower Records, a once-dominant icon of music retail, filed for bankruptcy.

    The California-based company was founded in 1960, the heyday of the LP, and in 1967 pioneered the idea of the record superstore. Tower prospered through the age of the cassette tape and into the days of the compact disc.

    But Internet-based music sites, like Apple's iTunes and giant retailers both online, like Amazon, and off, like Target, Wal-Mart and Best Buy, have all put a large dent in Tower's bottom line. Sales have dropped 10 percent in the last year alone.

    Now, its 89 stores in the United States are up for sale. Tower's parent company hopes to sell the chain within 60 days.

    And we look at Tower's past and some of music's future with Donna Halper, a media historian who teaches journalism at Emerson College. She's had a long professional career in radio, both on-air and as a business consultant.

    Donna, Tower the mega-store, I understand, actually started in a drugstore. Give us a little early Tower history.

  • DONNA HALPER, Media Historian:

    Ah, yes. It opened as a mom-and-papa store. It opened in 1960 in Sacramento. Russ Solomon was the guy that started it in the Tower Theater building, that's how it got its name, and his father had a drugstore there.

    And it went from just being a little itty-bitty place to — by 1968, it was open in San Francisco. By 1979, it was open in Tokyo. In 1983, they made the big move to New York City. And that was a big move because, back in those days, record stores were regional.

    You had chains like Peaches, which was in the South. You had New England Music City which was in New England, obviously. And for Tower to jump over to New York was actually at the time quite a courageous move. And it was a very successful move.

    And the timing was perfect, because 1983 was also the year that compact discs were introduced in the United States, so Tower automatically has a niche. They're like not only here in the East Coast suddenly, but they can make a big deal about, "We get the compact discs before anyone."

    And for a while, that worked. In 1996, they had revenues of a billion dollars annual revenue. But by 1999, they're losing $8.8 million. In 2002…

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