Sign of a sea change

Sign of a sea change

Summary: This is the way a titan ends, not with a bang, but with a squadron of emaciated temps brought in to march picket-like promotional signs up and down Newport Boulevard (and no doubt Sunset Boulevard); sullen attendants in a funeral procession.As Charles Andrews writes,If you read the business pages, it was not news that giant music retailer Tower Records was in trouble.

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TOPICS: Legal
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This is the way a titan ends, not with a bang, but with a squadron of emaciated temps brought in to march picket-like promotional signs up and down Newport Boulevard (and no doubt Sunset Boulevard); sullen attendants in a funeral procession.

As Charles Andrews writes,

If you read the business pages, it was not news that giant music retailer Tower Records was in trouble. But the speed and finality of its dispatch was a shocker to most. You’ve come to assume there’s a longer process through refinancing, restructuring, Chapter 11 and such before the patient is finally declared dead. Tower did restructure two years ago and filed for bankruptcy protection August 24, but the bidding process for takeover that began Thursday, Oct. 5, was completed Friday and the new owners, Great American Group, immediately declared that all 3,000 Tower employees would be let go as soon as every bit of inventory could be liquidated – sale starts Saturday.

My husband, who suspects I might be a card-carrying member of the Pirate Party (he's wrong; just the EFF), asked if I was happy about this turn of events.  "Happy?"  Of course not.  But aside from "the speed and finality of its dispatch," is Tower's official death a surprise?  Not a bit.  It's been dead in the Steve Gillmor Office-is-Dead sense for a long time, so seeing the final economic confirmation is just another "yep."  Charles Andrews also muses,

Maybe we no longer need a Tower Records in every community, because everything except the personal touch is available on the Internet, and the people buying the music know that. But if the day of the super-sized chains has passed, hasn’t the relevance of the mega record labels (now down to five, world-wide) who supply them actually taken an earlier death blow, through pro quality home studio recordings and increasingly-sophisticated Internet distribution and promotion, even though they stagger mortally irrelevant into the 21st century?

Of course, the personal touch is available on the Internet, whether it takes the form of the entertaining notes CD Baby includes with its sales, trusted recommending voices in the online community, or the personal connection accomplished when artists participate directly in that community.

So while I'm not "happy" to see Tower go by the wayside, not happy it couldn't adapt and adjust, I do look forward to and welcome — for all our sakes — those who can and will.  And to the day when it might no longer be necessary to employ clandestine third party remedial measures to render one's video programming watchable.

Topic: Legal

Denise Howell

About Denise Howell

Denise Howell is an appellate, intellectual property and technology lawyer who enjoys broad industry recognition for her expertise on the intersection of emerging technologies and law.

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3 comments
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  • Came close to surviving

    But the liquidator was just too determined.

    http://www.mercurynews.com/mld/mercurynews/business/15765773.htm?source=rss

    When WalMart sells 10% of all CDs and Best Buy and Circuit City also become major sellers, as so often happens the specialty retailers lose out. Toys R Us is not alone.

    The internet? A very very minor factor compared to WalMart. I guess all the increased sales gained from file sharing were not enough.
    Anton Philidor
    • Specialty? Special?

      Tower was awfully big to be dismissed as a "specialty" retailer. But the WalMart point is a good one, and not far off from the role of the Internet -- both sorts of competition require innovation on factors including but not limited to price if a business is going to survive. As for file sharing driving sales, who's to say it's not doing that for other legitimate retailers? The fact that it wasn't for Tower says to me that when a decision to buy was made, Tower wasn't high enough on the list of possible sellers to keep things afloat. WalMart is compelling as a seller on price and convenience; people are there anyway. iTunes is compelling on price, convenience, and user experience. MySpace has the opportunity to be compelling on all those fronts, and possibly others like capitalizing on the demand for more usefully licensed works, if it's smart enough to take advantage. All good lessons for those who hope not to follow in Tower's footsteps.
      Denise Howell
      • Choosing from whom and how to buy.

        The advantage now is with large size in a number of different categories and low prices.

        Toys R Us, the example in my earlier post, has been a victim of WalMart:

        "When Toys 'R' Us said in August that stiff competition from mass merchant Wal-Mart Stores was making it consider exiting the toy business, the news struck fear in the hearts of retailers everywhere.

        After all, Toys 'R' Us pioneered the "category killer" concept that's now employed by big-box specialty stores like Best Buy, Home Depot and Bed Bath & Beyond. The notion of creating giant specialty stores that cater to a particular product segment has become a staple of the U.S. economy. But Wal-Mart, the antithesis of a category killer with aisles stocked with a vast spectrum of products, is posing a dire threat to this way of business.

        http://moneycentral.msn.com/content/invest/forbes/P100080.asp?GT1=5809

        [links eliminated]

        This was posted on November 12, 2004, and the article now seems overly optimistic about WalMart. The point that remains, though, is that a store selling only one type of merchandise, like Tower, is under pressure.

        In response to this pressure, how much attention did Toys R Us pay to the internet? The company continued a partnership with Amazon which began in 2000, but has recently ended:

        "Toysrus.com teamed up with Amazon.com a year after its disastrous 1999 holiday season, when some customers got their toys delivered after Dec. 25, and is making sure not to repeat that logistical nightmare."

        http://www.sltrib.com/ci_4499103?source=rss

        The same article observes that, like Apple's share of music sales, online sakes are not very significant to the toy business, even though they are growing:

        "But online sales of traditional toys surged 32 percent in 2005, compared with the year-ago period, according to comScore Networks, an Internet research company. NPD estimates that online toy sales account for about 6 percent of total toy sales."

        Ironically, WalMart, which was said in late 2004 to be wrecking the "category killer" concept has itself become the category killer. But in many categories.

        Here's a quote from an article about yet another chain killed by WalMart and its like:

        "Weinstein said K?s had a retail model that had worked well for years with a smorgasbord approach that offered something for everyone, from jewelry to couches and electronics. But the retail ground had shifted as big box stores like Wal-Mart arrived and became 'category killers' with pricing based on volume purchasing that made head-to-head competition very difficult."

        http://www.qctimes.com/articles/2006/10/04/news/local/doc452334aaf07c7930663007.txt

        The same article shows that Tower did have a chance:

        "Randy Prince, president of the Greater Decatur Chamber of Commerce, said the retailers who survive in the post big-box store marketplace are those with a special niche ? outstanding customer service and products customers can?t get other places."

        The problem, I suspect, is that, for all Tower's customer service and wide selection, there wasn't enough volume left over after the big box stores had taken their share.

        Even Apple couldn't make money on music without the iPod.

        Offline factors are far more significant than online factors in determining survival.
        Anton Philidor