Tower Records was the most famous record store chain in the world, and in late 2006 it was sold off for parts. Russ Solomon founded it in Sacramento, California in 1960 — the name borrowed from the Tower Theatre nearby, the first stock pulled from the back of his father’s drugstore — and over four decades built it into a global institution: more than 200 stores spanning North America, Japan, the UK and beyond, peaking around $1 billion in annual sales in 1999. Its yellow-and-red logo, its enormous Sunset Strip flagship in West Hollywood, and its house ethos — knowledgeable clerks, deep catalog, a place to spend an hour you hadn’t planned to spend — made it the cathedral of the album era. On October 6, 2006, after its second bankruptcy in two years, the liquidator Great American Group won its assets at auction, and the going-out-of-business sales began the next day. The last US store closed on December 22, 2006.
No single thing killed Tower Records; three arrived together and reinforced one another. Digital downloading and piracy — the Napster era, then the iTunes Store — gutted the CD, the high-margin unit the whole business was built on. Big-box retailers like Best Buy, Walmart and Circuit City used hit CDs as loss leaders, pricing new releases below what a specialist could match. And Tower carried heavy debt from an aggressive 1990s expansion, much of it overseas, that left no cushion when revenue began to fall.
The combination was lethal in a specific way. The big-box price war squeezed the margin on the front-of-store hits; downloading destroyed the volume; and the debt meant that when sales fell, the company could not retrench fast enough or cheaply enough to survive the gap. A specialist retailer whose entire value was deep selection and expertise found that customers would happily get the deep selection from a file-sharing network and the hits from a discounter, leaving Tower paying rent on the in-between.
Tower filed Chapter 11 in 2004, restructured, and filed again in August 2006. This time the auction produced a liquidator’s bid of $134.3 million rather than a buyer willing to keep the stores open — against roughly $200 million owed to creditors. The 89 remaining US stores were sold down to the fixtures. Russ Solomon’s farewell email to staff read, in full character: “The fat lady has sung. She was off-key.” The chain’s rise and fall was later told in Colin Hanks’s 2015 documentary, “All Things Must Pass.”
Musicland was the dominant music retailer in the American shopping mall — the parent of the Sam Goody and Suncoast chains and the Media Play superstores — and in January 2006 its holding company filed for Chapter 11 bankruptcy and was broken up. Tracing its roots to a Minneapolis record operation in the mid-1950s (and absorbing the older Sam Goody name, a New York fixture since 1951), it grew into the largest music seller in the United States, with more than 1,300 stores at its 2001 peak and revenue north of $1.8 billion. For two generations, the Sam Goody at the mall was where a teenager spent allowance money on a cassette single or a CD, and the chain’s logo was as much a part of the American mall as the food court and the fountain.
Then the music moved off the shelf and onto the hard drive. Napster, then iTunes, then the simple habit of buying one song instead of a $16 album drained the category Musicland was built to sell, and the discount big-boxes — Walmart, Target, and Best Buy itself — undercut what was left. The mall record store, with its narrow margins and its rent, had no answer.
The financial story is its own small tragedy of timing. Best Buy bought Musicland in 2001 for roughly $685 million, at the very top, betting it could turn mall music stores into mall electronics stores. It could not; Musicland bled, and in 2003 Best Buy handed the whole thing to a private-equity firm, Sun Capital Partners, for no cash at all — Sun Capital simply assumed the debt and the leases. Three years later, Sun Capital’s Musicland filed for bankruptcy. The surviving Sam Goody and Suncoast stores were sold to Trans World Entertainment and folded into the FYE banner; the Musicland name, and most of its stores, were gone.
Virgin Megastore was Richard Branson’s grand statement about how entertainment should be sold — vast, loud, theatrical temples of music, movies, and games — and in the spring of 2009 every one of its stores in the United States closed. The first American Virgin Megastore opened on the Sunset Strip in Los Angeles in 1992, and the chain went on to plant flagships in the most expensive retail real estate in the country: the Times Square location that became the highest-volume music store in America, and the Union Square store a few miles south. At its 2002 peak the US chain ran about 23 stores and took in roughly $230 million a year. These were not mere shops; they were destinations, with listening stations, DVDs, books, and a scale designed to dwarf the mall record store.
What undid them was, first, the same digital tide that drained every music retailer. Album sales fell nationwide for most of the decade as file-sharing and then Apple’s iTunes taught customers to buy single tracks, or nothing at all. By 2009 the six remaining US Virgin Megastores were generating about $170 million, down sharply from the peak.
But the final blow was real estate, and it is the part that makes the story unusual. In 2007 the chain’s US operation was bought not by a retailer but by its own landlords — the developers Related Companies and Vornado Realty Trust. They held the leases on the most valuable Virgin locations, where Virgin paid rents locked in years earlier at a fraction of the going rate. The owners did the math and concluded the stores were worth more dead than alive: a higher-paying tenant would earn them far more than a music chain could. Forever 21 took the Times Square flagship. The Virgin Megastore was not so much defeated as repossessed.
Crown Books was the chain that put “books cost too much” on television, and in 2001 it found out exactly how much its own death would cost. Founded in Washington, D.C., in 1977 by Robert Haft with money borrowed from his father, the developer Herbert Haft, Crown was a discounting pioneer: it slashed the cover price on bestsellers, advertised the savings relentlessly, and forced full-price booksellers to explain why a hardcover should cost what the publisher printed on the flap. At its height around 1991 it ran roughly 257 stores and was one of the largest book chains in the country, with sales around $305 million.
Its undoing was a textbook irony in three parts. First, Crown taught the market that books should be discounted — and then the superstores it helped inspire, Barnes & Noble and Borders, took that lesson to a scale Crown’s small shops could not match, pairing deep discounts with vast selection and a café. Second, Amazon arrived in the mid-1990s and discounted everything from a warehouse, with no storefront to defend. And third — the part that made Crown a tragicomedy — the Haft family detonated: a bitter divorce and succession fight tore through the parent Dart Group, the founder was fired by his own father, and the company spent its critical years litigating itself instead of fixing the stores.
By the time the dust settled, Crown was a small-format discounter in a superstore-and-internet world, with no functioning family and no patient owner. It filed for bankruptcy in 1998, emerged briefly in 1999, and refiled in February 2001 — this time listing about $75.2 million in assets against $58.9 million in debts and asking to liquidate. Books-A-Million scooped up around eighteen of the better stores in April 2001 for a fraction of their worth; the rest were closed by that summer.
What was lost was a genuine consumer benefit — the chain that made cheap books normal — undone by the competitors it had trained and a family that could not stop fighting long enough to save it. Crown Books is the rare retail death where the autopsy finds both a structural cause and a self-inflicted one, and cannot quite decide which killed the patient first.
Wherehouse Music was the dominant record retailer of the American West Coast, and on January 21, 2003 it filed for Chapter 11 bankruptcy for the second time in eight years. Founded in 1970 in Gardena, California, by Leon Hartstone — and incorporated, with an entrepreneur’s optimism, as Integrity Entertainment Corporation — the chain grew into a fixture of Southern California strip malls, its stores stacked with vinyl, then cassettes, then compact discs, and, eventually, used CDs, video games, and rental movies. By the late 1980s it ran nearly 300 stores; after a 1998 acquisition of the Blockbuster Music chain it briefly commanded one of the larger music footprints in the country. Then the format that had made it rich — the $15 CD — collapsed into a free file on a college dorm hard drive, and Wherehouse, already weighed down by debt, could not survive the second fall.
The company’s epitaph, filed in court, blamed the obvious culprit. Management attributed its 2003 collapse to “the proliferation of free music on the Internet over the past several years, coupled with an exponential increase in the use of CD-burning technology,” noting that music sales across the industry had fallen roughly 10 percent in the prior year. That was true, as far as it went. It was also the convenient half of the story: Wherehouse had already gone bankrupt once, in 1995, well before Napster existed, and had emerged having changed remarkably little about what its stores actually did.
What the second filing exposed was a chain twice felled by the same disease — debt — and then finished by a genuine technological shift it was too leveraged to outrun. The 1998 purchase of Blockbuster Music from Viacom, for more than $115 million, doubled the store count and the liabilities at the precise moment the CD’s long decline was beginning. When the music finally stopped, Wherehouse carried more than $222 million in debt against $227 million in assets, and roughly 4,750 employees waited to learn how many of them had a job.
The afterlife was an absorption. In the bankruptcy auction, Trans World Entertainment — the Albany-based roll-up that had already swallowed Camelot, The Wall, and Coconuts — bought the surviving 148 Wherehouse stores for $41 million, closed 35 of them, and converted the rest to its FYE banner. The Wherehouse name, the one the radio ads had taught a generation to pun on, was gone from the strip mall within a couple of years.
Camelot Music was the great mall music chain of the American Midwest, and it ceased to exist as an independent company on April 22, 1999, when it was folded into the Trans World Entertainment roll-up that would become FYE. Founded in 1956 by Paul David in Massillon, Ohio — as a humble rack-jobbing operation called Stark Record and Tape Service, stocking 45s and LPs in drugstores and grocers — it grew over four decades into one of the country’s largest record retailers, with roughly 360 stores at its early-1990s peak, a fixture of the enclosed shopping mall whose tagline cast its clerks as “the music people.” It did not so much die as get absorbed, at the very moment the compact-disc business was cresting and about to turn.
The mechanism here was not a single technological guillotine but a slower vise: consolidation. As CD margins thinned and big-box discounters like Best Buy used cheap music as a loss leader to pull shoppers toward television sets, the mall music chains were squeezed from both ends — by retailers who undercut them and, soon after, by a digital format that would make the disc itself optional. Camelot’s response, like much of the industry’s, was to get bigger, buying The Wall and Spec’s Music in 1998 to become the nation’s largest mall-based music retailer, and then merging that combination into Trans World.
The irony, and the warning, sits in the timing. Camelot had already passed through bankruptcy once — a 1996 Chapter 11 driven not by the internet but by a leveraged buyout. The Bahrain-based fund Investcorp had bought the chain from its founder in 1993, and roughly $300 million of the $476 million in debt that drove Camelot into court was the cost of that buyout. The company emerged in January 1998, leaner, then promptly spent its renewed strength on acquisitions, and within a year had merged itself out of existence into a larger entity facing the same digital reckoning.
Fate, here, is Acquired: Camelot was not liquidated in a fire sale but absorbed and rebranded, its stores eventually carrying the FYE banner. The “music people” of Massillon kept their lights on under someone else’s name — until that name, too, retreated before downloading and streaming over the decade that followed.