Tower Records victim of iPod era A music icon will begin shutting its doors as a last-ditch bid to save the retailer and its 3,000 jobs fails. advertisement Article Tools E-mail to a friendTools IndexPrint-friendly versionSite MapDiscuss in a Message BoardArticle IndexRate this Article Click on the stars below to rate this article from 1 to 5 Low Thank you for rating. High Average rating: 3.11 from 805 users E-mail us your comments on this article View all top-rated articles By The Associated Press Industry insiders blame iconic music retailer Tower Records' demise on its failure to compete with the Internet and big-box discount stores, and its decision to keep opening new stores in the face of a consumer switch toward online music downloads. Great American Group's purchase of the chain, which has 89 stores in 20 states, was approved Friday by a federal bankruptcy judge. Great American plans to liquidate the chain, and going-out-of-business sales are under way. About 3,000 Tower employees will eventually lose their jobs. After almost 30 hours of what attorneys described as "robust" and "vigorous" bidding, Great American won with a bid of $134.3 million, beating Trans World Entertainment, which had hoped to continue operating at least some Tower stores, by a single bid increment of $500,000. Peter Gurfein, an attorney representing Tower, said the company will be sold for an aggregate of $150 million, including the sale of leases and properties. Among them is the company's signature store on Sunset Boulevard in Los Angeles, which is expected to fetch $12 million. "It's a sad day for the music business, and I feel badly for all Tower employees," Jim Urie, the president of Universal Music Group Distribution, told Billboard.biz. "Tower was probably the greatest brand that will ever exist in music retail." More from MSN Money So you want to raise a rock star Tune in to television's comeback Best Buy's stock is still a good buy CDs, DVDs and other things you shouldn't buy new Reception will improve for satellite radio Tower founder Russ Solomon starting selling records out of his father's Sacramento drugstore in the 1940s and opened his first store in that city in 1960. It was a new way of doing business, said Sacramento musician Mick Martin, a former Tower employee. "There were no stores devoted to music at the time that Russ Solomon came along," Martin told The Sacramento Bee. "You went to Woolworth's." Tower was known for stocking hard-to-find records and was a popular hangout for music fans. "I heard a lot of things for the first time there, hanging around," Martin said. "On Friday and Saturday nights, the hippest place to be was Tower." Industry changes caught up with company In 1968, Solomon expanded the company beyond Sacramento, opening a store on Fisherman's Wharf in San Francisco. The Sunset Boulevard store opened a couple of years later, and the chain continued to expand over the decades. The company started selling videos, too, and eventually had more than 200 stores in the U.S. and overseas. Annual sales reached $1 billion by the mid-1990s. Profits started to plunge, however, when stores such as Borders, Best Buy and Wal-Mart got heavily into the music-sales business, and the rise of Amazon.com and online music downloads sped up Tower's downfall. According to statements filed with the U.S. Securities and Exchange Commission, Tower's profits peaked at $17.3 million in 1994 and plummeted to $3.5 million by 1997. The company began losing money in 1999. Solomon, however, contended the online businesses weren't a major threat, and the company went further into debt to add new retail outlets. It added $80 million in debt between 1998 and 2000 to open a dozen more stores. Online companies "have been giving stuff away to create sales," Solomon told The Bee in 2000. The Internet "is certainly never going to take the place of stores." Reality eventually set in, though. When Tower filed for Chapter 11 reorganization in August, the company acknowledged that it had been hurt by music downloads and competition from big-box stores, as well as an industrywide decline in music sales. The filing came two years after an initial bankruptcy reorganization that resulted in bondholders forgiving millions of dollars in debt but taking an 85% stake in the company, leaving Solomon and his family with 15%. Michael Bloom, an attorney representing Tower's secured trade creditors, urged bankruptcy Judge Brendan Shannon to consider the closeness of the bids and the effect that liquidation would have before deciding whether to approve the sale. 'Model doesn't work anymore' "We can save this company or we can liquidate it," Bloom argued. "... Sometimes, the highest bid is not the best bid. In this case, your honor, we believe the best bid is the Trans World bid." Trans World, which has about 1,100 mostly mall-based stores nationwide, has recently acquired other music retailers such as Sam Goody and Wherehouse Music, consolidating most of its acquisitions under the FYE name, which stands for For Your Entertainment. Analyst George Whalin of Retail Management Consultants said Trans World, the parent of struggling FYE and Sam Goody, wouldn't have been able to make a go of Tower. "The model doesn't work anymore," he said. "I'm 62, and I have an iPod." Billboard.biz reported that the Tower Records brand might live on via Tower.com. Norton LLC, part of Great American, is putting up $3.8 million to buy Tower.com and Tower's Pulse Magazine. Solomon, now 81, told employees in an e-mail: "The fat lady has sung. ... She was off-key. Thank You, Thank You, Thank You."