The rise and fall of Tower Records

Do you yearn for a retail space that was important to you but no longer is? We got a great response from listeners when we asked that question a while ago. One of those lost spaces included Tower Records, which closed its last US stores 18 years ago this week. The chain was much more than iTunes in physical format. For many, it was a kind of temple of worshipers of music.

This month’s documentary, “All Things Must Pass,” about the rise and fall of Tower Records, is a kind of rock ‘n’ roll curriculum with teachable moments about money and business, including how to launch a startup.

The paper explores the importance of diversification: The recording industry went through a soft patch when disco’s glory days were met with a backlash that hit record sales. Then there is also the geographical diversification: Tower Records in Japan continues to thrive to this day.

We also see the scenes of a morality play unfold about the dangers of leverage, too much debt. Tower borrowed $110 million to finance the global expansion, and when those creditors grew impatient to get their money back, that was the end of it.

The Tower Records lesson that sticks out to me is about a special type of capital that doesn’t involve dollars but is still valuable. Sociologists call it “social capital,” which is built up when people get up from their couches, put away their screens, and mingle in person. At Tower Records stores, people came together in a physical space to share passions, exchange ideas and explore new content. In an archive footage from the film, a 1970s-era Elton John can be seen on one of his weekly foraging trips to Tower Records on the Sunset Strip in Los Angeles. The pop legend is dressed up, holding a pen and notepad, a man on a mission looking around the world as a discerning chef who picks out his vegetables at a produce market. A voice in the film observed that it was “both social and retail”, with people “spending hours together in the record bins”.

And one more lesson from the Tower Records documentary deals with a breaking economic issue: inflation. We are convinced that everything gets more expensive all the time, either slowly, as it did in the mid-1980s, or rapidly, like the crazy inflation we are experiencing now. It seems like most things are getting more expensive, except records. The movie mentions that a record cost $3.88 in 1962. But $3.88 isn’t a deal. According to my favorite online economics tool, the Bureau of Labor Statistics’ inflation calculator, $3.88 back then is like $38.30 now. I note that artist Beth Orton’s new CD can be had for as little as $13.59 if she wants the physical item, not just the ability to stream it. Just like long distance phone calls, some things get cheaper.

– David

Name of the movie: “All Things Must Pass: The Rise and Fall of Tower Records”

Release year: 2015

Director: Colin Hanks

Synopsis: Established in 1960, Tower Records was once a retail powerhouse with 200 stores in 30 countries on five continents. From humble beginnings in a small town pharmacy, Tower Records eventually became the heart and soul of the music world and a powerful force in the music industry. In 1999, Tower Records made a staggering $1 billion. In 2006, the company filed for bankruptcy. What went wrong? Everyone thinks they know what killed Tower Records: the Internet. But that is not the story. “All Things Must Pass” is a feature-length documentary that examines the explosive history of this iconic company, its tragic demise, and the legacy forged by its rebellious founder Russ Solomon.

Where I can see: “All Things Must Pass” is available to watch for free on YouTube. It also streams on various platforms, including Kanopy and Hoopla for some library cardholders, and on Peacock, PlutoTV, and PopcornFlix, for free. A digital streaming copy can be rented or purchased on various platforms, and if you want a physical copy, you can also buy the movie on DVD and Blu-ray.

Topics we will explore:

• From the retail floor to the C-suite: When do employees rise through the ranks at corporate America? How common is it today?
• Why physical music is still selling in Japan while the rest of the world embraced streaming
• The joys and challenges of running an independent record store in the US

Is there anything you would like Econ Extra Credit to explore? A question you want answered? Let us know by emailing the team. We are at [email protected]

Take a look at all our selected movies on our website.