“Tower records has been bought out and will go through a liquidation.” (source)

The Daily Priapism has a theory to why Tower Records has basically failed, and I don’t think I could agree more.

A lot has been made of piracy and online music downloads. Certainly I don’t blame the RIAA for going after piracy and basically trying to reduce theft of music. However, many traditional record stores and record companies have almost completely ignored online music sales. Why? It could be arrogance, it could be ignorance, but most likely it’s due to not having any idea how to respond to online music sales. Sure you could create your own online music store, but how do you get people to come to it? What about DRM and piracy concerns? What about file formats, Windows/Mac, iPod and iRiver? There’s a lot to this issue and I think some traditional brick & mortar companies just don’t know how to respond.

So, if a failing company wants to complain about increased ease of piracy, that’s a legitimate complaint. However, they should realize that not all of the music online is being pirated: increasing amounts are being legitimately bought and sold. And not everyone is buying a full album, either. Piracy may be easier than ever before, but impulse purchases are easier than before too. If I hear a song I like on the radio, I’m just a few clicks away from buying it.

Hold onto your hats and let this marketing newbie name some relevant market trends:

• Tons of people are getting broadband, more and more every day.
• Tons of people are getting iPods and MP3 players, more and more every day.
• Online stores allow you to buy as much or as little music as you want, any time you want, anywhere you want.

With those trends occuring, a physical store with limited store hours, a large physical inventory (with less and less turnover), and expensive prices is going to get slaughtered. I think at this point, it’s even too late to compete on price. So if I’m a person who fits into the above three trends (and there are a lot of people who do), why on earth would I bother with a physical store anymore?

I think record stores will always have their place, but I think soon enough they will no longer exist primarily as outlets for generic media and new releases. If they want to survive, they will have to play the niches and specialize. Collectors, snobs, afficianados, people who value community or a physical product over convenience and price, whoever. These are the people to cater to.

As a parallel, if I want coffee, I can blaze through the nearest McDonald’s or BK any hour of the day and get it for dirt cheap. If I want coffee (skinny boy decaf latte no-foam), I go out of the way to Starbucks during business hours and get it for $5. I think brick-and-mortar record companies need to be Starbucks.