Tower totters, but Solomon towers

By David Watts Barton, The Sacramento Bee, March 7, 2006

Tower Records has seen better days. Everyone knows it.

Russ Solomon certainly knows it.

Solomon launched Tower in 1960 out of his dad’s pharmacy in the Tower Theatre building at 16th and Broadway. He built the company into the most influential record chain in the world, but then saw it go through bankruptcy reorganization and slip out of his control.

Late last month, the company’s bondholders undertook a new effort to sell the company. Solomon still owns a small percentage, but these days, he is a salaried employee of his own company.

So how does he stay so optimistic?

“I’m an eternal optimist,” says Solomon, who turned 80 last September. “It’s my nature.”

Solomon, who has kept a low profile through his years as the head of Sacramento’s most famous cultural export, has been particularly press-shy during his company’s recent troubles.

Even after agreeing to an interview, he prefaces most comments about Tower’s current state with “This is off the record…”

He remains as down-to-earth and forthright as always. His language can be frank and salty, and his passion for the business still burns brightly.

“I hate to see this industry in such disarray,” he says during a phone conversation. “I’d like to see retail put itself back together.”

Solomon’s concern with the industry, rather than just Tower’s fate, is characteristic. He loves the company he grew and speaks fondly of the “music nuts” that made Tower the place to hear new music, not just in Sacramento, but in San Francisco, Los Angeles, New York, London, Tokyo, Buenos Aires and beyond.

“We’re practically the last man standing in terms of a quality retailer,” says Solomon.

Many of the specialty music chains that once competed with Tower – Musicland, Wherehouse, Peaches, Record Factory, Sam Goody, even some Virgin megastores, including Sacramento’s – have gone away. Music retail has had overall sales declines in four of the past five years, according to the Recording Industry Association of America.

Stan Goman worked at Tower from 1967 until 2002, when he retired as Tower’s chief operating officer. He’s seen Tower’s, and the industry’s, rise and decline.

“When I started at Tower, the industry was dominated by White Front and CBSS,” Goman says, referring to the now-defunct retailers. “When I left, the industry was dominated by Target and Wal-Mart. In some ways, we’re back to where we started.”

Jim Urie is president of Universal Music and Video Distributing, which commands 34 percent of the U.S. market. He says Target, Wal-Mart and Best Buy account for 48 percent of Universal’s business in the United States.

Still, Urie says, there is and will continue to be a place for Tower, for a simple reason: quality.

“Tower Records is the best brand that has ever been or probably ever will be established in music retailing,” Urie says from his office in New York City. “And I think that there is no Web site with the clout or reach or credibility that Tower has. They were the first, and they’re still the best.

“Specialty retail is going to continue to decline,” he adds. “But where Tower is better off than the recently departed Sam Goody chain is that they have this huge breadth of catalog, and what the consumer is saying is, they want the depth of catalog.”

It has been an uphill battle, but it’s not showing on Solomon. Despite his age, he’s out and about on a regular basis, traveling a bit to Japan and Europe, and still adding to what has been called the finest private art collection in Sacramento. He’s been exploring his lifelong interest in photographic portraiture.

But he still shows up for work at Tower’s West Sacramento office five days a week. Asked why he doesn’t retire, he responds, “And do what?”

Uh, play golf?

He closes the subject with an incredulous “Me?” Solomon has worked his entire life, and he has no intention of stopping now.

In fact, say some Tower veterans, Solomon’s continued presence in the Tower office has a positive impact on the company, despite his diminished role.

“The fact is, he’s there every day, and it makes a big difference to the employees,” says Mike Farrace, who worked at Tower for more than two decades, during which he created and edited the in-store magazine, Tower Pulse!

Even outsiders take solace in Solomon’s presence at Tower. Says Universal’s Urie, “My VP of national accounts is 34, and he loves Russ; he always tries to make a separate appointment with Russ when he’s in Sacramento.

“That’s part of his longevity,” Urie adds. “He’s always enjoyed young people, listened to them, hung with them.”

Solomon is more concerned about the industry’s longevity than his own. While he declines to comment publicly on the state of Tower, he doesn’t shy from criticizing the record industry, which has kept retail prices high and, he says, fought change at every opportunity.

“The business is in the hands of the record companies,” says Solomon. “But they won’t do anything. They refuse to take any substantial chances.”

He scoffs at the notion, common among industry observers, that people don’t want to buy physical CDs anymore.

“Anyone who thinks people don’t want actual records hasn’t been in an Amoeba Music (a busy Bay Area independent),” he says. He also lauds Sacramento-area independents Dimple Records and The Beat.

“People who want full albums are not in the world of digital downloading,” he says. “It gives them pleasure to own the album, the same way people get pleasure out of keeping a book after they’ve read it. It feels good to have it on the shelf at home.”

Solomon has seen music go through a variety of physical formats since he started selling records in his dad’s pharmacy in 1938. He is credited with being an early enthusiast of many of them.

“I’ve seen 78s, 45s, mono LPs and stereo LPs, reel-to-reel, cassettes, eight-tracks, quadraphonic LPs, laserdiscs, DCC (a high-quality tape that preceded CDs), MiniDiscs, compact discs and SACD (Super Audio CDs),” he says.

“There will be a future to the packaged part of the business,” he says with certainty.

Geoff Mayfield, a Billboard magazine columnist who has long followed the industry, agrees. He says Solomon’s wisdom is much sought after.

“He is still considered music retail’s greatest ambassador,” says Mayfield from Billboard’s New York offices. “He still has extremely high equity with all the record companies. He is one of the pioneers. In fact, he’s almost the last of the pioneers.”

Solomon’s esteemed place in the record industry was never more apparent than at his 80th birthday party at the Crocker Art Museum in September. Executives from New York, Los Angeles and as far away as England and Japan boarded planes bound for Sacramento to toast the man who helped create their industry.

Mayfield, who postponed a vacation in Australia to make Solomon’s party, says, “Everybody who was anybody was there. The presidents of three of the four major distributors, label executives, everyone.”

What was that like for Solomon, who usually avoids the spotlight?

“It was nice,” he says. “It’s good to know you have friends who will get up in public and tell flattering lies about you.”

“I didn’t do this company alone,” says Solomon, who often stopped by Tower’s stores on Broadway and Watt Avenue to have a drink with employees. “It is the product of hundreds and hundreds of talented people in the field who came up with the ideas. The learning process was at the store level, not the corporate level.”

Solomon can get emotional on the subject of his business, but he’s not one for recriminations or fighting old battles. He takes responsibility for past mistakes and looks ahead to a brighter future.

“I don’t feel any bitterness,” he says. “C’est la guerre.

“The truth is, I’ve had a great ride. We played too hard, we drank too hard, but we had a lot of fun. It’s been tough for everyone, these last few years, but what’s happened has happened. … I believe in the future of the retail music business and the future of this company.”

At a point in life when most are looking back, or trying to keep things the same, Solomon is looking for the new, the different … for change.

“In the music business, things become popular and go away,” he says. “That’s great, that’s what makes it interesting. This is still the entertainment business, and it changes in unpredictable ways.

“And I like that.”

TOWER’S HISTORY

1960: Russ Solomon opens the first Tower Records in Sacramento.

1968: Tower opens its first store outside Sacramento, in San Francisco.

1979: Tower opens its first overseas store, in Tokyo.

1996: Annual sales top $1 billion.

1999: Tower loses $8.8 million.

2002: Tower sells stores in Japan. Solomons yield management control to an outsider for the first time, CEO Betsy Burton.

April 2003: Tower delays a scheduled $5.2 million interest payment on its bonds. The company reconsiders its “strategic options.”

May 2003: Greif & Co., an investment bank in Los Angeles, is hired to sell Tower. No deal is completed.

June 2003: Tower misses a $5.2 million interest payment, defaulting on $110 million in bond debt.

Feb. 9, 2004: Tower files for Chapter 11 bankruptcy protection.

March 15, 2004: Federal judge approves bankruptcy plan, transferring $80 million in debt and ownership from the Solomons to a collection of insurance companies, pension funds and other investors.

February 24: Billboard magazine reports that Tower has hired a Los Angeles investment
banking firm to look for buyers for the company.