UPDATE (8/22): Tower Records has now filed for Chapter 11 bankruptcy.
From Digital Music News:
Tower Records Edging Closer to Disaster, Possible Liquidation
The once-proud Tower Records is now edging closer to the rocks, according to continued reports. The chain has been struggling with mounting debt, and major labels were recently forced to freeze shipments following various non-payments. Last week, the dire financial situation failed to thaw, part of a quickly worsening situation. The beleaguered retailer is now headed by chief executive Joe D'Amico, recruited to manage the current crisis and possible bankruptcy. Other possibilities include a straight liquidation, depending largely on decision of chief banking lender CIT Financial.
Labels want to get paid, but they are also disinterested in witnessing the fall of such an important retailer. Just recently, attendees at the annual NARM convention in Kissimmee, FL, were supportive of Tower, and crowned the retailer with a top award. But financial realities will probably spell a rough period ahead, despite the symbolic nod. If Tower Records folds, it would represent a critical loss for the dedicated, brick-n-mortar music retail segment. Other players in the landscape include big box retailers like Wal-Mart and Best Buy, which offer deeply discounted loss-leading CDs, and smaller niche outlets, which are also facing heavy financial pressures.
(Screencap taken from the Day of the Longtail video)