The fall of Tower Records increases fears for fate of British record shops

One of the great icons of the American music industry came crashing down yesterday when Tower Records collapsed under competition from internet downloads and discount shops.

The demise of Tower set alarm bells ringing across the British music industry, prompting fears that the days of the record shop could be numbered.

British retailers are clinging to the hope that record-buyers in the land that inspired Nick Hornby's tale of musical obsession, High Fidelity, would not readily relinquish the experience of pawing through the racks, but if the United States is a barometer of future British leisure habits then downloading and supermarket-buying are the future.

Staff at the 93 branches of Tower, one of the best-known international chains, learnt yesterday that the company had filed for bankruptcy with debts of $110m (£59m). It had faced fierce competition from the supermarket Wal-Mart and the electrical chain Best Buy.

It had been struggling for some time, and sold off its 14 British stores last year. Sir Richard Branson bought its flagship outlet on Piccadilly Circus in central London, which continued to trade under the Tower name.

The collapse of Tower follows the disappearance from the high street of other well-known chains, including Our Price and Andy's Records in the past 18 months.

A British music retailer warned last night that the specialist record store was under threat. Simon Dornan, spokesman for Virgin Mega-stores, said he believed that discount pricing of CDs by supermarkets posed an even greater threat to record shops than downloading.

Tesco, Sainsbury's, Asda and Safeway have become increasingly big players in music retail, cutting the price of chart CDs to as little as £9.77. Several major artists, including Cat Stevens, Rod Stewart and R. Kelly, have been propelled into the Top 10 of the album chart after making more than half of their sales in supermarkets.

"The scenario [for record shops] is far more dangerous than anything to do with downloading," Mr Dornan said. "Tower were quoted as saying they could not afford to operate in the UK market. You would have thought that in their homeland they would be safe. Everybody's shocked to see what has happened."

He said that if supermarkets came to dominate music retail, British music would become less exciting. "Labels will be less inclined to invest in a wider roster and we will have far blander music on offer," he said. "I don't suppose I will find Franz Ferdinand in Asda or Sainsbury's this week."

Noting that France's music retail was already dominated by supermarkets, Mr Dornan said that record shops had to offer shoppers a more "rock 'n' roll" experience with more of a "live venue status".

Last night The Sleepy Jackson performed a gig at the Virgin Megastore in London's Oxford Street. "I don't believe bands like that are going to play in a car park at Asda."

Other music retailers said record stores would survive because Britain had a different culture to the US. A spokesman for HMV said: "Stores are more part of the culture here because of the Sixties pop explosion. People seem to value not just the acquisition of a piece of music but the process of acquiring it."

British music fans liked to show their devotion to a band by purchasing a physical music product. The same culture was not as ingrained in the US, where downloading had taken off. "There doesn't seem to be the same emotional attachment to buying music. It's a more functional good over there."

Record stores will take comfort from the fact that CDs, like DVDs, are often given as gifts. "I don't think a download would make such a good present," the HMV spokesman said. He said, however, that downloading facilities in record stores could be a thing of the future.

The increasing popularity of downloading in Britain was revealed in figures from the Official Charts Company that showed there were more legal downloads last month (150,000) than sales of vinyl or cassettes. Legal downloads account for only 2 per cent of the total number, industry sources say.

Lawyers for Tower, meanwhile, are hoping to bring the company back from the brink with a restructuring package that could allow it to emerge from bankruptcy within 45 days.