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Finch Platte
02-14-2004, 06:22 AM
From the SF Chronicle.

President, Tower in denial

by David Lazarus

Tower Records filed for bankruptcy protection Monday but insisted that the problem was one of overexpansion, not the growing threat of downloadable music and aggressive competition from deep-discount retailers.

That same day, President Bush declared that 2.6 million new jobs will be created this year, even though we haven't seen employment growth like that in almost a decade and more than 2 million jobs have been lost since he took office in 2001.

Talk about being in denial.

In Tower's case, the company's West Sacramento parent, privately held MTS Inc., said millions of dollars in debt had piled up as a result of opening too many outlets. "Our issues are financial, not operational," Tower's chief executive, Allen Rodriguez, said in a statement.

A company spokeswoman, Anita-Marie Laurie, told me that competition from the likes of Wal-Mart, not to mention the Internet, wasn't a factor in Tower's money troubles. Once the company emerges from bankruptcy in coming months, she insisted, all will be well.

"We feel we're in a good position going forward," Laurie said.


Apple Computer's market-leading iTunes Music Store has sold more than 30 million songs since the site opened for business in April 2003, and that figure applies only to legitimate, copyright-friendly downloads. The total tonnage of pirated music siphoned from the Net during the same period is stratospherically higher.

A recent study by Forrester Research predicts that a third of all music will be delivered to consumers via modems within five years. Not long after, the study concludes, CDs will be all but obsolete.

Meanwhile, big-box retailers like Wal-Mart and Best Buy continue to sell CDs at below-wholesale prices to lure customers into stores. These diversified retail giants now account for about 80 percent of total CD sales.

Yet in clear signs of the times, Best Buy sold off its money-losing Musicland chain in June, while Wal-Mart started its own online music service. The world's biggest retailer is now selling songs for just 88 cents each -- undercutting Apple's price by 10 cents a tune.

So what does all this bode for Tower?

"Tower is toast," said Phil Leigh, head of market researcher Inside Digital Media. "A brick-and-mortar business that is focused on selling CDs, that business is history."

He observed that Tower can gain a few more years of life by pushing DVDs and video games. "But on the whole," Leigh said, "it's a business that will never be what it once was."

To see for myself, I visited the Tower outlet near San Francisco's Castro district. Only a handful of other people were in the store.

"It's pretty sad," one salesperson commented. "There's nobody here."

Tower has said that none of the company's 3,100 employees at the 93-store chain will be sacked due to the bankruptcy proceedings. But that's in large part because Tower has drastically reduced its payroll during the past couple of years.

One worker at the Castro outlet said the store, which recently expanded its square footage, now gets by with just a fraction of the number of employees it once had. This means everyone is required to work harder (at least on weekends when, according to the manager, customers still actually show up).

And so we circle rather neatly back to Bush and his economic outlook, delivered Monday in a 412-page report to Congress.

High productivity nationwide has discouraged many companies from hiring more employees. Like Tower, they've learned how to make do with fewer people. Nevertheless, Bush is forecasting creation of 2.6 million new jobs this year.

With 112,000 positions already created in January, according to preliminary estimates, that means a minimum 226,000 jobs will have to spring into existence every single month for the rest of the year.

"It's not impossible," commented Alan Auerbach, an economics professor at UC Berkeley. "But based on recent history, it's certainly a stretch."

That's putting it mildly. But then, the Bush administration has never been shy about going out on a statistical limb.

Early last year, the administration announced that, beginning in July 2003, its tax cuts would create an average 306,000 new jobs per month. In reality, the economy lost an additional 45,000 jobs that month and 25,000 more the month after.

New jobs finally started arriving in September but in numbers well below analysts' expectations. The best monthly showing during the past year was January's 112,000 new jobs. Most economists, however, had been projecting well over 150,000.

According to the nonpartisan Economic Policy Institute in Washington, an average 73,000 jobs have been created each month since last fall, compared with 216,000 per month in the comparable period after the 1990-1991 recession.

Nevertheless, Bush's election-year economic overview foresees at least 14. 5 million new jobs taking their place in a triumphantly resurgent U.S. economy by 2009.

That means, for those of you who don't have calculators handy, an average of no fewer than 241,000 new jobs being created this month, next month and every following month for the next five years.

"I will not be satisfied until every American who wants a job can find one," Bush said Monday. (House Democratic leader Nancy Pelosi replied Tuesday: "Claiming that jobs are coming does not create them.")

In the end, Bush's wildly optimistic view of employment is no different from Tower Records saying that everything'll be fine once the company rejiggers its debt load.

Why let a little thing like reality intrude on such happy thoughts?