wax&wires

Virgin Mega Store Times Square Closing

IMAGE: Declan McCullagh PhotographyI was just in LA last night for the live Diggnation and Digg meetup. My wife and I left The Knitting Factory around 10 PM or so and proceeded to stroll around downtown looking for a good place to grab a bite. It was pretty dead out. Baristas were stacking chairs on tables and pulling the patio furniture in for the night. Then we walked by the Virgin Megastore, doors open, music playing. They would have the lights on until midnight. I thought to myself, Man, that is such a staple of the big city. The Virgin Megastore being the last one standing on a late night out. We were just in New York this past May and saw the same thing, a line of Clay Aiken fans hanging around the Times Square store at midnight, waiting for the release of his new album the next morning.

Well as it turns out, that very store will be closing its doors for good this upcoming April. Not because of the sagging economy; not because of the incredible overhead for a 180,000 square foot Times Square lot; not because of iTunes and digital music sales pushing CDs into obsolescence. The number one music store in the country, moving $55 million of goods each year, will be closing its doors because it can make more money renting the space out.

Virgin pays only $54/square-foot for the Times Square landmark, and current market value for retail space in the area is at $700/square-foot. While the store generates $6 million in profit per year, Vornado (the real estate company that acquired Virgin Entertainment Group North America) expects to earn much more than that by leasing the space to other retailers. That cuts the total number of Virgin Megastores to 5, making the 14th street store in Union Square the premier Virgin Megastore in New York. Even the future of that store is in question, as they leased the ground floor to Nordstrom Rack this past holiday season; yes, during the holiday season which is supposed to be prime time for retailers. If they can afford to lease out prime space to other retail outlets during shopping high times, I can’t imagine it bodes well for them in low times, which are certain to be just around the bend.

As much as they might pin this on making strict business sense from a real estate perspective, you have to assume that the decline of CD sales played into it at least a bit. Brick and mortar music stores have become more of a novelty than a wise business venture. If the number one CD retailer in the US has better things to do with its time and space, expect to see other music shops go down soon.

This entry was posted on Thursday, January 15th, 2009 at 10:50 pm. It is filed under wax and tagged with album sales, amazonmp3, brick and mortar, itunes, virgin. You can follow any responses to this entry through the RSS 2.0 feed.