Mega No More: Virgin Megastores Closing Down, Liquidating This Summer

noah | March 2, 2009 5:45 am

It was probably coming, what with the news that its San Francisco and New York outposts would be closing over the next few months breaking recently, but the announcement that the remaining scraps of the Virgin Megastore chain will be euthanized in the coming months still made me kinda sad. The company will close its remaining stores in Denver, Orlando (Fla.), and Los Angeles over the next few months, and the assets of Virgin Entertainment Group North America (VEGNA) will be liquidated this summer. You may be surprised to learn, however, that the complete shutdown of the chain wasn’t a certainty when it was jointly purchased by the New York City real estate giants Vornado and Related—which owned the below-market-rent leases on the Times Square and Union Square outlets, respectively—a few months back. No, really!

While it now looks like Virgin was always destined to lose its Times Square space-Virgin pays $54 a square foot in rent there, according to press reports, while the market price for that location currently is in the $400-$500 per-square-foot range, according to Prudential Douglas Elliman Real Estate Chairman Faith Hope Consolo – the company still had a chance to continue, Virgin Entertainment Group North America CEO Simon Wright says.

For a while there was talk of moving Virgin to the empty space next door where Barcode closed down years ago-until the economy went south. VEGNA had successfully re-merchandised its Times Square store into a lifestyle experience where clothing and portable electronics were more of a factor in the store’s profitability, while using music as a draw-in factor.

But the company was also working on improving its concept for a smaller space. With CD sales sliding, “I tried my hardest to come up with a new model, and we were making a lot of headway with it before the holidays,” says Wright. But, the “economy is so bad; it’s all about batten down the hatches.”

The Barcode space, by the way, was recently used as a gigantic public restroom.

The “smaller stores” strategy wasn”t the first time that Virgin thought about reworking its model for its stores in the US; while searching for pictures to accompany this story, I found an AP article on former chairman Richard Branson’s attempts to revitalize the brand back in 2003:

“We used to be the best music store in town – the best range of music. But music has declined,” Branson told The Associated Press in an interview at the San Francisco Virgin Megastore.

“It may decline a little bit more,” Branson said. “What we realized was it’s because young people of this generation, they’re spending money on mobile phones. They’re spending money on clothes. They’re spending money on electronics. … Quite a few items which the previous generation, they weren’t doing. They were just buying music.” …

The new vending machines will be stocked with the latest music and movie releases, and will dispense titles on the spot, just like canned soda.

And there will be a selection of erotic media that includes books and DVDs.

Branson and other music retailers face a glut of new competition for music consumers. Online shops such as Apple’s iTunes Music Store and the relaunched Napster are vying for customer dollars alongside brick-and-mortar stores like Virgin.

The National Association of Recording Merchandisers, citing a survey of its members and Neilsen SoundScan data, claims there were about 28,500 music retailers in the United States in early 2002. About 1,500 shut down, NARM reports. The figures do not include mass merchants or chain electronics stores.

“We’ve been through some very tough times the last couple of years,” said Glen Ward, CEO of Virgin Entertainment Group for North America. “I’m encouraged that the last two to three months the market seems to be pulling itself together. There’s some good music out there. The economy seems to be lifting.”

Ah, 2003. You were so innocent, except for the whole “adding porn to stores’ shelves as a means of survival” thing.

Remaining Virgin Megastores To Close, VEGNA To Liquidate [Billboard]