By Clive Young.
Down the block from the Pro Sound News offices here in New York City, there's a sad sight today: The dark Virgin Megastore Times Square, which closed its doors for good yesterday. Until 6PM last night, it was the most profitable music store in the U.S.
The last few weeks have seen the sprawling, 60,000 square-foot retail space slowly get stripped to its bare bones, as CDs, books, DVD, clothes and Hello Kitty memorabilia slowly seeped out the doors, nabbed by tourists looking for a bargain. A telling sign of the times was the stacks of high-end Sony 5-Disc CD players, once used for the 100 listening stations throughout the store, each priced at $25. They didn't sell at all.
When the massive retail space opened in the early 1990s, it was a cornerstone of the aggressive redevelopment of New York's Times Square, which transformed the area from a squalid haven for porn theaters and prostitutes, to the family-friendly tourist Mecca it is today. There was no small irony in the fact that among the grungy XXX marquees, a two-story high neon sign blinked "VIRGIN" all day long--as much an advertisement for the store as it was a symbol of a new vision for the downtrodden area.
Seeing music shops with "For Rent" signs in the window has become an all too common sight these days, but the closing of the Times Square location is particularly painful. The store bragged on its website that it was not only one of the Big Apple's biggest attractions, it was also the largest entertainment store in the world. As it turns out, it was also the most profitable music retail space in the U.S.
That's right--despite the economy and the state of the music industry, the store was making money.
According to Reuters, the Times Square space had $55 million in sales last year, generating $6 million in profit. In fact, the U.S. Virgin Megastore chain overall did pretty well over the last few years--and yet it's being shut down entirely. While it once brought in $280 million a year across 23 stores nationwide, the company had over a dozen stores that weren't profitable; even so, after strategic moves and significant paring back, the chain was down to six stores, all of which made money as of this past January. Even the New York Union Square location was doing well, bringing in $40 million annually and a few million in profit, proving the town was big enough for both stores.
Nonetheless, the entire U.S. Virgin Megastore chain is now history, having been bought in August, 2007 by two real estate companies, the Related Cos. and Vornado Realty Trust. Their interest in the chain's well-trafficked stores had nothing to do with entertainment, and everything to do with the real estate mantra of "location, location, location." Virgin Megastore Times Square paid a rent of $54 per square foot for its retail space, while the average for the area is $700.
While the Times Square location was profitable, only a portion of that money was coming from music--the New York Times noted that apparel and electronics had made up 25 percent of the store's sales this past Christmas season. That's likely good news for the space's next tenant, however; Forever 21, a low-priced clothing chain, will open a flagship store in the space next year.