(FORTUNE Magazine) – I was checking out a newspaper circular from Tower Records the other day. Not much interesting in there, I thought. Then on the way to work I passed by my local Tower and noticed the "R" in the "Records" part of the neon sign had conked out. (They don't really sell records anyway.) Then at work I saw the headline TOWER RECORDS FILES FOR BANKRUPTCY. It all comes together, I guess.

Tower Records used to be the coolest place on the planet to buy music. Today it's much cooler to be in a dorm room downloading off a desktop, where the shaggy-haired consumer may or may not be paying for said tunes. Old-schoolers like me who care about cover art and liner notes mostly pick up mainstream stuff cheap at Wal-Mart or Best Buy. As for specialty items--like anything outside the Billboard 200--there are still funky little record shops around and, of course, Amazon, with its zillions of albums. So where does that leave Tower Records and its ilk? How about betwixt and between?

Yes, the retail record store is in real trouble, which is too bad, because I can't think of a better way to procrastinate when I have some serious work to do than to browse through thousands of CDs. Tower's fate is particularly sad because it was such an innovator, and in some instances--think Greenwich Village and Sunset Boulevard--its stores were such a scene. The chain's bankruptcy is prepackaged and said to be proceeding very smoothly, so much so that the company could be reorganized as early as mid-March. Still, those happy facts don't mitigate some other, less cheery points. Like that this private company has been hemorrhaging money. And that gonzo founder Russ Solomon and his family are surrendering 85% of the company's equity to the bondholders. And that the company is for sale. And that it sure beats the heck out of me how this company will make a go of it long term.

Tower has a great history. Solomon--who has been known to snip off the ties of visiting executives--started out selling records in his father's drugstore in the Tower Theatre building in Sacramento in the 1940s. In 1960 he opened his first record shop in that city. He brought his company's first megastore to San Francisco in 1968, where it became a favorite destination of hippies and such. From there the company took off. At its peak Tower had 179 company-owned stores around the globe. It expanded into video, books, clothes, even an art gallery. The company's sales peaked at almost $1.1 billion in 2000, and Solomon had a personal fortune that made him one of the richest men in the country.

Just how bad is the record business now? CD sales have declined three years in a row. Wherehouse Entertainment filed for bankruptcy two times in the past nine years. HMV is closing stores. And the fact that Trans World Entertainment, which operates over 900 FYE, Coconuts, and Strawberries stores, lost only about $8 million in the third quarter could be called a victory. Then consider the case of Best Buy.

In 2001 the electronics retailer bought Musicland, a national chain of over 1,300 stores under the names of Sam Goody, Suncoast, Media Play, and On Cue for some $685 million. Best Buy--which of course competed with those stores--must have thought it was getting the collapsing business at a bargain. It wasn't. The business got much worse. Last June, Best Buy "sold" Musicland to Sun Capital, a Florida investment firm, which received company stock and assumed Musicland's liabilities. No cash changed hands. In other words, Best Buy gave Musicland away. And you know what? Analysts applauded the move. Selling Tower may prove equally humbling.

Maybe I'm just being sentimental, but even with all the bad news, it's hard to imagine standalone record--er, CD--stores going away completely. Maybe the government should subsidize them! After all, that's what investors and corporate America have been doing.

ANDY SERWER, editor at large of FORTUNE, can be reached at aserwer@fortunemail.com. Read him online in Street Life on fortune.com and watch him on CNN's American Morning and In the Money.