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The troubled U.S.-based Tower Records plans to pull out of Canada, the victim of a tough music market and stiff competition.

The music chain, which never grew in this country beyond two mega-stores in Toronto, will close one of them next month and is looking for a buyer for the other outlet, chairman Russ Solomon said.

"Canada, in general, has not been up to our expectations," he said in a telephone interview from head office in Sacramento, Calif. "The competition is not as big an issue, I don't think, as the overall problems in the industry, which hasn't been growing."

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He said he'd be happy if a buyer were available for both stores, but no interested parties have come forward. Hanging on to just one outlet in a market is too expensive to operate, he added.

The move to close or sell the Tower stores comes as the music industry is battling the impact of free on-line music downloading and fewer big hits recently.

As well, taking on such a dominant player as HMV Canada Inc. is very tough, added Maureen Atkinson, a consultant with J.C. Williams Group Ltd. in Toronto.

"HMV is so strong in this market -- they're a killer to try to compete with," she said.

She said Internet download operations like Napster are making it tough for music retailers. "I think they're all struggling."

Last month, MTS Inc. -- Tower Records' parent -- reported it would close an unspecified number of its 184 stores worldwide and restructure operations to help cope with a $5.5-million (U.S.) loss in its second quarter, which ended Jan. 31. The company said at the time it would sell or close Canadian and Argentinian operations, among other things.

Tower arrived in Canada in late 1995, selling compact discs, videos and books at the corner of Yonge and Queen streets in Toronto, a stone's throw from rivals such as HMV and Sam The Record Man.

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Industry Canada officials launched a review of the superstore soon after it arrived after Canadian booksellers complained that the music and video retailer was selling large volumes of Canadian books.

The government was concerned because the store had devoted considerable space to books, making it a competitor to many smaller booksellers -- prompting Ottawa to ask Tower to reduce its book sales.

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