Online Music services like iTunes (and peer-to-peer file sharing sites) are driving High Street retailers out of the market.
Tower Records has filed for Chapter 11 bankruptcy protection for the second time in two years.
Bosses hope the move will keep the ailing music store afloat while new backers are found.
Earlier reports had suggested all was not well with major record companies rumoured to have stopped supplying stock due to alleged unpaid bills. Tower Records acknowledged in its filing, in US Bankruptcy Court in Delaware, that its same-store sales declined 9 per cent during the past year.
Tower Records pulled out the UK some years ago due to financial concerns, the major Piccadilly Circus store being bought by rival Virgin. Subject to court approval, Tower will attempt to finalise the sale of the chain within 60 days.
Last November, research from NPD showed that iTunes was already bigger than Tower Records, Sam Goody and Borders. Apple's online store ranked seventh, behind Wal-Mart, Best Buy, Target and Amazon.com.