As for the closing of Virgin...
Regardless of how much money the stores are or aren't making, it really is more a matter of real estate than anything else. The L.A. and NYC locations are in prime spots. Location. Location. Location. Yes, business may be down, but the rents and taxes have also gone up at a higher rate than the profits have fallen.
Personally, I've always found the business at the Times Square Virgin Megastore to be quite "up" - at least there's always a good crowd of people in there. And there have been weeks when I've stopped in there every day, and I can tell that they most definitely moved some product off those shelves.
However, there is "talk" that Virgin may consolidate down to one store in New York City - they also have a location down at Union Square. But, again, this is more a matter of cutting down on real estate expenditures rather than the stores not making money. At least in my eyes.
*Then you have J&R Music World down in lower Manhattan. If I'm remembering correctly, that company actually owns the buildings they occupy - they are not leasing - and I know that helps a lot when it comes down to the bottom line. Additionally, they're still located in a "cheaper" area of Manhattan. -And I have to say, they've always had quite the extensive selection of CDs and DVDs (plus computers, home appliances, electronics, etc.). If they were more convenient for me to get to (it's at least a 30 minutes train ride with a transfer), I'd probably shop there more often - their regular prices are most stores sale prices, and they routinely offer new CDs at $9.99 during the first week of release. However, Virgin is 10-15 minutes from me, and the sales aren't bad either.
**I should also point out that different markets call out for different types of stores. The main place to buy CDs in Richmond is Plan 9 Music - a funky little mini-chain. Great stores, great service. Yes, their selection may veer more towards the pop and rock catalog, but they always handle special orders with a smile, and their selection of old LPs is always fun to browse. They are also a great supporter and promoter of the local bands in Richmond and Charlottesville. Dave Matthew Band and Carbon Leaf are two of their early discoveries.