Billboard announced last week that Best Buy Stores, Inc. (NYSE: BBY) is rumored to be the exclusive retailer for the continuously pending Guns n' Roses album, Chinese Democracy, by the end of 2008. For anyone who does not know about this album, it is likely to be one of the longest produced and most expensive in the history of the music business; it went into production in the mid-1990s.

Helping to fuel this rumor is the band's new management, Irving Azoff's Front Line Management, which has a history of releasing new albums exclusively through single retailers. Front Line released the Eagles return album Long Road Out of Eden through Wal-Mart Stores, Inc. (NYSE: WMT) a year ago with massive success. The "new" Guns n' Roses album would predictably see similar success when and if it is ever released, and Best Buy is smart to be grasping at the exclusivity if it is more than a rumor.

But will the album's release recoup the amount of money spent producing it? This is one of the major reasons the album is continuously unreleased, despite rumors of release dates and its appearances on release schedules. A March 2005 article by the New York Times stated that production costs had reached $13 million, a figure that could only have increased in the following three and a half years. These high figures raise the question of whether the album will truly be worth release financially, even if it is critically or popularly successful.

According to a Billboard article published Wednesday, Neilsen Soundscan has reported an 11% decline in album sales during the first half of 2008, compared to the same period in 2007. Consumers purchased 204.6 million albums between January and June, over 25 million less than a year ago, but luckily not as sharp a decline as the 15.1% that occurred in the first half of 2007 as compared to 2006. Nielsen Soundscan told Billboard that the "drop is fueled largely by the 16.3% decrease in CD sales" despite digital album sales rising 34.4& to account for 15.4% of sales (31.6 million units).

Digital growth is still a productive and lucrative spot for the music industry, with single track downloads growing 30% to 532.7 million units in the first half of the year over first half sales in 2007 of 417.3 million units. Universal Music Group is still the most dominating music company, despite dropping .3% to 31.2% in sales. Sony BMG Music Entertainment and EMI Group also fell, with Sony BMG dropping .5% to 24.8% and EMI dropping 1% to 9.4%. The only major music company to gain any ground was Warner Music Group Corp. (NYSE: WMG), rising .8% to 20.8%. Independent music companies also rose in the first six months of 2008, capturing 13.9% of the market -- up 1%.

Declines in album sales are a constant trend in the music industry, so an 11% drop is no real surprise but the lowered decline over one year ago should cause some relaxation. The only problem with the drop in decline is that album sales are still falling off. Even though Nielsen Soundscan and Billboard both commented on the hope provided by single track downloads, the industry still looks to album sales to justify the recording and marketing of music. If that trend would change, single track downloads would make an obvious market to rely on. Instead, reports about declining album sales will still continue while single track downloads continue to grow.

A British trade group that reports on music retail has published new findings to Billboard Friday "indicating Britons buy more CDs than any other country, and are bigger consumers of legal downloads than any of their European neighbors." It's the fifth year the British have led CD purchases, buying an average of 2.3 CDs in 2007, while Americans only bought an average of 1.7 CDs. These findings come from the International Federation of the Phonographic Industry's new handbook out this week: the Recording Industry in Numbers.

Digital figures for British music downloads totaled $169.5 million in 2007, and were announced at the New Music Conference at London's Earls Court by the Entertainment Retailers Association Thursday. The association's chairman commented that British retailers offer "more and better music retailing than anywhere else in the world," but seemed to connect the higher CD and digital sales in the UK with consumers' love of music, rather than where the real strength of the report is: consumers apparent continued satisfaction with CDs and interest in downloads.

Even though this news indicates that CD sales are still steady, consumers buying an average of two CDs a year can hardly be that great for the music industry. In a market where CD sales continue to be seen as the lifeline of the industry, the reality of CD sales indicates how much digital downloads have to make up in order for some form of equilibrium in the industry. Clearly these numbers should force the industry to build up efforts to solidify and strengthen digital sales, but since it was put out by retailers, that group may resist such moves.

Contrary to reports published last week, Billboard has announced this morning that the Eagles' new album Long Road Out of Eden is the number one album in the Billboard 200, beating the Britney Spears "comeback" album. The announcement comes after a change in chart rules that "will now allow exclusive album titles that are only available through one retailer to appear on The Billboard 200 and other Billboard charts." According to the report, Nielsen Soundscan places the album at number one with 711,000 copies sold, primarily at Wal-Mart Stores, Inc. (NYSE: WMT) stores. Spears' new album Blackout is charting at number two (it would have been number one) with 290,000 copies sold.

The change is also a product of the new methods that music is beginning to be distributed through in the market, with Billboard's chart director Geoff Mayfield noting "it was inevitable that Billboard's charts would ultimately widen the parameters to reflect changes that are unfolding in music distribution." Before this, exclusive albums like the Eagles album sold exclusively by one retailer were only eligible for the Top Comprehensive Albums chart, which primarily tracks catalog releases. The change also came about because Wal-Mart chose to report the data for the high sales of the album.

It may dismay Britney fans out there that defiantly defend her, but in the end it is a nice position for the Eagles to chart with their new album. More importantly, this kind of change by Billboard indicates that as the record industry shifts and changes with regard to digital releases and limited physical release availability (the Eagles' album is not the first and won't be the last exclusive title from any store), charting practices will stay on top of the game. Of course, the most surprisingly and perhaps best news to come out of this change is just the sheer number of copies sold at Wal-Mart stores for the album. Maybe the CD still has life in it yet, but it could also point to the generational gap that exists with music listeners and buyers in today's market.

Sony BMG (a merger between Sony Corporation (NYSE: SNE) and Germany's Bertelsmann) posted a $8 million loss in sales during the company's fiscal second quarter, which ended on September 30, in a report by Billboard today. Sales in the second quarter totaled $851 million, which was down from $948 million during the same period of 2006. Nonetheless, Billboard notes that the $8 million loss is lower than that year's $39 million drop.

Sony BMG attributes the drop "to the declining of the physical music market and to fewer major artist release in this year as compared to last year." The $8 million drop is also compared with the 2005 second quarter results, which were $60 million lost and revenues of $936 million. Clearly some gain has been made in lowering the drop, but in comparison to the large revenue gap between 2006 and 2007, the loss seems pale.

In the record industry, Sony BMG has traditionally ranked second to Universal Music Group, amounting to about 25-30% of the market. The company has also reportedly signed on with Universal to create the new Total Music, which hopes to compete with Apple Inc. (NASDAQ: AAPL)'s iTunes Store, but as a subscription-based service. Unfortunately, Universal Music's second quarter earnings have not been announced, so any correlation between the two largest music companies and the decision to create Total Music cannot fully be assessed.

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Billboard reported last night that the new Spice Girls Greatest Hits album will be sold exclusively at Victoria's Secret stores, a division of Limited Brands, Inc. (NYSE: LTD), starting November 13, until it is released in other retail outlets starting January 15. According to the same report, fans will have a 24-hour period to pre-order the album from the Victoria's Secret website starting tonight at midnight. The album will also be available in digital stores from November 13, while the Spice Girls begin a worldwide tour in early December.

The deal that Capitol Music Group made with Victoria's Secret will also see the quintet performing at the "Victoria's Secret Fashion Show," which will be broadcast by CBS (NYSE: CBS) on December 4. The world tour currently only features 10 dates, but due to popular demand, more dates are being added, according to Reuters.

The move to sell the greatest hits album in a retailer that focuses on women's lingerie is certainly understandable, especially given the marketing possibilities that will undoubtedly be unveiled shortly. At the same time, it is not an altogether bad move for the music industry to market an album like this strictly in a single store initially. Greatest hits collections are often hit and miss in terms of sales, so limiting the output initially may offer a better picture of how the album will sell after it is released to all retailers in January. The problem with a greatest hits album like this is that it is pulling 15 songs from only three albums that fans likely already have.

One idea that is sure to crop up in the marketing ads is that Posh Spice (Victoria Beckham) has the same name as the store... but that may be just too obvious.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) reported that Highfields Capital Management LP, which owns an 8.5% stake in Wendy's International Inc (NYSE: WEN), has sent a "strongly worded letter" to Wendy's chairman James Pickett, urging the fast food chain to pursue a sale.
• Barron's Online's (subscription required) "Weekday Trader" column wrote that Western Digital Corporation (NYSE: WDC) shares could appreciate another 20% or more from a recent price of $18.06 per share, if investors can appreciate that the PC market is not permanently sluggish.
• The Financial Times (subscription required) reported that Dow Chemical Company (NYSE: DOW) and Saudi Aramco are close to signing a deal to build a petrochemical plant worth about $20B.
• German prosecutors and investigators are looking into allegations that a German paint supplier paid bribes to at least five Volkwagen AG (OTC: VLKAY) employees to gain contracts with the company, reported the Financial Times.

OTHER PAPERS:

• The Canadian Pension Plan Investment Board is heading up a consortium that is in talks to possibly buyout the parent of Bell Canada, BCE Inc (NYSE: BCE), reported the New York Times.

WEBSITES:

• Paul McCartney reportedly told Billboard that a deal is "virtually settled" to make the Beatles catalog available for sale online.

We all saw how fast Napster caught fire, then was swiftly extinguished by the long arm of the RIAA. Who could turn down the alure of free music? Five years later, YouTube caught fire. Many industry pundits expected a similar fate for the company. But wait! Unlike the draconian music industry, television producers figured out YouTube was actually a positive marketing tool. Could the record industry backpedal on years of lawsuits and start restricting consumers less?

Of course, peer2peer services are essentially dead now, at least for the general public. P2P is replaced with another acronym, DRM. Digital Rights Management helps you be honest, and helps prevent rampant piracy, but it also restricts where, how and how often music can be played. Until recently, DRM-ed music like Apple Computer Inc.'s (NASDAQ:AAPL) iTunes was the only place to get music. But now DRM-ed track sales are starting to flatten out, and the music industry can't point to protected track sales increasing sales numbers as a way to justify their existence. Instead, selling less restrictive tracks could be a way to stimulate growth. Yahoo! Inc. (NASDAQ: YHOO) already struck a deal with Jessica Simpson's label, and sold an unrestricted version of her single "Public Affair" for $1.99. Now, Yahoo! says it's following suit with two more tracks this year, and expect other online music services to follow suit.

As the age of the iPod continues, expect more consumers to become savvy consumers and realize all their iTunes Music Store tracks aren't playable anywhere except their iPod. Perhaps we'll see a subscription model, such as Microsoft Corp.'s (NASDAQ: MSFT) PlaysForSure initiative, gain more traction in the marketplace, and stir something up. PlaysForSure ensures device compatibility between music services and devices. DRM stays, but so does your music, as long as you switch to another PlaysForSure approved device.

In addition to PlaysForSure and Yahoo!'s experiment, Billboard Magazine lists a few other companies to watch. Among them, Amazon.com Inc. (NASDAQ: AMZN), News Corp's (NYSE:NWS) MySpace, LimeWire and eMusic.