Billboard had initially planned its own computerized information-gathering system. When that failed to materialize quickly, Michael J. Shalett and Michael Fine jumped in with Soundscan, which sells its information services primarily to Billboard and record companies. Soundscan pays stores for exclusive access to their information.

Today, Soundscan measures more than 60 percent of all record, tape, CD and music video sales and returns in the United States. Every musical genre -- on both albums and singles -- is tracked. (Billboard has elected to use Soundscan for only some charts; its rhythm-and-blues chart, for instance, is compiled under the old system.) Soundscan, unlike the old system, also reveals whether the difference between a No. 2 and a No. 3 album is 100 records or 100,000 records. "Soundscan puts a great burden on other, more subjective record charts," says Robert J. Smith, marketing chief at Geffen and DGC Records. "I'm reluctant to admit it, but very soon we will not be able to live without it."

The new system has its flaws, however. "We're finding that the Northeast is not properly reflected in their numbers and that the Southeast is overrepresented," says Henry Droz, president of the Warner-Elektra-Atlantic Corporation. Garth Brooks's strong showing on the Soundscan-Billboard charts last year could be one result. Others say that the system relies too much on the record distributors who supply the blockbuster albums to chain stores, and not enough on the trend-setting independent stores.

Mr. Shalett admits that the system can be manipulated: if records are sold far below cost, the sales still turn up in Soundscan's data. And, says Russell Solomon, the president of Tower Records, which has been reluctant to join the Soundscan system, "I can just imagine what some computer hacker could do. With $30, $40, $50 million riding on some records, I'm sure someone is bound to try to crack the system."

In response to criticism, Soundscan is trying to beef up the number of stores that report on the East and West Coasts and to establish a separate reporting group of 500 independent record stores. Tower Records has committed only 6 of its 69 stores, and none in New York. Mr. Solomon says that his stores are not equipped with the necessary bar-code scanners. Beyond that, Stan Goman, Tower's senior vice president of retail operations, says, "With Soundscan, what you have is a fairly accurate measure of what's selling. What we had before was a real accurate measure of what's hot. We already know that Natalie Cole is selling."