Nothing like an earnings release to try to put a positive spin on a grim situation. Entertainment retail chain Transworld emphasized what it could in its press release, mentioning its 18% increase in revenue in the second quarter. The problem is that the increase came entirely from Transworld's acquisition of Musicland stores. Adjust out sales from Musicland stores and you've got what's important: a "comparable store sales decrease of 7%."

Bottom line: Transworld had a net loss of $7 million on revenues of $298.3 million.

Another telling figure: Same store music sales (which means music sales at all locations other than the newly acquired Musicland stores) dropped 16% and accounted for 48% of total revenues. In the second quarter of last year music revenues represented 58% of Transworld's revenues.

Revenues from other products rose in the second quarter. Same store DVD revenues were up 6%, same store game revenues were up 10% and same store revenues for the remaining categories (electronics, accessories, etc) were up 10%.

President and COO Jim Litwak expects stronger music sales in the second half of the year to be fueled by releases from Janet Jackson, OutKast, Diddy, Beyonce, Justin Timberlake, Ludacris and Jay-Z. During the earnings call he told an analyst that the company is "we're being very, very aggressive in terms of promoting the rest of the music category for the fourth quarter" and that labels are being aggressive with Transworld in their fourth quarter promotional push. He later told another analyst that he thinks a $9.99 is the key new release price point for at least the first few days of release.