The CD is having a terrible fourth quarter. Album sales, already far lower than the previous year, suddenly slipped even more in September. Circuit City announced today it will close almost 20% of its U.S. stores. Now the country's largest brick-and-mortar music retailer is scaling back shelf space.

Wal-Mart is replacing some floor space given to CDs with additional Blu-ray stock and electronics products. The company's chief marketing officer told analysts last week, according to the report, that packaged media such as CDs would be scaled back. Wal-Mart cited a 23% drop in CD sales in the first four weeks of the fourth quarter.

The CD has life left in it, but declining sales are having a multiplier effect. A decrease in demand, coupled with fewer major releases, induces retailers to either go out of business (e.g., Tower Records) or cut back on inventory (as mass merchants have done). September's sharp drop in album sales appears to have coincided with Wal-Mart's decision to reduce CD inventories further.

For Wal-Mart, the trend is obvious. It will put its focus on gaining exclusive rights to albums and generate sales from related items (DVDs, catalog titles, merchandise, spicy corn chips). Between the souring economy, increasing adoption of digital music and the company's desire to emphasize growth product categories, the old ways of selling CDs at Wal-Mart are out of style.