In 1977, BOZ Scaggs had a moderate-size hit single called "Lowdown," and two films then in production wanted include it in their sound-tracks.

Scaggs opted for the more promising one: the film version of "Looking for Mr. Goodbar." The album sold slowly, but at the mechanical royalty rate of 2 3/4 cents per song per album for approximately 125,000 copies, plus the licensing fee, Scaggs did all right.

The movie he passed up dealt with a new kind of music and starred an unproven television star, John Travolta. Scaggs' manager, Irv Azoff, reportedly dismissed it as a "little disco movie." Forty million records later, Boz Scaggs must wince whenever anyone mentions "Saturday Night Fever."

For Scaggs, it was a million-dollar wrong decision -- the king that no one in the record industry intends to make again.

"Saturday Night Fever" and "Grease," both on RSO Records, are the two highest-grossing albums of all time, through the gap between them is enormous. At No. 2, "Grease" has only sold 10 million copies.

Pop, rock and country-oriented soundtracks have become big business ever since "SNF." This year they are bigger then ever, and as the stakes have increased, so have the complexities of marketing.

In the scramble for sales, the lines between record and movie have become blurred: The soundtrack album may bear little relation to the way the music is used in the film; the album now frequently precedes the movie to allow maximum marketing value; and the relationship between the movie and the record is engineered so that a gain on one will offset a loss in the other.

Though no one expects to see sales figures like those for "Saturday Night Fever" again, there is still much to be gained from being included on a successful soundtrack. Becky Shargo, the music supervisor for "Urban Cowboy" (whose soundtrack has already sold over 2 million copies) says that "it became a very competitive thing among music publishers to try and get their songs in there. We ended up getting very low fee quotes for songs we licensed for the movie and soundtrack, with a certain fee if it was in the movie and soundtrack and a higher fee if it was only in the movie and not on the album."

With each track on "SNF" earning more than $1 million for its artist (Yvonne Elliman, with the hit track "If I Can't Have You," reportedly earned more from the soundtrack than Travolta did for starring in the film), the potential gains are enormous for both artist and filmmaker. "SNF" had both the No. 1 single and album at the time the film was initially released.

Olivia Newton-John's single, "Magic," held down the top chart position last week; the film it's from, Xanadu," opens this weeks. "Urban Cowboy" has already spawned four hit singles, with at least 10 more projected. Clint Eastwood's "Every Which Way but Loose," which grossed more than $100 million, was pushed along by four No. 1 country singles. "American Gigolo" got a No. 1 single out of "Call Me."

Airplay of the singles is the equivalent of countless millions of dollars in advertising. "Record buyers and the movie-going public are the same," says Stephen Paley, music director for Orion Films, which recently released "Caddyshack." "It's a way of cross-pollinating each other. One acts as an ad for the other." That interralationship has produced some of the major record-movie tieups of recent years: RSO/Stigwood with Paramount; Casablanca/Filmworks, Arista and Twentieth Century-Fox joining together as ADA Films; former Asylum president David Geffen with Warner Brothers Films; former Casablanca president Neil Bogart with producers Peter Guber, and Jon Peters. Orion Films must show all of its soundtracks to Warner Brothers Records first.

Many of Hollywood's new moguls have grown up listening to rock and are more receptive to its integration into film -- and to its promotional value. Billboard's latest sales charts are dotted with soundtracks: Full Moon/Asylum's "Urban Cowboy" is No. 4 with a bullet, and starring John Travolta, who was also in "Grease" "Empire Strikes Back" on RSO is at No. 8. "Frame," also on RSO, is holding strong at No. 11, while "The Blues Brothers" on Atlantic is at No. 13. MCA's "Xanadu" is at No. 26.

Seventeen of the top 80 sinlges (and six of the top 20 country singles) originate from soundtracks. No, But I Heard the Movie

What you hear on the radio and on a soundtrack often bears little resembleance to what you hear in a film.

Becky Shargo of "Urban Cowboy" points out that by law a song must be in the movie to be on the soundtrack. The law, however, has little to say about just how long the song must be on.Of the 38 songs in "Urban Cowboy," more than half are heard for less than 30 seconds; some last for less than 10 seconds, mixed in the background, as close to subliminal sound as one would dare get. and though the movie is ostensibly country music's answer to disco's "Saturday Night Fever," the first (and most commercial) side of the double record soundtrack is basically rock and roll.

One of the interesting conflicts provoked by a successful soundtrack occurs in promotion. Most companies will allow their artists to appear on another label's soundtrack. After completion of arrangements between publishers and artists (almost all of whom understand the marketing value of a successful soundtrack), it then falls on the original labels to work out their singles strategies.

Traditionally, the artist's own label released the single version. With "Urban Cowboy," nine of the 14 targeted singles will come from "Full Moon/Asylum. The exception is Kenny Rogers' "Love the World Away," coming out on his normal label -- United Artists -- where it has replaced his own "Don't Fall in Love With a Stranger" on the charts.

But Mickey Gilley, whose club is at the center of all the action in "Urban Cowboy," has a problem: His "Stand By Me" on Full Moon is the current No. 1 country single, and it's riding roughshod over the new single by his normal company (Epic), "True Love Ways", currently No. 23. That is typical of a situation which amuses many program directors: In the competition for tight airplay time, promo men are pushing artists on competing labels. Three Ways to Win

There are three basic types of pop soundtracks. The first is derived from performance/concert films like the Who's "The Kids Are Allright" (which made it into the top 10), Neil Young's "Rust Never Sleeps" and the Band's "Last Waltz." These albums are little more than a variation on best-of albums. A second type is a compilation of older songs, using previously recorded versions. "American Graffiti" was the great success here, so much so that there were three double-album soundtracks, though there were only two films. "Easy Rider," in 1969 was the major success of this category.

The third type involves recording new songs, or a least new versions, specifically for a film (though some existing tracks usally find their way onto soundtracks). Shep Gordon's Alive Enterprises joined with Steve Wax Enterprises to do the soundtracks for both "Roadie" and "Up the Academy," neither of which did particularly well at the box office. "Roadie" (which Alive also financed) did yield hit singles by Cheap Trick, Teddy Pendergrass, Eddie Rabbit and Emmylou Harris/Roy Orbison.

In the past, there have been soundtracks that outgrossed their films. One exapmle is "FM," which Azoff spokesman Larry Solters described as "a great record, terrible movie." The movie stiffed at the box office; but the two-record soundtrack sold 2 1/2 million copies. Earth, Wind and Fire's soundtrack for "Shining Star" (which almost no one has seen -- or heard of) sold 1 1/2 million. "SNF" high grosses at the box office were nothing compared to its grosses from the record stores.

And there are the mix-and-match soundtracks, like Giorgio Moroder's score for "American Gigolo," with a few songs and a lot of filler. Even RSO wasn't interested in that soundtrack: "We passed on that one because, quite frankly, we didn't think one hit song could carry the album," says RSO's Oakes. Blondie's No. 1 single "Call Me" did just that, prompting a remembrance of Paramount Records turning down "SNF because "soundtracks just don't sell." The Chicken or the Egg

Traditional soundtracks -- with scores written specifically as a filler or background music -- still come out at the rate of 150 albums a year. They've always been an integral part of the music market, with sales depending on a theme song's popularity ("Exodus," "The Way We Were," "Fame," Star Wars" and "The Empire Strikes Back").

But sometimes the music can pre-date the movie. "In 1955 film "Blackboard Jungle" featured a song by Bill Haley and the Comets called "Rock Around the Clock." A year later, the success of the song had engendered a movie of the same name. Throughout the '50s, there was a plethora of films based around "rock" or "beach" motifs. In the mid-'60s, the Beatles delivered "Help" and "A Hard Day's Night," and 1970 brought one of the greatest original rock soundtracks -- Jack Nitzche's brilliant "Performance."

Currently in production or release are 20 films built around country music themes along, and some films are even being made from singles. "Ode to Billie Joe" and "Harper Valley, PTA" were only the beginning. We can look forward to Ann-Margaret in "Middle Age Crazy." Also coming: "Take This Job and Shove It," "The Night the Lights Went Out in Georgia" and "The Cowgirl and the Dandy." Kenny Rogers' "The Gambler" was so successful as TV movie that it's being remade as a $10 million theatrical feature. His recent concept album "Gideon" is being translated first to a Broadway show and from there into a film, with Rogers expected to appear in both.

The move from recording studio to soundstage in nothing new. Bing Crosby did it in the '40s, and over the years some of the biggest names have followed suit: Frank Sinatra, Elvis Presley, Barbra Streisand, Diana Ross, Bette Midler. Some of the littler names too, like Paul Williams and Meatloaf.Recent arrivals include Olivia Newton-John, who has moved from "Grease" to "xanadu" and probably won't appear in the sequel to "Grease," Paul Simon in the upcoming "One Trick Pony," Tanya Tucker and Michael Murphey in "Hard Country," Neil Diamond in "The Jazz Singer" remake. Roger Daltrey starred in "Tommy" and "Lisztomania"; he also stars in the new thriller "McVicar," whose soundtrack is regarded as being just short of a new Who album. Sting, the bass player from the Police, starred in "Quadrophenia" and is now being touted as a major villain in the newest James Bond sequel.

And, of course, there are Willie Nelson ("Electric Horseman" and "Honeysuckle Rose" as well as the upcoming "The Red-Haired Stranger," The Willie Nelson Story" and "Redneck Romance," Hollywood's renaming of his "Phases and Stage's album) and Dolly Parton ("Nine to Five," "Best Little Whorehouse in Texas"). And let's not forget Luciano Pavarotti, who (perhaps wisely) turned down the role of Blutto in the million-dollar "Popeye" film. Of course, it's a two-way road, with Sissy Spacek actually singing her role in "Coal Miner's Daughter," Clint Eastwood dueting with Merle Haggard in "bronco Billy" and Burt Reynolds crooning "Let's do Something Cheap and Superficial" in the sequel to "Smokey and the Bandit."

"When writers submit scripts these days, they practically have to put several music cues in," says RSO's Bill Oakes. "Now," he adds, "It's a complete reversal of past practice. Some people are making albums with an option to do the movie."

It does seem that many movies are written merely as an excuse to put out a soundtrack. Irv Azoff, who was so disenchanted with "SNF," was co-producer with Robert Evans on the $13 million "Urban Cowboy" film. Remember Boz Scagg? This time, he has a cut on the soundtrack.

According to Billboard, the copyright values of his songs has gotten so out of line that an artist can get "six figures up front against a percentage of the movie's gross, a picture development deal and a hefty royalty on the sale of the soundtrack album." The Sound of the Future

Of course, there have been "significant" failures. A classic example: the Bee Gees and Peter Frampton in "Sgt. Pepper." RSO, riding high on the boxoffice and soundtracks successes of "SNF" and "Grease," felt it had a winner. It didn't. Not only did the film fail to customers, but radio programmers, fearing a guilt by association, avoided playing the album. RSO shipped 4 million albums; 2 million were returned. Any one else would have been happy selling 2 million two-record sets. But not when the unwanted 2 million had already been printed up.

Nonetheless, the future of soundtrack albums seems secure. "They'll keep doing it until it's not succesful," says Orion's Paley. "And then they'll just think of something else." RSO, which despite "Sgt. Pepper" seems to have a golden touch when it comes to soundtrack projects, will release "Times Square" in early October -- six weeks after the first singles and the soundtrack album -- with songs from a number of big New Wave groups.

Future projects include the sequel to "Grease" ("It was the biggest movie in Paramount history," says Oakes, "and they wanted to know where the sequel was"), the Latin-salsa-flavored "Angel" (to be directed by Pat Burgess, the choreographer for "Grease," who will probably also direct the sequel) and the film version of "Evita," whose film rights recently sold for more than $7 million.

From Irv Azoff, who wet his feet wih the dismal "FM" and whetted his appetite with "Urban Cowboy," it'll be the Eagles films and "Coast to Coast," starring Robert Blake. Shep Gordon wouldn't list his upcoming projects, but some of the other big (and in some cases imminent) releases include Paul Simon's "One Trick Pony," Queen's theme song and soundtrack for "Flash Gordon," Neil Diamond's "Jazz Singer," "The Idolmaker," based on '60s rock vocalists, and further down the road, a 45-song soundtrack for a film called "American Pop." EMI Videograms has just released former Jefferson Starship singer Marty Balin's "Rock Justice" as a 60-minute video cassette, along with a soundtrack of the same. As more theaters feature Dolby sound systems, rock, country and pop music will undoubtedly become an increasingly integral part of the movies.

There will probably be a downtrend in the next year, because as Shep Gordon admits, "whenever anything gets hot, there's always too much of it for a while." But don't mention that to RSO, which started out 10 years ago as an artist management company with Tim Rice and Andrew Lloyd Weber and "Jesus Christ, Superstar." It was a record, a play, a movie and finally a soundtrack. Rice and Weber also wrote "Joseph and the Amazing Technicolor Dreamcoat" and a musical that RSO will film and release a soundtrack from in the next 18 months. It's called "Evita."