Although the film was a critical and commercial disappointment, the soundtrack was a worldwide success and received positive reviews from music critics, earning double platinum certifications in the United States and Canada. The singles "Magic" and "Xanadu" reached number one in the United States and United Kingdom, respectively. "Magic" became Olivia's ninth Number One single in The Netherlands, while "Xanadu" topped the chart in Italy. All in all, the album was the fifth most popular US soundtrack of 1981.The soundtrack featured songs on side one by the film's star, Olivia Newton-John, written by her long-time producer, John Farrar. The songs on side two were written and performed by ELO; the title track which closed side two featured Newton-John as lead vocalist. The Newton-John side also featured Cliff Richard, the Tubes and Gene Kelly.
At the time of the album's release, Olivia Newton-John was signed to MCA Records, while ELO were signed to Jet Records. A compromise was worked out between the two companies in that the album was released on MCA in the US and Canada, and on Jet in the rest of the world. Not every song from the soundtrack was included on the album, with the Newton-John solo, "You Made Me Love You" released only on the B-side of the duet "Suddenly", "Fool Country" released as the b-side of "Magic", and ELO's "Drum Dreams" released on the b-side of both "I'm Alive" and "All Over The World".
In their review, Billboard praised the album. "Newton-John's first soundtrack since the multi-platinum Grease has her romping through a variety of cuts, ranging from the bewitching ballad "Magic" to the rock-inflected title cut, written by Jeff Lynne. Newton-John duets on three of her numbers - ballads with her costar Gene Kelly and one time mentor Cliff Richard and a hot rock number with the Tubes. The other side of the soundtrack is dominated by four ELO tracks, including the hot single "I'm Alive." Since Newton -John and ELO are both coming off top 10 albums -"Totally Hot" and "Discovery" - it's hard to see how this single-disk package can miss."
Other reviews noted that the soundtrack is fluff stuff to be sure, but some pearls float amongst the mire. Lead-off "Magic" remains a fine single. "Suddenly," a duet ONJ ekes out with British luminary Cliff Richard, seems better than most love themes. The second half glows from the Electric Light Orchestra, soaring at its commercial height, escaping this crippling fairy tale fairly untarnished with three more hit bits: "I'm Alive," "All Over the World," and the Olivia Neutron Bomb showcase title track. "Don't Walk Away" and "The Fall" stand as two of Jeff Lynne's finest.
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