I don't buy the theory that it was the gay thing, or 'break free'. I think it was the result of the move to Capitol who didn't promote them properly, and the lack of touring.
Queen's worst and perhaps gayest single, Body Language, was a HUGE hit in America.. #11 on the charts.. and that completely goes against saying that Hot Space or the disco thing hurt them here. Radio Ga Ga was a top 20 hit..
Break Free almost made the top 40 and MTV did show the video at least twice because I saw it once and then caught it and recorded the audio from it the 2nd time.
From then on I think it was just a matter of poor promotion. And when you think about it, it's only two albums that really suffered.. A Kind of Magic & The Miracle. Hollywood Records promoted them well and got their stuff selling like hotcakes even before Freddie died.
So for 2 studio albums on Capitol out of 15 they didn't do great here.. big deal :)