The war is over. Let's face it. You lost. Things will never be like it used to be. But it's not all doom and gloom. There's still a spot for you in the new world order. Pessimistically, I expect not a single change from this. Everything I've seen indicates the heads of your industry are firmly against the necessary changes.
I'm reminded of a monkey trap. It involves a box with a hole and fruit inside. The hole's large enough for the monkey to slip his hand in, but only empty. Holding onto the fruit, the hand's too big to leave. Sure enough, the monkey's greed does him in, self-imposed shackles firmly on until the end. Tricks like DRM, root-kits, and suing grandmas only seal the industry's fate, discouraging people from listening to any new music.
The trick is to play to your strengths. Cost isn't your strength; that goes to Kazaa or Gnutella or whatever kids use for P2P these days. But why does iTunes still do well? ITunes can't beat P2P's price of free either. Their secret sauce isn't DRM. It never has been. It's been ease of use.
Time is money, and 99 cents is a good trade for the minutes or so P2P would take. No, this doesn't include teenagers, who have more time than money. But Wil Shipley's right: if your company depends on 15 year olds, you're already in trouble.
So where does that put you, oh member of the recording industry? Price isn't your strength. Ease of use online isn't your strength, either. Let's face it: musicians these days need you for pressing CDs, advertising and placement, and that's about it. So do that. But that flat bit of plastic hasn't changed in years, possibly even decades. It's outdated, and clunky in its current shape. It needs an update.
The jewel case is now a liability; it costs more than the disc, is bulky, and takes up space. Your customers, the ones who buy a lot, will have already thrown them away, opting for binders to store hundreds of discs.
The disc itself isn't too useful. The first thing people do with them, save for CD players in cars, is to pop it into the computer, and rip the tracks. No, it's not stealing. It's necessary, because the discs are almost as bulky as the jewel cases; the plastic is a wrapper for the bits. Remember that.

First, get rid of the jewel cases. No more awkward plastic seals, either. It's not worth inconveniencing the buyer. A cardboard sleeve like is good enough. But make it useful. Put tabs with holes on the left. Make tabs on the right that'll lock into the holes. And make sure it's standardized. Why?
Part two is to sell empty binders and cases. Ones with rings that match the new sleeves. That's right, the sleeves become a binder pages. Or part of a rack of CDs. Or even wall hangings. Buy a disk, and it's already got a home, nice and organized.
Now that the physical aspect of owning CDs are easier, now is time for the CD itself. Downloaded music is what? 60MB to an album? You can do that 11 times over. Right now, you're been wasting that space.
Ripping tracks take time and cpu power. Do it for them. Have a data portion of the disk. Include MP3s, AAC, maybe even Ogg Vorbis for the 15 people that care about it. But don't stop there. You've got the space. Make standard music player versions and then some really high-quality versions. AAC supports 5.1 sorround sound, you know.
Fortunately for you, some soul has already made a database of tracks. It's imperfect, and relies on others. You can do better. Make sure the music files already have all the information on them. And include lyrics on the disk. We want to know what we're listening to.
Even better, put a simple DVD-based menu in there. That's right, plop that CD into a dvd player, and they can get full 5.1 surround sound, with lyrics onscreen for Karaoke. Now you're talking a reason for physical discs.
Now, a price point. You're saving a lot of money switching from jewel cases to cardboard. Not only in materials, but shipping and handling. And with all those features on the data disk half, you might need to cut down on the number of tracks. And remember when you promised when CDs would get cheaper than LPs?
So cut the tracks down to about 10 in a disc. And charge $7. $7 is an impulse buy. $16 isn't. $16 is when you wonder why a movie's soundtrack costs more than the movie itself. $7 per 10 tracks is cheaper than online, and saves us from burning backups. And 10 track albums let you release more discs.
Do away with those anti-theft stickers. Shrink-wrap and stop insulting us. Put a 5" by 5" sticker in there as well. Something that has the band name, nice and visible from a bumper. You get free advertising, and it works for Apple.
Oh, and no DRM. It's pointless, because they could rip tracks anyways. You're here to make it easy to get music. And you need to do us a favor by including this. Ease of use makes repeat customers. Never forget that.
