Why should they have to pay $20.00 for one song? You don't have to be a genius to figure out that most music on a CD is filler. Perhaps one or two songs on a CD are worth listening to, with the rest being crap. Abandon the CD and half the problem is solved. If you focus on delivering singles to the market, rather than expensive and crap-filled CDs, then you've already gone halfway in meeting your consumer's desires. You can still offer compilation CDs or boxed sets, but that will be a niche market. Your consumers will decide how they want to arrange their music and will most likely use CD's as a means of arranging music to their tastes.
The next decision you'll have to make is how to deliver music to the consumer now that you've abandoned the CD. Judging by the recent spate of lawsuits, I think you're already aware of the various means of music distribution available today. Here's the kicker: you're going to have to knock off all this copyright infringement bullshit if you want to even begin engaging your market in a successful manner. Don't worry, you're still going to be paid a fee, but you'll have to give up trying to thrust your meaty hands into the consumer's pocket every time he wants to listen to a song. If you're willing to accept short-term loss for long-term gain, then you're ready to get back into the game of making money.
A cursory glance at the market reveals the time is ripe for exploitation. MP3's are common but portable devices still haven't reached critical mass. This means you can jump right in and takeover the market. First off, get those R&D dollars flowing because your eggheads need to come up with a music standard superior to the MP3. I'm sure you all went to business school so I'm confident you understand the concept of offering a superior alternative to an established product. Spending thousands of dollars to design and implement exotic CD copy-protection schemes that can be voided with a Sharpie isn't going to cut it. Developing a standard that offers better clarity in a smaller file-size would be a good start. While you're at it, make sure your standard is backwards compatible with the MP3, meaning people will be able to play MP3s on your products, but won't be able to play your files on current devices and software. Once you've accomplished that, offer the encoder/decoder free. Now don't go choking on your filet mignon just yet! You're still going to get your money, but not in this arena. All right, calmed down yet? Good, let's continue.