A new Gartner report says the 2008 Christmas season should be the last for the CD. Bad advice.

It's ludricrous to encourage an industry to turn its back on the format that, as Gartner points out in the report, currently makes up for nearly 80% of U.S. recorded music revenues. Cutting of its left arm won't help the industry's right arm grow faster, and it will only make the entire body less healthy. For every dollar of sexy digital music, there are four dollars of unsexy CD sales. Granted, nobody wants to put out a paper that admits the incredible financial value of an antiquated format, but a dollar is still a dollar and more revenue is better than less revenue.

As has been the case much of the decade, the music industry needs to balance its need to build for the future with the realities of today's marketplace. CD sales are dropping and floor space is shrinking, but there are still billions of dollars in CD revenue to be captured.

Bottom line: the industry needs to find new ways to sell music. The retailers of the 1990s are no longer the trustworthy partners they used to be. Today's digital sellers are already seeing sales taper off. Next-generation online services -- ad-supported streaming, subscription, Internet radio -- are long on potential but short on revenues. Somewhere out there, other solutions exist. New methods of selling will require new partnerships, staffs with non-traditional expertise and an ability to walk away from the status quo. There has so little creativity over the years -- even though labels pat themselves on the back for self-described innovation -- that putting a Prince CD in a Sunday newspaper still stands as the most forward-thinking distribution model yet achieved. One of these days there will be real creativity -- or else.

CD burning is not a wise strategy in the next 12 months. Gartner encourages labels to move CDs to an "on-demand publishing mode." That's bad advice that incorrectly assumes the physical product's problems can be solved by digital technology. The CD-burning kiosks has been around for a long time and nobody has made it work (in part because consumers have given it the cold shoulder). Consumers buy CDs, in part, for the physical packaging, and they will pay more for physical packaging than for a digital version. Once you create CDs on-demand, the value of the tangible product is greatly diminished. There is a greater future in nicely packaged physical product than generic, on-demand product. On-demand publishing would certainly require keeping the jewel case around and killing the digipak -- that's going in the wrong direction. And moving to on-demand publishing isn't something that labels can decide on their own. They need hardware manufacturers to create a winning product, and retailers need to be supportive and enthusiastic. Neither are going to happen by Christmas 2009.

Here is better advice:

• Allow the CD to age gracefully and continue to service those customers who perfer to buy a physical format. There is still life left in physical formats, especially with older consumers. Don't concentrate only on teen consumers. The 30-and-over crowd is going to buy music for many more decades and will prove itself to be a valuable segment. And don't forget some consumer segments are slower adopters of technology. Country, hip hop and R&B all lag pop and rock in digital sales. And while the CD isn't dead, labels cannot count solely on existing sales avenues. Direct-to-consumer selling needs to more focus and resources, and new retail partners will need to be discovered and developed.

• Revamp physical distribution, don't look to CD burning. Four distributors for four majors (not including their indies) is too many and cannot last for long. The four majors should consolidate distribution through one or two joint ventures. Labels' releases could get proper distribution and marketing as volume drops and each individual distributor becomes less financially viable. Even when CD sales are miniscule -- in five or more years -- there will still be a need for physical distribution. It may all be outsourced, but there will still be a need for it.

• Create new partnerships for digital products. Institute policies and licensing schemes that encourage and enable the next generation of products and services. Labels have invested in digital distribution. They have invested in digital marketing. They have mobile divisions. They have staffed up digital while decimating physical staffs. But as is the case with brick-and-mortar retail, labels cannot do it alone. They need other companies to create the products and services that will connect their music with consumers. Mobile- and broadband-based services will require the enthusiastic participation of corporations and industries that are not yet fully invovled in music.

The real danger in Gartner's advice is that digital sales channels offer increased consumer choice with lower label revenue. If they continue to push consumers toward digital, labels need to be prepared for the track-for-album substitution that has plagued the industry for the last five years. New digital strategies should create a better return per transaction. If labels are going to move further away from the CD, they need more than a couple digital tracks in return.