No copy protection for CDs

Cast one of those cheap RFID tags (link) into each CD-ROM. Each tag has a unique serial number, an ID that identifies the music and basic information about the contents of the CD. The music itself is also tagged with the same ID in some hidden bits that don't affect the sound.

"Old" CD players don't care about the tag and just play the CD. Next generation CD-Players include receivers for the RFID and compare the RFID with the ID found in the music. If those don't match the player issues a warning that the music may be pirated. The legal owner may still copy without problems. There will just be the warning. If the owner sells illegal copies they can be traced back to him/her using the ID. The illegal act would not be the copying, but tampering with the tracking system.

This system will make it easy to track criminal activities, so there is no need for full-scale copy protection. Some losses due to occasional sharing among good friends should be acceptable. Not so good friends wouldn't share because the owner knows that the music can be traced back to him/her if it enters a big market. Users who like to burn their own selection of songs into a CD at a store can also do that. The CD-burner at the store just adds the ID as it burns and the tag carries a signature for the store to signal that the CD was obtained legally.

The music industry of course will demand every penny and whine about the losses in the transition period from "old" to "new” CD players, but I think it is a feasible compromise between copyright and users rights. Even the IRS has to be happy with paper trails and tracking instead of permanent observation of all citizens.