Record label EMI will lay off 2,000 and shift its focus toward digital music, private equity investor and company topper Guy Hands told the Financial Times. Hands said the music industry operates on fallacies with origins in "the phenomenon of the 1990s and the CD" and as a result, companies like EMI are hemorrhaging cash. EMI, for instance, spends $50 million a year destroying unsold CDs. Guess whose model Hands said the industry should follow to turn itself around?

It's time for the recording industry to embrace digital music instead of focusing on CD sales and cell-phone gimmickry (the ringle?). So says Guy Hands, CEO of Terra Firma, the new private-equity owner of EMI. About time someone said it. Radiohead leading the charge into "free" music territory with the digital release of its new album for whatever consumers are willing to pay for it, and others are following suit. EMI and other record labels risk getting cut out of the equation. The music industry needs a new business model, nowish. One suggestion by Hands: Instead of granting big advances, they should offer to subsidize recording costs in exchange for a stake in earnings.