The top digital executives at the four major record labels assured a retailer-heavy crowd at NARM today that the digital music revolution would not pass them by.

From searching for new physical music formats that bridge the digital/physical divide, to encouraging retailers to establish digital services of their own, the "2007 Digital Strategies" panelists tried their best to convince attendees that the source of their greatest fear -- digital music -- is also are area of great opportunity.

Sony BMG's Thomas Hesse outlined an effort to begin creating a wide range of physical music products to match the many products available in digital formats.
"The way we need to do business in the future is to innovate in the physical space," he said. "We're going to launch an entire array of products and programs to do just that."

On the digital side, there are multiple products labels can sell -- such as ringtones, downloads, remix tracks and wallpaper images. Sony BMD developed 71 different products around Justin Timberlake's new album, but only one was physical.

He hinted at future CD releases that would imitate special edition DVD titles that are issued around popular movies like Spider Man -- such as the collector's edition, the gift edition, multiple albums bundled into one.

"At the end of the day, we want to increase the amount of money consumers spend on music and get there in multiple ways."

WMG's Michael Nash unveiled a new physical CD format called MVI (music video interactive) that uses a CD as a "gateway" of sorts to additional digital products. The CD would include content such as behind the scenes video, software that allows fans to remix songs into custom ringtones, digital booklets. The first act to release music in this format is Linkin Park with their "Minutes to Midnight" album.

Universal Music Group's Amanda Marks suggested retailers get more aggressive with opening their own digital music services.

"There's no reason why digital and physical can't work hand in hand," she said, encouraging retailers to either launching their own digital services, or partner with existing retailers like Circuit City did last week with Napster.