I would also caution Brian about some of this other assumptions. He is assuming that he can get a discount from CD producers without confirming this. Indeed, rarely do such entities sign into favorable agreements with underfunded startups. I would also caution Brian about entering into this business without a long-term business plan. Even if his wild, uninformed assumptions prove to be prescient in the short-term, the technological shift represented by the mp3 is something that could easily destroy his business before it achieves critical mass. It is foolish to enter into a business based around a technology that is approaching obsolescence without considering the impacts of the new technologies on the long-term future of the business model.

3) the first step I would advise Brian undertake is to design...

It is unwise to invest thousands of dollars in building a business based on a hunch. He needs to know for certain that there is a market out there for his idea, and he will also need to have a sense of the best ways he can reach that market. This can only be done by designing and implementing a professional market research survey.
The second step Brian needs to undertake is to build a business model around his research rather than his own preconceived notions about the best way to meet the needs of the customers. He needs to be flexible and act without any ego associated with his own ideas. Brian is a long way from being ready to launch this idea as he has not demonstrated that the idea is feasible nor has he determined the best way to make the idea work.