I have been following this thread with keen interest as it is a subject close to my heart.
Firstly i share both David and Al's points for very different reasons and i want to set what i believe is the happy medium for both points of view.
1. Digital is the logical way for anyone outside of the major record companies to go and even for the majors it is in their best interests long term. However they do have the retailers to consider and have a certain loyalty towards the retailers that they would not jump 100% into digital at the moment. I have no such affiliations and have launched my label as a digital label.
2. Vinyl is the logical physical product labels can support because it is the only format which users cannot cost effectively clone so there is a certain value an authentic vinyl record release can have and as a result it grows in value.
3. Vinyl is the format i started my label with because i started in dance music and it was the format of choice for DJs. There is a certain 'fetish' element to vinyl which cannot be matched by any product at the moment.
4. Vinyl can be manufactured on demand if you are wise and know a few little tricks of the trade. However vinyl should be sold by the label/artist DIRECT from their website or from ebay or GEMM or Amazon. It should be considered a merchandise item and therefore should be released in the following manner.
A: ON demand prestige version. Released with original signed posters, comments, lyric-sheets, photos or any other 'merchandise' element at a premium. You can manufacture these at a cost of perhaps 20.00-30.00 GBP and sell for 50.00GBP. Only the ardent fans will snap this up and these must be hand made customised in some way so that they are limited to around 10 copies.
B: Once you sell out of these contact
www.gzvinyl.com and master your production on demand run and obtain 6 test pressings or more. Then build up an advance order list of vinyl junkies who want your album/single and sell it to them on ebay alongside printed posters (not signed) etc or anything you can think of.
The above will cater for the minority fans or collectors who will buy your record and store it as a value added item.
5. Digital will get better and better and soon anyone will be able to make perfect copies of the digital single. CDs will become relics of the past and DVDs will rule the roost for 5 mins before the IPOD or its successor becomes ubiquitous.
6. In spite of this i predict that sale of music as an item in itself will not last 5 years before the Napster model of Ad sponsored music becomes the eventual market leader. At the moment Napster do not know how to make it work, but is currently like digital singles before Itunes took over.
I predict that some smart alec marketing company with quality advertisers will make a kick ass hardware player with the ads integrated in a clever way linked to a website of course will eventually crack this model and things will change again.
7. We may not like to hear this but music will become free and if you as a label are not keeping one eye on this model and preparing yourself for it you will not survive.
8. Vinyl will now become even more important when music becomes free because premium vinyl will bring a new dimension to life when digital music becomes free to the consumer. It will become a collectors product of choice and will hold much value.
9. There will be lots of money to be made from music still as the ad sponsored model will make google look like child's play because the amount of time people listen to music will explode.
This is what my crystal ball tells me.