I just see digital distribution like shopping at Jewel Osco as opposed to Peapod.com. For convenience's sake and budgetary constraints shopping at Jewel is way more convenient if it's a block away or a mile away than to order online overpriced groceries that you have to get delivered to you.
In market terms while the ability to get digital downloads seems cheap at first, you have to realize someone had to plunk down money initially at first to buy a computer to download a program such as iTunes or plunk down money to buy a mp3 player. Buying a ghetto boombox to play your cd's or cassettes is an expediture as well but not as much as digital electronics. For the majority of the US those outside of cable/dsl modem speeds physical cd's and/or media like the radio is still what holds sway in what they buy or what they hear as opposed to MySpace which in geek terms seems like a big market (20 million people visit it everyday I believe) in real terms like percentage of population it's a small amount of the music market.
I wouldn't count record labels out just because for convenience sake and for the majority of people that is the choice defacto for any kind of musical buys. If you still are in the market to market your work might as well go to the source that can put you within a block rather than rely just on just digital realms.
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