Some say the music industry is no longer based on physical CDs. We disagree.
It's true that it's shifting to an attention economy. There are more bands than ever thanks to improved technology. Any home computer is potentially a sophisticated music studio. Innovative software developers are forever making composition more accessible to the masses. Distribution is totally free over the Internet. These days the problem is getting listeners. There is some attention to be had through so-called Web 2.0 resources like MySpace and Facebook; however, in general one must purchase it like any other commodity.
How does that happen? Attention is intangible but buying it requires a physical product. Virtually all reviewers, broadcasters, and respected arbiters of taste demand a press kit: A color-printed CD in a jewel case, a 4" x 6" glossy, professional writeup, postcards, stickers, and other goodies. Listeners may be happy enough with MP3s but a band won't have listeners without promo material that can clutter up some reviewer's desk. All that stuff costs money, paid for by the artist.
How to defray the cost? Let's face it, listeners don't have much incentive to pay for audio in these days of unfettered digital copying. However, they do have some incentive to buy patronage. In other words, they pay because it feels good. It's a vote in favor of the artist, "I like what you're doing, keep doing it." Perhaps this is evolving into universal cost free, DRM free music and "Donate Here" links on every band's homepage, but for now CDs are part of the process. They're a thank you gift in exchange for a donation.
Artists are like public radio stations. The product is free and financial support comes from voluntary sponsorship. Just as NPR will "gift" you a tote bag, so does a band gift you a CD. And just as NPR offers cooler gifts over a range of price points, some bands offer more elaborate physical packages. The audio may be free, to capture your attention, but the goodies will cost you. This is interesting from an artistic standpoint since it expands the concept of a release from a handful of songs to whole bunch of stuff. Physical stuff. Again, the tendency toward physical objects.
At least musicians aren't subjecting you to pledge drives. Yet.
Bands that play live have one more reason to make CDs. They're a great souvenir, and listeners are more likely to buy after a couple of beers.
As for us, we give away our music to make it as easy as possible to get listeners. We make CDs for promotion but also because, hey, it's fun and cool to make CDs. We offer them for sale to make patronage possible.