The dilemma of every major and independent label is if they should focus on hard copy or digital distribution.
The major labels usually have the capital to absorb investing more revenue into physical hard copy releases.
The major labels are able to negotiate manageable distribution deals that can be lucrative for the label and the distributer.
The real major players in the record industry also distribute their own products so the risk is lower than an independent label who has to pay a distributer upfront costs but move minimal product. Independent labels usually release digitally to minimize cost of production. If the Indy label is paying an average of $2-4 dollars per CD pressed (plus a distributer to move their product), the labels cut will be minimal at best. The artist will lose in the end, and if you do the math, there is essentially nothing left over for the artist.
There are ways to combat the mismanagement of investment capital. The first step is to determine the budget that you are willing to invest in the project. Once the budget has been put in place the development process can commence.
I advise Independent artists and labels to start with digital releases and progress to hard copy products through iTunes and Amazon. This way the label can press a small amount at a time to service the demand of the product.
Personally I like to have hard copies of CDs and mixtapes for fans at shows and venue appearances. There is nothing like connecting with your fans and allowing them the opportunity to receive signed copies of CDs and merchandise.
The most important part to remember is that the more money the label retains, the better the chances that the label will profit on the release. So if you have a limited budget go with the digital release and maximize your profits in the beginning in order to ensure financial success of your project.