I would tend to agree with Nina and her 3 approaches.
We're a small independent band from Europe and we just released our third self-produced album, called One Frame Per Second.
Selling digital music online is a no brainer. The cost of putting music on stores like iTunes, Amazon, eMusic and streaming services like Rdio, Spotify and Deezer allows just about anyone to get their music out there. Creating the music is a different story but I won't get into that here.
When it comes to choosing the formats on which we release our music, we always try to find something new, or different, because we like experimenting.
This time, we found the PlayButton format, a button with an embedded MP3 player on it, on which you pre-load your album. We thought it was cool, and since we're kind of geeky, we were intrigued.
We contacted the company behind PlayButton a few months before we were supposed to record our new album.
At the time, they could only take minimum orders of 500 units. We don't even sell that many CD's, so we knew there was no way we could sell that many of them. I asked the folks at PlayButton if they could sell us blank ones in smaller quantities. They said no, but that they would contact me if ever they changed their minds. A month after we recorded the album, I got an email from them stating that they had developed DIY PlayButtons!
So we put in an order for some and made them available for people to pre-order along with the CD and Digital versions of the album.
We really didn't know what to expect but the PlayButton edition is already sold out.
A month after we started taking pre-orders for the album, a young lad from Germany posted a message on our Facebook page asking if we had any plans to release the album on Vinyl. We said no because the minimum order for 12" vinyl is 250 copies and that we didn't think we could sell more than 10! However, we had a quick look at the cost of pressing 250 copies and joked that if he could find 66.6666667 people to pre-order a copy at 15 euros/copy, then we would have them made. Then we started receiving dozens of comments from people saying that they would buy one.
So we quickly opened a google spreadsheet asking people to put their names there to keep track of how many there were. Within 2 days, we had almost 40 people on there and thought, what the heck, let's just do it!
We found a supplier, and put up a pre-order system on Bandcamp with a mockup of what the record would look like. To add some incentive, we offered to put the buyer's name on the back on the record using Moo.com to make the custom labels.
We didn't get enough pre-orders to pay for the full 250 copies, but we got enough to pay for more than half of it and we are confident we'll sell some more over time (and if we don't we'll make a donation to a frisbee club!).