This is the best advice regardless of the business you're in. Decide what you want to be, get to the customers you want to reach, and then pump the product through the best channel you can find.
- If you are an unknown / lesser-known artist trying to get noticed / established:
Establish your goals. What are you trying to do / accomplish? If you are looking for mainstream super-success (think Lady GaGa, Coldplay, U2, Justin Timberlake) - your best bet in my opinion is to look at major labels and prepare to share all revenue streams / creative control / music ownership. To reach that kind of critical mass these days your need old-school marketing muscle and that only comes from major labels. Good luck with that one.
- If you're forging your own path, read on.
Forget thinking you are going to make any real money from record sales. Make your record cheaply (but great) and GIVE IT AWAY. As an artist you want as many people as possible to hear your work. Word of mouth is the only true marketing that matters.
Parter with a TopSpin or similar or build your own website, but what you NEED to do is this - give your music away as high-quality DRM-free MP3s. Collect people's email info in exchange (which means having the infrastructure to do so) and start building your database of potential customers. Then, offer a variety of premium packages for sale and make them limited editions / scarce goods. Base the price and amount available on what you think you can sell. Make the packages special - make them by hand, sign them, make them unique, make them something YOU would want to have as a fan. Make a premium download available that includes high-resolution versions (for sale at a reasonable price) and include the download as something immediately available with any physical purchase. Sell T-shirts. Sell buttons, posters... whatever.
Reznor's additional advice: Take advantage of the technological and business services advances the cut the cost, time and difficulty of operating your business. Be user friendly. Know your customers.
Also implied in the "premium" model that NIN used for its most recent album: partner with other good artists who work in other media (packaging, stagecraft, web) to provide engaging user experiences. The important thing about the music is not just the music itself; it's what you're doing when you listen to the music.
This is readily apparent if you go to the Rock and Roll Hall of Fame. You will find a lot of old guitars behind glass, together with a lot of costumes designed for people who are shorter than you think they were when you saw them on stage at the music festival. What you won't find is the inspiration to get up there and make some music on stage yourself, nor the feeling you get from the music that you loved when you were sitting in someone's bedroom going through their record collection.
There's one more thing you need to think about that Reznor doesn't provide: a model of how the money comes in and where it goes out (what the VCs call a Sources & Uses statement). What are the big ticket items? What costs you a fixed fee (recording costs), no matter how well you do, and what's variable (total expenditures on CDs)? What costs do you need to watch closely (marketing budget or gas money)? How do you know when you're doing well, or need to change, or when to stop?