Music industry statistics show that only about 1% of all records produced will ever sell more than 1000 units. This leaves 99% of the market to local, independent record labels, as most major labels won't back small projects.
Although typically much smaller in size than major labels, local record labels benefit from lower overhead, which allows them to invest in recordings that would not be attractive to larger labels and realize a profit on fewer units sold.
With the advent of MP3 and music download technologies, local record companies are able to release new music via the Internet to a world-wide audience, at relatively little cost. This reduces the amount of money invested in a recording and lowers the break-even point.
Local record labels can benefit from a close association with artists and their fans, making for a better understanding of individual marketing techniques and a street-level view of each project. This type of understanding is not typically present with major label projects.
Local record labels typically produce new recordings in increments of 1000 units, rather than the hundreds of thousands produced by big name labels. This production level allows local record labels to make adjustments to the sound or look of poorly selling releases in order to boost sales.
The production of download-only releases allows local record labels to sell music in CD form, as singles or packaged in groups of two or three songs in an EP-style release. This flexibility offers a wide range of income streams from a single recording.