Maybe the music they are releasing just doesn't appeal to that many people. I'd love to see their sales numbers pre-internet compared with their sales numbers now. All small labels have always struggled to make ends meet.
Look, I agree that file-sharing and the internet are factors that all labels need to come to grips with. In fact, I think they are, right now, the single biggest factors that labels need to come to grips with. If they don't, they will continue to see declining revenues decline, but not because people are stealing music. Because they are missing the single-most effective direct marketing tool available to their companies.
Most labels no longer rely on vinyl lp's as their cash cow. They may still offer them in limited runs, but most of their output is in a CD format, much to a small minority's dismay. The generation after mine could care less about format. Then again, they could care less about Sharp Nine, Sirocco, MaxJazz, Palmetto, Omnitone, Origin, etc. Come to think of it, aside from this board, I can probably think of five people other than myself that know any of those labels by name.
My point is is that format is not the problem.