We all thought that cassettes were history and according to Soundscan, only 34,000 were soldin 2009, but it seems like there's enough of an appetite for new product, and there are enough tape machines still out there that work to constitute a market. In fact, M2 Communications (where Burger Records get their tapes duplicated at) state that they're currently duplicating being 6,000 and 10,000 a month.
The key to making this work is pricing - $6 per unit. Of course, short runs of only 250 (usually at a buck a copy cost) makes the outlay and the risk small, and also make it an exclusive piece of merch for the true fan.
Cassettes are actually not that bad a distribution medium in terms of reproduction quality. Sure, when they first came out in the late 60's the quality was pretty poor, but by the end of their reign the playback quality was surprisingly good. I remember taking a tour of a record pressing and tape duplicator and hearing some tapes off the line played back in the QC department and being shocked how good they sounded. The key, of course, was that their playback deck was aligned weekly, something that never happened in consumer decks.
While the return of the cassette tape is a short-lived fad that will be nothing but a sales blip (if that), it is a good example of thinking outside the box in terms of marketing. It also goes to show that in Music 3.0 almost anything works, even if it's low tech.
Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.