CDs are nearly extinct. I, for one, still enjoy getting a physical disc, browsing the liner notes, reading the credits of the string players on track 8 (who aren't credited on iTunes downloads) and using one more of my senses (well two if you count the smell of paper and plastic) during my album listening experience.
I'm in the minority. Hell, that piece about the NPR All Songs Considered intern (that sparked the 2012 "should I pay for music" debate) said that in her 21 years she has purchased fewer than 15 CDs. Ok, with my packed 300 CD wallet and 4 boxes of cases in my closet, I'm a little different - just 6 years older.
However, in the current state of music, the CD is still necessary in the ease of distribution during a physical encounter. I sell the majority of my albums at my live shows in the form of a CD (not a digital download card or a vinyl record). Buying my CD live is one part "I want to listen to this," one part "I want to listen to this in my car on the way home" and two parts "I want to have a moment with this artist who I just enjoyed the live show and get him to sign it." It's the same kind of moment they want to have buying you a drink; however, this moment they'll actually walk away with some music.
When you have a new album out you most likely will want to give a certain amount away to people that you think could potentially help your career. Be it a venue owner, a booking agent, a record company exec, a radio DJ, a newspaper journalist or your rich uncle. To get these people to actually listen to your album is much more difficult than you expect and it's not always just because they're "too busy."
When I'm on tour I get handed a CD nearly every other night. However, they almost always give me their CD shrink wrapped. The mental effort it takes to battle with a shrink wrapped CD way outweighs the actual time and effort it will take to actually unwrap it (10-300 seconds depending on the length of my guitar nails at the moment). In your mind you have thought this out: "It's more professional if I give them my CD shrink wrapped. It looks like I'm a legitimate artist. They'll enjoy unwrapping it - like a present!" This is wrong on all accounts.
ALWAYS UNWRAP YOUR CD BEFORE GIVING IT AWAY!
This includes mailing it to a radio station or newspaper reviewer or giving it to a fellow musician at a show. If you want them to listen to it remove as many steps as you possibly can from the equation. If you give someone your disc at a show all they should have to do while driving home is remember they have it and with one hand on the wheel slide the disc out from it's case and pop it into their CD player (you don't want to cause them an accident do you?). The same goes for the journalists getting your disc in the mail. They see 5 discs on their desk. 4 are shrink wrapped and 1 is not. Which disc do you think they're going to start with?
When I finish my tour I have about 30 shrink wrapped CDs cluttering up my car that I eventually throw away and 2 burned demos and 3 actual released CDs that were given to me unwrapped and have been in rotation in my car throughout the tour.
I'm playing a show at The Hotel Cafe in Hollywood on Saturday, Nov 22nd. Get tickets.