It's really kind of sad, but things have been headed this way for a long time, now.
Album/CD sales are WAY down from where they were 10 years ago, and illegal downloading is one huge reason. The recording industry was slow to embrace downloading on a pay per download basis, and that gave the filesharing sites the vacuum they needed to flourish.
Now so many albums get uploaded onto file sharing sites it's not all that hard to find new releases online before the CD even hits the shelves.
This is problematic for new bands as they can't make any money off their recordings. Older bands just sign exclusive deals with WalMart or Best Buy to guarantee their money, but newer bands can't do that.
The future doesn't look good for new music. Where there were thousands of releases every year in the past there may be a few hundred in years to come. Who's going to spend all the money on recording an album when it's just going to be stolen online? If there isn't going to be a fair rate of return on the investment in recording new music then how many bands will be able to afford to do it? How many will be willing to do it? Not many - not as many as we've been accustomed to, anyway.
One thing that I think hurt the record industry is the lack of artist development starting in the 90's.
In the 70's and 80's record companies gave artists/groups multiple albums to catch on. First album doesn't hit it big? No big deal, let's try another one. That doesn't become a big hit? Let's try it again, maybe with a new producer. That album doesn't meet expectations? OK, let's take one more kick at this can before we give up on it.
That's how it was for 17 or 18 years to the late 80's. Then the accountants took over and the A&R guys were put on a short leash.
It became, "First album didn't become a hit? Was it almost a hit? If yes, go to new album sessions. If no, go to band dropped by label."
Bands like AC/DC, KISS, Rush, Alice Cooper, Judas Priest, the Scorpions, etc, all were given multiple albums to hit it big - and hit it they all did. Then the record companies had a wealth of back catalog albums to promote and sell to a (then) newly established fanbase.
After the 80's the record companies stopped developing artists over the long haul, and almost never had a band hit it big that had a sizeable back catalog to sell. That back catalog was a profitable item for record companies for years, and then they lost that when they just started dropping bands whose first or second albums failed to meet expectations sales wise.
So that shift in philosophy along with internet piracy/downloading has led to a record industry in shambles.
And that's going to hurt the development of new artists in the decades to come.
Things will never been what they were. Ever again.
But distribution has been taken out of the hands of the big labels. Recording costs are way down. I could record a song of reasonable quality (if not stellar or even C-league production values) out of my office.
Managing margins, proper and vivid cross promotion, and touring like hell can still lead a band to success. But it's still a struggle. Always has been.
I did a paper on this for school a couple years ago. I think it has to do a lot with illegal downloading and the attention span of the public is so small. Hardly any of these newer artists are going to have long careers and have a huge impact like the Stones, KISS, Aerosmith etc.
I don't get downloading. I do understand maybe not wanting to go a store (like Wal-Mart, Best Buy) and having to put up with the people who work there but that's why iTunes is so great! Sit at home on your computer and buy an album for $10. Don't want the entire album? Just buy one song for a buck. It's awesome but for some odd reason, people don't want to pay for something they can get for free. It's ridiculous.