The simple fact is that most startup founders not only create the products that define their success, but drive that success almost entirely on their own, with modest help from their investors. As much as everyone likes to hate on record labels, the good ones do almost everything involved in the business of making your music successful. The artist is the product, but very rarely does the artist drive the business. Most are terrible business people. The amount of money a record label puts into a deal might look like a small VC deal. But the amount of work they put in is something else entirely. That is why they take a larger share, and as long as they're fair and do a good job, they deserve a significant amount of the returns.
Their behavior for the past 20 years can be cited as a reason not to want to contribute to them as businesses, but the reality is that, while most artists who have a label make very little, most who don't never make it at all.
I'd say this is only partially true. These days labels are not, and I would argue should not be the artists' primary target for income. Touring and new media are things artists have control over to a much larger extent and that's where artists should be focused.
If a good independent label wants to pick you up, like say Bella Union or Merge or Sub Pop (still) or the like then go for it, it might help. Or it might not. For some it's a big deal, but mostly in terms of promotion and profile, better tours. The good labels, like Bella Union, get very involved in that side of it, others not so much. Even then those lucky acts that are on good labels are still primarily touring bands, and downloads and sales and royalties are a small percentage of their income, unless something really breaks on radio, and that my friend is whole other ballgame and extremely rare from the average artists' perspective. Better to hope to get on a TV show or film, raise your profile some and get better tours.
Also, most of the time those higher-profile independent labels came along and were interested because those acts already had something going, some sales, regional numbers or whatnot that made the label relationship more like a partnership.
It helps to go into it from a position of strength, where you know you can walk away. And if you can walk away, you might not even need the Independent label. Mostly you need good management and good promotion to get better tour numbers going, build into a position of strength and really think about what means of income are available to you in an age where access to distribution channels (the primary former attraction of labels) are now available to virtually everyone.
That's the same as startup getting investment because they have "traction", and most won't if they don't. And the benefit of having a label is that, while you don't need one to tour and focus on new media, it sure as hell helps to have professional help from people who have done this countless times. There are thousands of independent labels. Some will do nothing for you. Those that do their job can do things that a fraction of 1% of artists can do on their own. Nobody should sit around waiting for a label, but nobody who knows what a good label can do would say they're not extremely valuable and worth signing over some of your "equity" to.
This is all true, and it's important to distinguish between "The Industry" and the good indie labels. Bella Union is one I have first-hand knowledge of and they are incredibly fair, and involved in the artists' tours and PR to a large degree.
If you know that's the kind of label you're looking at signing with, great! But the idea that labels are gatekeepers to distribution and royalties is a thing of the past.
Labels work best now when they act more like YC and less like RCA.
You make a great point, that artists usually are terrible business people, and in a label relationship are usually passive and unaware. I think that, as much as any other aspect of the music industry, is what artists need to change.
The average artist could learn the world from the average startup founder. Most don't have the temperament for it, and that's unfortunate. But those that do can take control over their income and business model in ways artists 20 years ago could never dream of. Earbits, Spotify and Pandora (which will pick up interesting unsigned artists, I hear them all the time) are great examples. iTunes and YouTube are still and will remain for a long time, viable and important ways to raise your profile.
This is the just the world we live in, and many artists I think are slowly realizing this as well. You can't passively rely on a distribution machine that operates in near total numeric obscurity to treat you equitably. Artists have no choice but to become business-minded, social networking and new media-savvy, and aggressively creative in that area.
I just suspect that you don't want to live in a world where the only music that surfaces to the top or provides a living for its creator is one where all good musicians must also be astute business people. You miss out on a lot of good art that way.
Very true, I really don't and I'm pretty burned out on trying to convince a lot of the very talented songwriters and artists I know and sometimes play with that they can't passively wait on some label system to put them on a treadmill to success.
I myself have a hazy dream of a promotion/tech/PR/consulting company that can hand-roll technologies, web, mobile and such, tailored to the creative ambitions of musicians, to find new creative tools and ways of manifesting their visions that go beyond the album-tour-album cycle, which I also think is more and more a thing of the past.
I just want to translate YC into music. Interview people and make sure they're all insanely talented, super dedicated, and not assholes. Make sure they can afford rent and food for a few months. Put them in a room together and let them find their best co-founders (or bring co-founders with them), and finance the creation of a low-cost demo product. 3 months later, put each group on stage in front of the world's best independent label heads, and help them get fair deals from good people. One day, Radiohead will come along and say they love what we're doing so much that they want to give every band $150k with no cap and no discount. You almost don't need to do anything differently. ;)
One shining example of a band that "gets it" is Pomplamoose. They may not be getting rich, but dammit they're making good music on their own terms and it looks like they're having a lot of fun doing it:
Their behavior for the past 20 years can be cited as a reason not to want to contribute to them as businesses, but the reality is that, while most artists who have a label make very little, most who don't never make it at all.