this guy's thesis, broadly speaking, is: "The model for record labels was that the U2s paid for the Hold Steadys, and that's supposed to keep regenerating. But obviously the labels aren't able to do that so well anymore because they're shrinking their rosters." this is true, but he misses what is important, which is that bands like the hold steady were always an awkward fit for the mass media industry. t-pain can sell millions of records; simply put, sleater kinney cannot.
you have to shell out a ton of money before you get a marketable mainstream hip-hop album, while the cost of producing an "indie" record ought to be quite modest. with such records, modest sales should be able to reap modest profits. these profits are way too small for GIGANTIC companies like sony and time warner, which is why i've always found it odd that the big labels want anything to do with indie music in the first place. undeterred, however, labels merged and acquired all sorts of smaller, once independent labels over the last ten years (as was the style in the times). and now they bitch that the hold steady doesn't make enough money.
there's another problem here, one which steve knopper, rather oddly, doesn't mention: there aren't any record stores left (if he expects to find a viable profit model for digital distribution, then he should really give the new york times a call; i hear they've been waiting for one of those for a decade). it's hard to make money off of theft, and bundling your digital product (easily attainable for free all over the internet) with a t-shirt and a concert ticket is a stupid fucking idea. the music is the product, and if you can't sell it, then you can't fucking sell it.
at this point i would say, "figure something else out", but that's not what i believe is going to happen. more importantly, that's not what i think SHOULD happen. the record industry is FUCKED, and that's OK. record industry folk believe, as does knopper, that the purpose of a label is to "develop" new artists, but nothing could be further from the truth. an entire, globe-spanning industry has been built on the profits that are made from the sale of music; all of those salaries (fewer and fewer every year, but still) are paid for by the sale of music. they make the music as much as a supermarket makes soda. the industry develops nothing; its only jobs are promotion and distribution.
but the digital revolution is really a self-promotion revolution, and now that there aren't any record stores left, exactly who are they distributing to? and if they're so goddamn good at developing musicians, why are they all broke?
what profits there are to be had from making and selling music will be paltry -- generally, this has always been true and it will always be true. music may even be such a poor career choice that it might make sense for us to declare ourselves "not-for-profits". shit, my private liberal arts college did that, and they charged 36 grand a year. but whatever the particulars are of whatever future model we can imagine, i would hope only that ALL profits generated by the sale of music return to those who were integrally involved in the creation of that music.
the key word there, of course, is "integrally". edgar bronfman may own dozens of different imprints, he may be very rich, but it's creativity that makes music, not capital.
my advice to decaying labels would be this: if you want to make money selling music, maybe you should write a song or two; i insist, however, that you stop shitting down my throat and calling it cake.