Artists were still expected to be self-promoters back in the pre-Internet era. I'd suggest, with only a few exceptions, the artists that got signed were the ones that knew how to play the game of self-promotion. There were artists that bucked this trend (Nick Drake springs to mind first, and I'm sure there were others), but for the most part the act of getting signed required some level of hustle. If you don't believe me, how many 20th century music artists can you think of that didn't have a distinctive appearance?
As for developing talent, we may have lost the multi-album development deals that allowed artists to take risks whilst still being supported financially, but the development of artists doesn't have to be confined to music studios. Artists get real-time feedback on their music when they play live, and they can still make a living doing so.
The last point I'd like to make is that the services labels used to offer are still available, and there's greater flexibility for the artist when it comes to picking and choosing which services to use. Want someone else to handle distribution? It can be done. Want someone else to handle promotion? That's possible too. Want to hire a studio and a music producer and an engineer? All fine if you've got the money. Previously, if signed to a major label (some indie labels had different business models), you gave up your song rights and part of your creative control in order to secure a loan to make an album, a loan which you'd then be obligated to work off. Nowadays you have no obligation to go into debt in order to release music, it's completely up to the artists to choose how much they engage with the labels.