Because they are essentially giving into a massive bribe, often at a very young and vulnerable age. And keep in mind, the vast majority of musicians out there do not sign with record labels. Furthermore, only a small percentage of those who do actually become successful. It's essentially like playing the lottery.

It used to be that record labels provided powerful marketing power in addition to the initial cash bribe, but these days superstars are born on myspace and YouTube. I think record labels will be replaced be smaller, more agile PR/management teams who understand how to nurture viral growth and also manage the business side of making it in the music business.

It's very different to be good in two disparate fields at once.

I've spoken with a lot of bands, and most of them know they're going to get fucked by labels, yet still sign, because they think it's still necessary to get ahead in the world. They think it's the only way do what they love every day, all day: making music.

Who can blame them? That's how it's been for fifty years...

The value that record labels provide is distribution and advertising the question should be is all that distribution and advertising worth so much of a percentage.

There is a reason so many bands continue touring year after year other than the want to play live, that is how they get paid.

There is starting to be a rise in indie and self published bands through many online services (one of the first big ones was cdbaby, which a hner (sivers I believe) made and sold) and other things which may be the life of new bands, pop music and such will probably be burdened forever with large record labels.

Up front money, and connections (which they use to further screw you over) if you're one of those 0.1% who make it big enough to need the connections. Lots of groups sign out of necessity - it's that, or break up. That they break up later due to the crap they signed themselves into is another issue.