I'm not bullish on the prospects for small music startups. I wouldn't start one. But that doesn't mean that the middleman roles in distribution and promotion aren't going to be taken by some new entrant.
Compare: Ticketmaster has what seems to be a mortal lock on the business of music performance. But concern promotion is a relationship driven business where firms compete to lock up exclusives with a few venues in each market. None of those venues are particularly interested in vertical integration. So Ticketmaster is likely to hold on to their market position until forced out of it by a huge company or government action.
Why, exactly, is Amazon or iTunes going to abet attempts by firms like Warner to lock up distribution? Amazon has already aggressively positioned themselves up against the major incumbents in publishing. Remember, all they have to do for music is to let more small labels interface with them; unlike the agency debates in publishing, they don't even have to fight the business model.
I just don't see it. However complex you think the music world is, so that we need firms like CD Baby to get artists listed on iTunes, I just don't see why 5 years from now a label like Kill Rock Stars is going to need the relationships it needs now to gets its products into the mainstream market.
It is going to get easier for companies like KRS, and harder and harder for firms like Warner. It just looks like it has to.