In our haste to cast out the old guard, we tend to lose sight of the fact that the old guard still fills what appears to be a necessary purpose: the breaking-out of artists. I'm confident and hopeful that their crucial role in that purpose will, eventually, weaken or fade. But for now, it's still a strong reality.
Ultimately, we have yet to see indications that this new model is any kinder to small-time or nascent artists than the old model is. That's the big problem. The winners of the new model (Radiohead, Trent Reznor, Louis C.K., et al.) have first been winners of the old model. So it's very premature to say that the new model is better for the little guy.
To put it in financial terms: the new model holds bigger theoretical upside (share of profits) for artists and consumers (reduced costs). But it does nothing about the downside (risk of never breaking out, financial burden of building a fanbase, etc.), and may even make the downside worse for most artists. At least the little guy in today's model has a chance, albeit extremely slim, of getting discovered and catching a big break. But will the same thing be true in a pure long-tail environment? The jury is still out.
To be totally but somewhat apologetically blunt - that is a steaming pile of BS. That is the exact party line repeated by every single rank and file music industry do-nothing to justify their phony-baloney jobs.
In my own personal experience, affiliation with a record label as a young and growing artist is almost certainly more likely to handicap your chances at success than it is to actually help it. The reason is that when the young artist buys into the party line that "you need the major label machinery to grow your career", the artist then hands over a large amount of control and trust to a supposed "experienced, connected industry professional" to do a job that 99 times out of 100 would be better off done by the artist themselves.
Not only that, but the young artist has no idea that the supposed "experienced, connected industry professional" has zero interest in or understanding of what it is that the artist actually has going for them, either artistically via their music or commercially via their fanbase. At that point all they know is that for some reason, things aren't working out as everybody had hoped it would with the new label. They find out later that they are essentially paying a 100% interest rate on their advance for the privilege of believing this in the first place.
I and all of my buddies in other bands live our lives in the long-tail environment and we play for larger crowds and make more money than probably 98% of the suckers that take the advice to place their bets on "the traditional industry model". And we own our souls outright. You've probably never heard of any of us, but we're okay with that.
THE ONLY WAY FORWARD is to once and for all crush the notion that the "traditional industry model" is anything other than a parasite that eats hopeful and talented artists and excretes auto-tuned plastic dolls.
Rant over for this round.
This is still marketing. By removing the publisher, which specializes in marketing, we put the burden of publishing duties on the artist.
Note how financially successful, award-winning, prime-time comedian Louis CK is playing the little guy against the publishers, mentioning that he financed it all (much like a publisher would do).
Who knows who he's paying or how much. The role he's playing implies that all the cash goes straight to him, the artist, but did he pay anyone for the production? Does he have a future royalty agreement with an agent or, perhaps, a channel like Comedy Central? Is he paying for advertising, or has he hired a marketing manager/publisher to rustle up publicity? Is he calling in favors to get mentions on news sites (much like a publisher would do)?
I'm not being cynical, just that he's playing the game very well, he's using his fame/brand to leverage sales, and that this distribution method doesn't really change anything except move the same roles elsewhere.
This is sort of how I feel about the traditional publishing industry. The way it's worked traditionally is that can't quite tell which authors are going to be big sellers, so you take a chance on a bunch, and the more successful ones subsidize the less successful. Now the successful ones for obvious reasons resent this and can shift to a self-publishing model. The problem is they never would have gotten successful had some publisher taken that initial chance on them. Where's the next generation coming from?
Your band could have been poised to be a very successful mid-level act and have been mispositioned, because mid-level acts aren't hugely profitable, and thus seemed to be a failure in a market you weren't wanting to compete in.
The small bands don't need a ton of financial support, especially these days. Recording a song can be done, professionally, for just a few thousand dollars and traveling to nearby concerts is pretty cheap. If you drop the idea of trying to sell an album in stores (payola!), and doing continent-wide tours, it's not all that expensive to spread your music to fans and enjoy a moderate return on investment.