The current model seems unnecessary with the internet though. Seems like artists, if they are good, should be able to become famous selling their music direct to consumer through some distribution service like iTunes without a long term contract.

Once someone has made a name for themselves, it would seem perfectly reasonable for a label or a venue to approach them about doing a concert or a tour and taking a cut of the proceeds.

Perhaps the problem is that bands or artists want to fast-track their road to fame. In signing with a label, it seems like they are giving up a lot to get there faster. The question is, can artists who are willing to work their way up more slowly or organically able to, or are certain doors closed because they aren't signed with a label?