I think you misunderstand music as an industry, and you definitely stopped reading after the GP's first sentence. Label execs have very refined taste -- for one, specific thing: finding "artists" that have broad appeal to a target demographic. And even that's a Silicon Valley-esque "lost money on 99, made money one 1" kind of situation.
Music needs labels for the same reason startups need VC: they have resources, connections, and expertise not often found within (bands|founders). Yes, it is possible to bootstrap in both situations, and yes there are companies trying to disrupt that model in both spaces. But it's not the status quo.