Tim Lee recounts Chris Anderson's recounting of the story of the band Birdmonster which not only aggressively used web-based publicity efforts to gain attention for the band before it got offers from record labels, but eventually started getting offered deals. Deals they turned down: "We're not anti-label in principle, but the numbers (risk vs. reward) didn't add up."
That's interesting. And, clearly, digitial technology does a whole bunch of things that tend to undercut the rationale for the record label as it's been traditionally understood. At the same time, I have to think it would be odd to see tons of folks want to follow down this particular path over the long haul. Just because technological changes may make it easier to do publicity, marketing, distribution, etc. on a DIY basis doesn't necessarily make doing things that way appealing or advisable. After all, there's no particular reason to think people ready and able to produce music people want to hear are going to have enormous aptitude or inclination to do this other stuff once they're in a position to get someone else to do it for them in exchange for money. That could be the case even if, in some sense, the numbers "don't add up." The simple added convenience of outsourcing functions outside one's core areas of interest/competency has value. More likely, you'll just see the nature of services that bands get in exchange for a chunk of their earnings will shift as the structure of the music industry shifts with it.