I spoke to a friend yesterday who used to be in A&R at a major label until he quit in frustration. He made a few points I thought were telling:
There are no record people at record companies. The only criteria they have to judge whether a song is going to be a hit is by comparing it, bit by bit, to the last big hit as if they were matching bathroom tiles or paint colors.
Since they have no musical judgment they rely on focus groups of consumers to tell them what they like and want. It's a recipe for stagnation. As Henry Ford said, "If I'd asked my customers what they wanted they'd have said a faster horse". The opposite of that is Apple: no one knew they needed or wanted an ipod, iphone, or ipad until someone had the audacity to put it in front of them.
He ran through an impressive list of artists he found and wanted to sign but wasn't allowed to, who went on to be very successful at other labels. Being wrong had no consequences for his superiors, and being right made him a pariah within the corporation.
He says the focus on kids is total, there is no other serious market as far as the label was concerned. And yet the target audience treats music as wallpaper and doesn't feel compelled to pay for it. He believes there is still a huge pool of potential buyers for whom music was formative and will still pay for it, but the labels make no effort to reach them because it goes against the conventional wisdom.
He feels there are plenty of opportunities for success, but that financing is scarce. He thinks someone is going to find an artist, get financing, and market correctly to demonstrate that there is still the potential for big hits with good music - Norah Jones selling 14 million copies of her first album being a good example.