Unfortunately I only see the situation getting worse. I'm not in the music business, but I think the chances of some A&R guy going to the Sunset Strip to discover the next Guns N Roses are slim to none. Way too time consuming and expensive to sign, produce, and promote an act that way under the current realities. You need a ready-made act that can be promoted via another platform, a la Hannah Montana or the Jonas Brothers, High School Musical, etc. Then revenue can be driven via DVD's, posters, merchandise, etc.
The key here is that the actual musical content is not what is driving the music business, it's stuff on the periphery..