Not to be prophetic or philosophical, but it will be in the end like it was in the beginning.
In the beginning, bands formed and recorded music in their garage, with the best equipment and recording technology that they could afford. The collaborated in the best space they could find (someone's garage) and they self published the recording they made. Maybe they made money, maybe they didn't.
Today, musicians can record with (nearly) the same quality in their house as they can in a major studio. Musicians can collaborate over the internet either directly or with the help of a collaboration service that helps musicians find each other and exchange / submit tracks. Musicians can publish their tracks on services where they either get money per track or as a donation model (see http://coryjohnson.bandcamp.com/ for a perfect example of this).
Musicians can self-promote on the internet, and perhaps reach greater audiences than they can through traditional media and distribution channels.
The musicians simply need to embrace these new ways of doing things and be willing to take on these tasks directly instead of having someone else do it (and probably rip them off in the process).