Re: " it was that it didn't return any money to the creators"
I must respectfully disagree with several points in your post.
The issue here is generally about percentages. You sign to a label; they front you £20k to get an album going (through their preferred and partially owned studio...) and have a smash hit. Great.
Now; they'll be having that £20k back, thanks. So the 40% of royalties you get for each play is null and void until it's paid back the £20k. This is essentially therefore a loan; the interest is their 50% of royalties earned... until you consider that they earn this for the lifetime of the song. 10 years after you've paid them for everything they did for you, they're earning a massive amount of money for no discernible services rendered. That's the issue.
A comparable example: You get a bank loan to buy a complex piece of hardware for your factory. A percentage of the profits created by this machine go to paying off the loan. When the loan is repaid... you continue to pay a percentage of the profits to the company who gave you the loan for the lifetime of the hardware.
In any normal business sphere this would be considered insanity.
My second point: a vastly larger group of musicians make money by playing their instrument live (as a dep, session musician or part of a gigging band) than ever make their money through being signed to a record label. The assertion that the industry is in any way synonymous with widespread awareness or a position in the top 10 is a lie entirely peddled by the record labels themselves because they don't profit from unsigned acts gigging and making money.
third: Record Labels do indeed act as gatekeepers for that top 10 aspect of music, and I think the current state of popular music speaks volumes for exactly how incompetent they are at that job. Bland uninspiring music, X Factor winners, "old classic" music... such as boybands from the 90's, etc. This is neither progressive or representative of music being created or performed around the world right now.
Record Labels are not good for the music industry as a whole. merely for a very small proportion of musicians and themselves.