There is no short supply of talent, but the record industry has a great many criteria about whether they want to do business with you that have nothing to do with talent. Some of the criteria are, quite frankly, appalling. The record labels aggressively "game" the market to try and maximize their profits. What has happened is that the market is more fluid than it used to be but they are still trying to be as heavy-handed as they used to be.
The fundamental problem is that there IS lots of talent. The record companies used to be gatekeepers for reasons largely having to do with capitalization, but while this continues to be less true every day, the record companies act like it is as true as it was a few decades ago. More interesting, many of the criteria that were the basis for rejection of talented individuals have made these individuals particularly well-suited to doing reasonably well in the emerging market landscape. The arrogance of record label talent selection in the past decades selected against the very people that could effectively compete against them in the current market. They burned one too many bridges and it is biting them in the ass now.
The question is where are you more likely to find talent? The major recording label that put out 1,000 albums a year (just a guess don't know the real number), or 50,000 independent artists putting out 1 album a year each?
Now, you're more likely to find non-talent in the 50,000, but you're also more likely to find good original talent in the 50,000. Not only because of the sheer numbers, but because it hasn't gone through the filtering system the other 1,000 has that filters out real talent that doesn't fit the mold they are looking for.
Is it worth sifting through tons of coal to find the diamonds, or is it better to settle for rubies and avoid the coal (but also miss out on the diamonds.)