Spotify already lets unsigned artists add their music through music aggregators like cdbaby: http://www.spotify.com/us/work-with-us/labels-and-artists/ar...

I suppose the music aggregators are a modern day take on record labels.

Not really, a label does much more than get an artists music in a store. Distributing the content is probably the easiest thing for artists to do on their own. Marketing, touring and merchandise are more complication and labels are still the best solution.

Well, that's why I said "take" on it. These companies are actually doing quite a bit that a traditional label would do: they store the media (the digital version of manufacturing it), distribute it, and market it. I don't think a traditional label is always the best solution, especially for groups that will never be big enough to justify the huge upfront costs a label puts in.

These aggregators are really for the tail end of the spectrum: the 90% of bands who represent 1% of music listening time and don't have much hope of getting signed.

They could, but only for a short while with small artists until the labels start seeing them as a competitor rather than something to be exploited. Once the labels start to feel threatened you can be 100% certain they will take their ball and go home. That and probably litigate against Spotify.

Assuming Spotify signs artists (or Apple for that matter), will they be willing to upfront costs against touring, recording, production? How would they structure recoupment? Apple could structure a better deal because they can cover mechanical royalties through download purchases. Spotify would be streaming only. The economics would be very, very tight.

It'd be hard for them to do a 360 deal to get revenue from the money making aspect of music (sponsorships and live), unless they also staffed up artist development (touring) and sponsorships/partnerships/biz dev.

Its not as easy as just "signing an artist"

If it was, we'd have already been disrupted by the indies.

I realize it's a complicated question, and that Spotify (or Apple, or any other company we love) couldn't just jump straight in and be an instant success. And while Apple certainly has the cash to cover upfront costs, staffing up, etc, Spotify probably doesn't, at least at large scale.

Are there cases where it would work, though? Bands that stumble upon internet fame are still the exception, but they exist, and it seems like they benefit much less from the visibility and other perks that traditional labels offer. Could a band like OK Go (back in their early days of YouTube success) be better off going directly through a distributor like Spotify, getting less up front, and getting a bigger revenue share? I know a couple of years ago they jumped from EMI (http://okgo.net/2010/03/10/onwards-and-upwards/). Maybe they could have done so earlier?

OK Go would still have to register with a publisher and a PRO if they wanted to see any residuals at all. If they just wanted to bypass music and be a "video" band they'd still have to manage the music bed in some fashion, even if through Tunecore or someone like that.

These "the labels must die" discussions get tedious because not many know what they do. I quit being at a label, but not because I think it should die, just because it was anyhow.