Change in Economicsw phenomenon as the book industry is currently going through this same dilemma: Independent and self-publishing is undermining big publishing.
No More Editorial ProcessWhat we are losing is the big publishing editorial process. As record labels are downsizing, so is their acquisition and editorial staff. No longer willing to take chances on failure, record labels are mostly going for established artists and thus not needing an entire department of editors. Without editors, executives are again not taking chances on new artists. New artists are now turning to the self-publishing route and thus undermining the entire business model.
What are we left with? A plethora of music to choose from, but no vetting process. This means that you have to hunt for new music or music in a genera (or sub genera, or sub sub genera) you like.
Computing Cost vs Performance
The new millennial employee is also extremely computer literate, which makes the paradigm of analog recording almost obsolete. Why record analog when the computing power of non-linear editing is not only cheaper (no costs for tape), but highly cost effective in terms of staff time. If you don't need 80 hours per song to do basics and fix mistakes and only need 20 hours with digital recording, big studios are losing out on 60 additional billable hours.
So Now What?
The paradigm has changed. The old way of analog and big studio recording was too rigid and inflexible. We are now an industry of individual production. We see this with new artists emerging out of the EDM genera who produce their own music and are more successful than established bands working in the old label paradigm. What we can see however is that there is still a need for experienced mixers and mastering engineers. With the resurgence of vinyl record sales, the back end of the production process is still thriving.
The need for good sounding mix rooms is still driving most new construction but the purpose is more for mixing and mastering, not for recording. This might not be a bad thing, but recording studios need to adapt to the changing market, or find themselves facing extinction in the production market.