During the late 1970s and into the 1980s, the record companies were bought by conglomerates that imposed strict corporate structures onto businesses that had been relatively free-wheeling. The labels had been able to use profits from their hit artists to develop stables of new talent to give opportunities for lots of different artists. That became a conflict once quarterly profits became the dominant goal over artistic diversity.
It all pretty much ended once superstar artists were given monstrous advances and/or signing bonuses. When Janet Jackson received $100 million, her label had nothing left to develop up-and-coming performers and writers. This structural change affected companies in different ways but fundamentally, it meant that the labels had to justify every dollar they spent. This is a big reason why niche areas have become neglected, (i.e., theatrical cast recordings, jazz, classical, etc.).
Here's another problem. Singers were convinced by their lawyers and agents that if they wrote their own songs, they could increase their profitability with larger royalties. Songwriting is a serious and difficult craft and art and not everyone can do it well. Look at the popular songs of the last 40 years and pick 10 that have become standards. It's difficult to do! Very few songs today get cover recordings and generally, the song is concretely cemented to the singer.
Thankfully, technology has come to the aid of new talent. With the advent of home and computer recording technologies as well as outlets on the internet, artists can build their careers without the major labels shepherding them into their cookie-cutter regimes. These artists are thus able to reach out to audiences and (hopefully) make some money to continue their ambitions.
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