The way I understand how the industry works, and someone please correct me if I'm wrong, is that bands who got signed to a label would essentially get a nice big fat bonus check. Only it wasn't a bonus check at all, it was a loan - yes a loan in which the band had to pay back in record sales or out of pocket if their record didn't sell well. And that loan was meant to pay for the recording process, many times in the cost of 40-90k (usd) per CD, which included all recording mixing and mastering, and the remainder of the check went to a tour bus, and a few other living expenses. Well the record sales, something as ridicules as say 90% of the profits all went to the record companies to pay off the loan and also new expenses for other bands etc. Well a year goes by, the band that got signed needs to write a new album and hope its a hit record, because in many sad cases the previous album either barely paid for the first loan or hasn't paid it off yet. Most of the money that bands made in the past was from selling merch, however because of lower CD sales, the record companies are now dipping into the merch sales of the bands to make up the costs. Maybe thats why those 2 dudes on the video were saying they would rather have the profits from the merch?
So even at the early stages of a newly signed artist, even if they sell millions of CD's they could still be very broke on their first few albums. Most record companies are making profits from only a handful of artists, and especially pop music where the new flaver of the week can change daily, people are just fickle that way.
So to say that bands didnt work their butts off for their music that they are selling is just plain wrong. Being on the road and all the fame and glory, also comes at a price as well. Trust me they pay for it, and many artists are still paying for it.
I had the chance to speak with a guitarist from a popular metal band recently who stated that he doesn't have the money to even pay for a new amp, even if he wanted it, that he had to wait for the record company to purchase it and for the endorsement contract to sign off, and this is after 3 good selling albums.
My question is how is the record industry going to adapt to the way things are. I seriously doubt file sharing is going to go away, no matter how much it bothers many of us, especially those who understand the music business financial aspect. I say if you enjoy a band, support them any chance you get, especially the metal bands, because they are at the lower end of the financial food chain.