"This made you a much better player than just looking up a video or tab though."
I disagree. Not about the "just looking up a tab" bit, but about the general gist of your argument that "the hard way teaches you better". Easier access to knowledge is always better when you want to learn things, and the internet is absolutely the best access to knowledge that has ever existed.
I've been playing guitar since long before the internet made it easy to find a tab or chord chart for almost any song. I learned the "hard way". I've taught guitar lessons (also before all the modern options for learning came along), took college level music classes (in high school and in college), etc. All that knowledge was hard-earned, and I appreciate the time and effort it took to learn, but if I could go back in time and give my twelve-year-old self Rock Band and the Internet I sure as hell would.
To put it into perspective, in addition to guitar I tinkered with drums even back in high school and college (though I never had my own real drumset until adulthood). When I played in bands, I'd always push for at least one song where we'd switch it up so I could play drums for a little bit. I wasn't good at drums, but it was fun and I could hold down the rhythm for a simple song. As a grown up, I started playing Rock Band. Damned if my drumming didn't go through the roof in terms of quality and confidence. And, it happened fast, too. Within a few months of playing Rock Band maybe three or four hours a week and occasionally watching a video on YouTube about problem areas, I was a completely different drummer.
What I'm trying to say is that educational tools matter and the tools provided by technology today are incredibly better than they were when those of us over, say 30, were learning to play.
Not only that, I can browse YouTube and watch hours of instruction from professionals in any field. I've watched master classes on composition for orchestra by people who do it professionally, for example. I had that kind of access to really knowledge pros for a brief window when I went to a high school for the arts and to a lesser degree during college, but after that and until the Internet, it was something I had to get from books. Learning from professionals who're speaking directly to you in a video is way more valuable than slowing down a record and listening to it a hundred times (though there's value in ear-training, the tools for that are better now than ever) or reading a book about the subject.
Anyway, the point of my rambling is: Don't let nostalgia for how it used to be to cloud your view of how much better it is today. There will likely be younger prodigies in every musical genre than ever before because of the Internet (and Rock Band and apps that let you practice your intervals, etc.) if kids still want to learn how to play instruments. I think about folks like Lorde; she was writing fully formed, mature, and extremely competent, music at a ridiculously young age. I doubt it could have happened without tech.
And, I don't know if it's awful that kids may spend time learning to play other things rather than guitar, drums, bass, and piano; maybe they're learning sequencers and samplers and such instead. It may just be different, not worse. I learned a lot about music making mods in a tracker on my Amiga back when I was a teenager. It allows one to understand the whole song in ways that banging it out by yourself on an acoustic guitar might not.
I try not to let nostalgia cloud my appreciation of art that's happening today. And, there's a lot of great art happening, in music, too, including some real rock and roll played on real instruments. Pop music has never been about the guitar, even though the guitar was ever-present in pop music for a few decades. So, it shouldn't be all that surprising that pop music isn't going to cling to the guitar; all pop really cares about is pretty faces and very catchy repetitive songs.
So, while pop goes wherever the wind blows, there are plenty of guitar rock bands being started even today. Most major cities have a great music scene of real bands playing real instruments. They may never again rule the charts the way album rock did in the 70s, but they aren't extinct.