I think I explained my point poorly.
If you do not care about music enough to seek it out (which is most people) and music is just something that's in your life when you're driving to work or doing the cleaning you rely on the "music industry" to be your aggregator, they make/take music that they know the average person will like (yay formulas!) and deliver it to you through radio, television and all the other places people listen to music.
If that disappears and music becomes something you have to actively seek out, or find yourself disliking most of the music you're hearing on the radio ("this week on the top 40 from some website that people that care about music visit...") you're just going to give up.
music is a part of our lives, yes, but not because it's something most people are passionate about, it's because it's just something that is there. I've started to enjoy music a lot recently, but for the majority of my life it wasn't something I cared about at all, I would just listen to whatever was popular and I was happy with that. My mother is the same, she'll hear a song on the radio and like it and then go out and buy the bands album and listen to that, she would never sit hunched over a computer trawling through websites sharing different music, or flick through TV channels, or switch between radio stations.
I used reddit as an example of a website that delivers content of a specific type to people that want it. The example you're using (Soundcloud, Hypemachine) would be sites like Hackernews, they cater to a specific audience. Most people that use reddit are just idle consumers, they go to reddit.com click the top 20 links, laugh at the cute cat pictures and move on. How many ever subscribe to communities they care about? A relatively small amount. That's the amount that would ever seek out music. (edit: I think a good way to explain it in simple terms is: reddit is "my first internet content aggregator", the music industry is "my first music aggregator")
How the system works now isn't PERFECT, but it's pretty great. Popular music is distributed by big labels, they control what the average person hears and "know" what most people like; people that want more than just the popular music can seek it out and/or contribute through kickstarter (which is growing, which is great). I think what the article describes is fantastic and it SHOULD happen, but alongside big labels, not as a replacement.
Music should be paid for, music should generate revenue, artists should be able to use labels to get big, but artists should also be able to stay independent, make music for making music, have their fans fund what they want to hear. That sort of thing is great, but both can exist at the same time (and I think they will)