WeatherJinx,
I do not see them cutting out the record labels any time soon. The record labels spend a huge amount of money promoting the artists via advertising and concerts.
There are very few artists/bands that can pull away from the record label machine and they are a well oiled machine that controls everything & everyone in that industry.
Richard
P.S. The thing the record labels missed is that a good percentage of the people that download the music in an MP3 will go out in buy the CD if they really like the song/group. They want the better quality sound that you get from a CD, which the MP3s just do not have.