Veteran artist/executive Dez Dickerson then joked, "Pretty soon, they're going to have a cart outside Best Buy -- a little hot dog cart selling new releases."

Across the hall at a panel on the shrinking label market, EMI A&R executive Steven Melrose noted that the physical retail landscape -- already decimated by the loss of Tower Records and hundreds of independents -- continues to shrivel. Big box retailer Best Buy, for instance, recently cut the number of titles the outlet carries from the label by half, Melrose said.

The odds, to put it mildly, aren't in the favor of the 2,000 bands performing during the music industry's annual spring break gathering. "It was a really simple industry," Bengloff said of the music business 20 years ago. "What you tried to do was get your music played on AM/FM radio. If it got played on the radio, it pushed people into record stores, where they bought these round plastic discs. If they bought these round plastic discs, we made a living."

Rich Bengloff, who leads the American Assn. of Independent Music, dropped some updated industry stats that he said were courtesy of Nielsen SoundScan. Ten years ago, 28,000 full-length albums were released. That number swelled to 134,000 in 2009. More stark, of the 103,000 albums released in 2008, only about 6,000 sold more than 1,000 copies.

As sponsored parties toss away free beer and questionable tacos, it's easy to get swept up in the revelry. Impressive sets have arrived from such little-known indie acts as the Besnard Lakes and industry legends such as Roky Erickson , but as rootsy punk rockers Titus Andronicus sing, one can't necessarily get by on "merit and merit alone."

As the annual South by Southwest conference in Austin, Texas, reaches its midway point, artists and labels were splashed with some cold, hard facts as an early morning wake-up call Friday. Two early discussions called into question the relevancy of signing with a label, either major or indie, and illustrated the uphill battle that the nearly 2,000 bands performing in the Texas capital will face.

It's pretty much taken as fact in 2010 that the Internet has provided opportunities for independents and the do-it-yourself community that never before existed. Priyanka Dewan, who joined Warp Records in 2005 as U.S. office manager, said her initial year was the first time the stateside offshoot of the English label turned a profit. Last year, fueled by the success of quiet harmonizers Grizzly Bear, Warp turned in its best year in its decade-plus history.

Good news, right? Bengloff cautioned the roomful of artists against celebrating. Bengloff noted that he's approached routinely by artists asking for advice. "They say, 'I pressed about 1,000 CDs.' Great. That's not the answer," he said.

Indeed, what emerged was a picture of an industry still controlled by a handful of gatekeepers. Bengloff's panel largely expounded on the benefits of linking with an independent label, especially when he noted that the trade group estimates there are more than 5 million music pages on MySpace.

"You can get your music on iTunes, but how do you get it noticed on iTunes?" Dewan said. "We have the relationship with iTunes where you can get a button on the front page."

Adam Farrell, who overseas marketing for the Beggars Group (which co-owns indie stalwarts Rough Trade, XL and Matador, among others) hinted that the market will continue to shrink at the major label level. "We sell records to people who buy 25 to 30 per year. What we're talking about on the top end is the people who bought three records per year. They bought a Kings of Leon record, and that was their first album in a year. But you can have a nice business marketing solely to the people who buy 25 to 30 records per year."

As major labels experiment with 360-deals, which essentially view the album as a loss-leader and instead take a cut of an artist's touring and merch revenue, Farrell said Beggars is sticking with its old-school model. "Sigur Rós doesn't help on their merch or touring business," he said. "We're not even looking at the stuff. It's not our position on the market right now. Our value right now is helping bands market themselves and sell records."

Labels, said Bengloff, have gotten better at understanding their fan bases. He pointed to Roadrunner Records, and said the hard rock-leaning label once had an e-mail list of 500,000 names, and was losing fans by spamming Slipknot die-hards with Nickelback news. Today, Bengloff said Roadrunner has trimmed its mailing to list to about 100,000 names.

At a panel on the future of online video, Erick Snowden, a creative director at Warner Music Group's Altantic Records, suggested the way forward for labels is to market direct to consumers. "The biggest problem the music industry has faced is one that hasn't been talked about, and that's transitioning to being a direct-to-fan business," Snowden said. "We've always had people in between us, whether that's retailers or iTunes."

It's an approach, ultimately, that sees major labels having to act a bit more like indies. Summed Dickerson, "It's not about being made legitimate by signing someone who makes your dream comes true. That's not reality... It's not either/or. It's both/and. Will there be a place for majors? Absolutely. You can't get to big without it."

In other news from Austin this morning . . . .

A mobile video battle is brewing: An early panel on the future of online video hinted at a potential showdown between Apple and the major labels. Sony Music's online video guru John Sasso noted that the iPhone is currently responsible for somewhere in the range of 30% of all streamed online content in the mobile space. With the impending launch of the iPad, the mobile video market seems primed to mature. One snag: The majors are hitched to Adobe's Flash, which offers greater control over content, but Apple won't support it.

"We're supporting all the phones that are going to be supporting Flash, which is every smartphone but iPhone," said Atlantic's Snowden. "We're building iPhone apps for our artists."

A frustration, said Sasso, is the lack of standardization. "It's impossible to standardize because there's all these different formats. So you have to build for all these formats."

Alexander Kisch, vice president of Vevo, a video and entertainment site co-owned by Sony Music and Universal Music, was on the panel as well, and though no stats -- or the status of the company's talks with Warner Music Group -- were revealed, Kish noted that the company was prepping an iPhone app and would soon launch overseas editions. He said Vevo is also digging up rare and vintage content, including old MTV and BBC shows, as well as obscure international music programs from decades past.

--Todd Martens