There's a gigantic amount of music produced every day, and only a limited time for listening, so filtering is a real issue, and labels do help there.
Record labels are labels, and in some genres of music, labels are a really good way to filter the signal from the noise for listeners. I do not believe this entitles them to keep a big part of the money generated by the sales of music, but it is clear that even if your music is on iTunes, Google Play, or any other service, if no one hears about it, it will just sleep there.
Therefore, to me, the next step in the elimination of the need of record labels would be an efficient music discovery service, where you could be sure that if your tunes are good, no matter the lack of promotion, they'll fall in the relevant ears. There is Pandora and the likes, but I don't think we're quite there yet (hype will probably always be a very strong thing). I have good hopes though.
Stripping off distribution and press, "labels" are really just left as VC firms and/or incubators for music-production "start-ups" (in est, bands.) Which sounds about right.
You are right about labels one day just being startup incubators and venture capitalists for bands. I guess when you factor in all of the benefits the Internet brings to a band, there aren't many left a label provides other than cash. For a true decent recording you need cash for studio time, a producer and then more money to get it mixed and mastered.