Sure, a band can distribute their work via the internet, but unless they are already well known they are always going to have trouble finding an audience.
I hope that the situation is slowly improving now that there are more ways to distribute your work, but it's still a sad state of affairs given that 'MySpace Music' is still the best known alternative distribution model...
These days a many bands chose the alternative route of becoming independent. It's not impossible to succeed this way but if you go down that part you as an artist have to invest a lot more time in marketing yourself than you would had to if you signed up with a commercial label.
Has there ever been an industry whose downfall is more deserved?
"Advancements in technology have drastically changed the music industry by providing musicians direct access to resources previously controlled by record labels. While the Internet has increased musicians’ artistic freedom, it has also given them unwanted responsibility over their day-to-day operations. Musicians have to book and promote their own shows while also coordinating distribution channels for selling goods. This do- it-yourself environment has forced independent artists to divert their attention away from making music."