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I would point out that the actual shocker here is that this democratizes the slop production. The labels need not be involved in this process at all.
As far as I can tell, "Breaking Rust" is just some person with a Suno subscription who used Distrokid to put the music on all the streaming services, and it ended up being used in some popular tiktok videos. Maybe they did some additional guerilla marketing or something, I dunno.
I've actually done it myself, to vastly less (read: zero) success, just to see how simple the process is.
As far as I know, it was exceedingly rare for an indie artist to make it to the big time while producing music in their garage alone, they needed the studio systems for, if nothing else, distribution/radio access.
It became semi-common in the streaming era for an artist to upload to e.g. bandcamp or soundcloud and get some traction there before they signed with a label.
This current case seems different from even that.
That's not really much of a shocker, though. We've had similar democratization with the streaming services for 15 years now, and while I'm sure somebody has had a hit by virtue of nothing other than having uploaded their music to Spotify, if you look at the Billboard charts it's almost exclusively artists signed to major labels. Even the artists you're referring to were only able to use Spotify to get enough traction to get signed with major labels. "Rich Men North of Richmond" is the only song I can think of off the top of my head that became a hit despite having absolutely no label promotion, and it's a good example to use because Oliver Anthony refused to sign with a label. Despite touring with name acts he hasn't had any real success since, and despite venting about his ex-wife on Rogan, the song he wrote about their divorce stalled in the lower reaches of the Country chart and didn't crack the Hot 100 at all. Zach Bryan is probably the epitome of the phenomenon you mention, as he was self-released until 2022, but none of his music actually charted until after he had signed with Warner the previous year. There isn't any evidence of a sustainable path to success for a self-released artist that doesn't involve eventually being picked up by a label.
And this is for artists who have at least some ability to self-promote, whether through social media, local radio, licensing to TV/movies/advertisements, or simply playing shows wherever you can. If the strategy is simply to upload as much material to streaming services as possible and hope something catches on, there's no way to engage in even this kind of low-level promotion, since it doesn't make sense to invest anything beyond the minimum that's required to get the song uploaded. It may happen occasionally, but there's no reason to believe that simply increasing the volume will turn it into a viable business model, or allow it to play a significant role in the industry.
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