Music fans will often give two points for when the music industry became like this. The first is the rise of MTV and music videos in The '80s, which produced artists like Michael Jackson and Madonna. An artist's image was always important (just ask Elvis Presley, The Beatles, David Bowie...), but the visual medium of music video meant that they and others were defined primarily by their images, rather than just their music. This has been called the start of the music industry's equivalent of The Blockbuster Age of Hollywood, one less about the music and more about the profits — much more than usual, anyway. Of course the music of the era, including the two artists named, is often well-regarded in spite or even because of the focus on image.
The second point, which tends to spark much less disagreement, is the Telecommunications Act of 1996, which deregulated American radio and allowed companies like Clear Channel to consolidate radio. This made it tougher to appeal to a niche, as commercial music had to be homogenized for an audience of 300 million Americans.
Younger artists are very susceptible to this trope. This is probably one of the reasons labels prefer younger artists: they're less well-versed in the ways of the business and easier to control. And it's likely the reason the industry focus on younger listeners. Older music buyers/listeners already know what they like and don't like, whereas younger listeners can be told what to like.
It should also be noted that record labels aren't exactly what they used to be: they're more like corporations now. And there's only three major music companies: Sony Music Entertainment, Warner Music Group, and Universal Music Group (which absorbed PolyGram, then bought EMI and divided its assets with Warner). Then there's the fact A&R doesn't do much artist development anymore, or help create long careers; For instance, if you fail to garner high six figure sales in the first week or two, you're usually dropped like a hot potato. Record companies want immediate results; they have no time to actually build and grow artists' careers anymore. Some argue that the way the industry is set up now, legendary artists like Stevie Wonder wouldn't have a snowball's chance in hell of getting signed today, let alone have a fledgling career. Lastly, labels don't help people record albums anymore: they only sign people who have already recorded professionally-done albums and release them. This is not impossible — Jonathan Coulton does it in his basement — but you still need amounts of time, ability, and money that a lot of people would find prohibitive.