This quote has been attributed to plenty of people over the years, I've always heard it as being from Duke Ellington - "There are only two kinds of music out there, good and bad."
Years ago I always used to say genre distinctions only serve to increase the ease of commercial sales. At this point I think there's a bit more to it than just that. Especially where I now have to look through the R&B/Rap/Hip Hop section to find Boards of Canada or Air at my local HMV.
I think large encompassing genres are somewhat necessary, especially for younger inexperienced musicians. The framework of the genre provides defined structure and stability within the group at a time when most of the individual members are still trying to figure out their own paths. It's like the confines of the genre absolve them from the responsibility of recreating the wheel. If you start a punk band then you know you don't need to worry about learning a bunch of slick chicken picking country guitar tricks. Though at the same time developing that ability makes it easy for the group to present itself to different markets based on how they blur the line between various genres.
It's a weird situation, like you need the structure of the defined genre to help prop you up at the start, so that you can eventually knock them down after having developed something special. Like the old saying - You need to know the rules so you can break the rules. If the structure of the genre is removed there's little opportunity for any group to feel like they've overcome any sort of real creative challenge or accomplished anything of real substance since their playing field would never change.
As for the Hendrix thing as being the first Heavy Metal guy that's not quite accurate, it was a reflection of the use of the term to describe music, Steppenwolf simply used it as a lyrical descriptor. Here's the deal with that quote (I don't have the liner notes anymore but...) It was in regards to the EXP, opening track for Axis: Bold as Love. The reviewer for I think Melody Maker struggled to define what he was hearing and described Hendrix's guitar as '...the sound of heavy metal falling from the sky'. Also Led Zep's Communication Breakdown also gets dropped as being the first song to actually
sound like metal.
But I digress. In regards to genres I think the more popular ones of the last couple of decades are getting to the point of being messy. All the Post-genres vs. all the genre-Cores etc. It's inane distinctions that serve little purpose more than external validation for the bands who want to be able to monopolize the attention of the listener by forcing the facade of a distinct style rather than appealing to the wider tastes of the umbrella genre that really covers their twist on the default.
If anything I think it's going to go the way of Jazz. When I talk to my old man or uncles about jazz they can spot the distinctions between styles like
that. Not unlike how I and my peers can spot the distinctions between rock styles. But for the most part, when my friends and I listen to jazz, we just call it jazz, yes we're aware of distinctions, but we don't care if it's Be-bop, bossa nova, fusion, proto-funk or whatever, it's just jazz. I have a feeling that my niece and her generation will be some of the first to approach rock music with the same attitude, where this idea of alternative, vs. indie, vs. grunge becomes a farce for old people and those kids will just like 'rock'.