Here's my theory. Record companies traditionally have operated in the "red". They needed money from ancillary publishing firms. Folk songs are not copyrightable, They are in the public domain, therefore don't bring in any money. Original songs do. They can be published and promoted. Many folksongs were copyrighted by publishers but there's only so many that can be done without problems. With songwriters, original material can be exploited easier. Hence, we have the singer-songwriter. Artists have a dual value to a record company.

The record company calls the singer-songwriter a folksinger so they can sell 'em. True with all labels that have singer-songwriters on them.

Frank