The frontman told NME that the music industry is unwilling to take risks on artists that "strive to break barriers" and that his band had found it hard to find a record label free from "shenanigans or dictatorships."
Lydon called shows like X Factor and American Idol "unimportant" saying, "It's a shame that the music industry has been taken over and dominated by them. Particularly American Idol... You know, the way they love to award themselves every year, those institutions.
"It becomes like the way record companies used to operate," he added. "In fact, if you ever want to know why I'm not on a record label, look at The X Factor.
"Honestly, of all the people that strive to break barriers in music and do good things and write great lyrics, not one of them would ever pass the first round on any of these competitions."
The band's ninth studio album, 'This Is PiL', is to be released in the first half of this year.