I personally like working with the same people day-in, day-out. Contracting is not the same as being a part of a company and forming a strong team to solve real problems.

It might work for small time "innovation" like snapchat and domylaundry.com, but I highly doubt you can get the kind of work we saw come out of Bell Labs with anything less than a well-paid team of long-term employees who'd been working there for a while together.