Lyric discussion by songmeaningstom 

Cover art for Cut-Out Witch lyrics by Guided by Voices

I could be wrong, but I assume the word cut-out refers to the record industry practice of using a saw to cut a notch in the corner of a batch of record albums or CDs to show that they don't count as sales and should be sold wholesale at clearance prices or otherwise dumped to retail outlets. You'll usually find these in local record stores' 99 cent bins.

The cut-out witch could come in suddenly and make albums affordable to the compulsive record buyer.

The cut-out witch could also markdown and write-off a band's remaining inventory, proving that band has under-performed on their record contract, and it would be a signifier that the record contract is ending. While it means the record company is taking a loss and the band is getting dropped, for some bands stuck in the major label contract this might be good news.

From the point of view of