davedotco said:
For a lot of artists this appears to be the issue.
To be slightly more correct, Spotify pay the 'rights holder' which may well include writers, composers, producers and of course record companies. For the artist a lot will depend on the contracts they have signed, particularly with the record companies who can be rapaceous.
In the days when product was sold as physical media. records, CDs etc, it could be argued that the record companies desrved their large percentages but now, in a market dominated by downloads and streaming that is no longer the case.
New artists will benefit from the new style of management that works to a rather different business model, making reasonable returns for a wide range of artists rather than a handful of 'superstars' making fortunes and 'subsidising' the rest of the industry.
You're right: streaming services do have the potential to reshape the music business. By kicking out the greedy record companies, artists could develop a more direct relationship with consumers.
But whether this will happen depends on (at least) three imponderables:
-- will the record companies go quietly? It's well known that the big record companies feel they were shafted by Apple over iTunes, and their reaction was to negotiate a rather better deal for themselves with Spotify et al., which is one of the reasons Spotify can't make money. I suspect the record companies will hang on for a while yet. They're still quite powerful, and the history of artistic rights (whether music or film or book publishing) shows that in all but a few cases it's the record/film/publishing companies that have the upper hand economically.
-- you're right that one of the traditional justifications for the existence of record companies was the production of physical media. But that was by no means the only justification. A significant part of record company expediture is on marketing. (Whether we think record companies do this well isn't really relevant.) If the record companies all but disappear, who's going to do the marketing?
-- but the biggest problem is the consumer. Many (most?) consumers resent paying money for online services; younger people in particular have a sense of entitlement as far as the web's concerned. (Just think how many people use pirated music and video files.) If Spotify charges an economic rate, these people will go elsewhere. The paying consumer is also a problem. How many of those who pay for a Spotify premium account would be willing to pay what artists are likely to demand? I suspect not enough for Spotify to be viable.
Comparison with digital book publishing is illuminating. The relative success of e.g. the Kindle is based on the fact that people are prepared to pay hugely inflated sums for new releases of e-books, by which I mean that the retail price of a new e-book bears practically no relation to what it costs the publisher to produce it. Consumers pay these inflated prices for the benefit of convenience: being able to carry a small library around on an e-reader is just wonderful. (I'm sitting by the pool ATM: it's 30 degrees; I have all my holiday reading on my Kindle.)
By comparison, music streaming services don't offer the same enhanced convenience. I can easily rip my CDs, tell iTunes to downsample them to 256kbps, and have a substantial library of music for poolside listening on my portable thingy. Perfectly convenient.