That's just how the record companies work.

There was an interesting breakdown from the CEO of Mog discussed his revenue model on this pretty good Fast Company article: http://www.fastcompany.com/1796382/mog-ceo-on-artist-payment...

Which is why their business model is now flawed. If you look at what a music publisher actually does. From wikipedia:

"In the music industry, a music publisher (or publishing company) is responsible for ensuring the songwriters and composers receive payment when their compositions are used commercially. Through an agreement called a publishing contract, a songwriter or composer "assigns" the copyright of their composition to a publishing company. In return, the company licenses compositions, helps monitor where compositions are used, collects royalties and distributes them to the composers. They also secure commissions for music and promote existing compositions to recording artists, film and television."[1]

So basically the publisher is getting money (a large portion of it) to make sure they get paid and provide contract negotiations. Spotify can easily (1) ensure the artist gets paid and (2) provide negotiations (you get X for Y amount of plays). The excessive overhead of the middle man is unnecessary now. IMHO, recording labels should just provide artists access to studios/producers/etc and become glorified marketing (music specific) firms. Also it might still be interesting for publishers to collect royalties for things like tv-ads, inclusion to movies, etc. But to the mass public it's a service that's no longer needed.

Lots of business models are built on assumptions. The assumptions have changed.

[1]- http://en.wikipedia.org/wiki/Music_publisher_(popular_music)

I've thought about this. We aren't really getting rid of middle men. Rather, if what you proposes runs its course, we are shifting the middle man from old media distributors to... new media (internet) distributors.

What's to say streaming services wouldn't run up the price on artists once record labels are out of the picture? You could argue that artists could simply take their music to another service but if one service has A LOT of users (ie, Spotify) that might not be a viable option.

I thought the main advantage of the record companies was that they could loan artists large amounts of money to make and market a commercial record.

Most musicians I know are poor and would make pretty poor business people. Unless spotify or apple decide to go into developing artists themselves.

Because streaming services wouldn't own rights to artists' work and they wouldn't be tying them down with multirecord deals. With these constraints lifted, there'd only be free market mechanisms left, which would force the services to be nice both to artists and users.

Or spread artists amongst competitive services, forcing us users to subscribe to multiple services.

I'd rather take a copy of the music, and own the copy the rest of my life, thank you.

Just like Amazon are doing to publishers. Middle men are getting disintermediated left right and centre.

And that's why the record companies are in a downward spiral, and why they are fighting so hard against online markets for recorded music.