But if they are not on spotify then where are they? I don't know anyone who buys CDs these days and torrent sites definitely don't pay artists anything.

Sometimes directly from the publisher. Anecdotal example, I like an album by a band Tap Tap. They were short lived and based out of the UK. US Spotify does not have that album, but I can purchase it from their publisher at the time (ironically named Stolen Records).

But how many people buy directly from publishers? Maybe some hardcore fans - but who else?

And another thing - I've discovered lots of artists through Spotify and Youtube. If they weren't there - I would't even know that they existed.