Spotify's benefit to the consumer is they pay less for listening to the same music. Compare that to iTunes which doesn't save you any money, it just makes it a whole lot more convenient. (As an aside, I was far more appalled by the discrepancy between retail albums and iTunes albums: Both cost the consumer $10, but the label gets 5x more from iTunes while the artist gets slightly less than the $1 they get from retail.)
You can save the consumer a certain amount of money by cutting out middle-men, but at the end of the day if consumers are paying less money the producers are earning less money. It only makes sense to the producers if it doesn't cannibalize their existing revenue streams.
And yes, I'm of the general opinion that albums and songs that are /bought/ are overpriced... kind of. I don't care if I own my music. I care that I can listen to many different artists without having to buy $200 worth of albums to discover all their music.
I was not spending anything like £120/year on music for several years before I got my Spotify subscription.
I've listened to vastly more new music since I got Spotify, because I could try things without having to buy a single or an album.
That's worth £10/month to me.
Imagine a clone of Spotify. You can do offline streaming and such for all the music in it. You pay $10/month for the privilege (which I think is fair). $5 or so goes to the company to maintain their servers and such. The other $5 though you can do interesting things with. Basically, each month you have $5 worth of "tip money". You can send however much money you want to whatever artist you want.. or you could alternatively setup other neat dynamic setups (the author gets 50 cents when you favorite his song, etc). .. The point being that it's under the user's control. And, if the user chose to not tip any artists this month(or they have left over tip money), then it's evenly split between all the artists they listened to for the month (depending on song count or whatever).
This model I believe would work because the biggest thing standing in the way from giving your favorite band a tip is that it's through services that you are not already using. I don't want to go to their website and then sign up for paypal to give them a $1. The thing with this method payment is already accounted for. You already paid. Now you just get to pick which band deserves your money. This could even work with a free version by doing a model like for every 10 ads you must listen to in a month, you get 10 cents added to your tip money..
If I knew anything about the music industry, this would be the startup I'd be behind. This wouldn't work with the label model, and giving artists tips isn't really something I think most people would understand at this point... but some day... some day.