You're right -- I think the reason this is so contentious is that the market for recorded music didn't collapse, to the degree it did, due to lack of demand; it collapsed due to the marginal cost of reproduction dropping to effectively nothing. I'm not making a moral argument here, lest market libertarians prepare to jump -- I'm not saying the market as it existed should have been propped up artificially. I'm just making the observation that "there is no market for recorded music" is a very different statement than "there is no market for horse-drawn carriages." People are listening to recorded music as much as ever, by some measures more so; we just don't expect to have to pay more than ten bucks a month for All The Music.
Spotify could pay far more for each stream than it does. But it chooses not to, and the money mysteriously disappears into the bank accounts of the management team, assorted investors and Spotify's owners - which include the major record companies.
The arts publishing/management/distribution businesses have always been about relentlessly screwing value out of creators, usually by leveraging differences in political and corporate power to intimidate and bully creators into "voluntarily" signing over their income in return for access to various walled-garden markets.
Streaming media have really taken it to a new level.
While this is probably an Unpopular Opinion™, I think the heart of the problem is ultimately that streaming services undercharge. There's no objective reason to believe that their current price is correct, and the fact that Spotify loses money while artists think they're being underpaid seems to strongly suggest that the price is too low. But consumers now believe that $10/month -- less than the price that a single CD generally is, even on Amazon -- is the Objectively Correct Price, and everyone is stuck.
