Spotify artists earn $167 per 1 million plays.

This is The Problem for the record industry - there's an almost infinite supply of very talented musicians that are thrilled to do exactly what you suggest. That makes it extremely difficult to buy the argument that we won't have music anymore if people aren't willing to pay for records. It just not true, all we'd lose is heavily produced pop music, and everyone else would continue to play because they really love it. I don't see live gigs drying up as an income source for quite a while, and they are (just barely) enough to let plenty of people play for a living.

I'd add "teach lessons" to that list, too, that's how most of the musicians that I know actually make rent each month; gigs are just beer money if you've got a full roster of students. Learn a few extra instruments, you don't have to be very good to teach most students - I know drummers that teach piano, pianists that teach guitar, etc. To optimize for income, find yourself a nice rich suburb with some cheaper (but still pleasant) areas to live in around it, and teach lessons to the kids in the suburb (you can charge probably 2-3x what you'd get anywhere else, even if you're not one of the best) while living cheap a couple towns over and playing gigs in the city that you're near.

It's a argument people often make that are so entwined in the thinking of "selling music" like it was a physical thing...

This kind of thinking needs to stop.

Artists have more ways of making money today then they ever did, because they can do it themselves (and/or hire somebody to do it) - Selling live shows, selling merchendise, selling music in a form that makes it a "collectable", even music for films etc... The possibilities are there, but you need more omph than just standing in the garage bad-mouthing the downloaders while nobody will sign you up...

There's a totally different experience to actually being in a crowd listening to a band. I may have a (near) perfect recording on my computer or iPod, but there are many nuances that you miss out on when you listen to music at home.

From the artist's perspective, there's nothing like playing live. Playing in a studio is worlds apart from playing with your fans right in front of you. I know quite a few artists that love that, myself included.

Where's the sweet spot? Serving music has got to cost much more than serving a jpg ad, but maybe less than or equal to a flash ad (depending on the song and ad of course). I could very well be wrong about that though.

I know that's probably a tough number to come up with but if it is $200 or $2000 then we can start to consider things in perspective.

I think everyone here will agree that it is complete FUD the amount of damages the record industry claim from illegal downloads - and that it is apparent some (though again I suspect not as many as people tend to claim) publicity and additional sales is created from illegal downloads.

In this sense perhaps Spotify is almost a loss leader; barely scraping a living on the idea that it's users are more likely to go out and buy an album or go to a concert. If that's the case they need to be more up front about it; otherwise fall outs like this will happen.

Of course it could well be that they are just ripping off artists. who knows.