Most of the market of actual paying customers don't really care to have directories of FLAC files and terabytes of local data. And most of the people who have large collections of FLAC files probably didn't spend much to get those collections and aren't likely to bother paying for an app to be developed and supported. Most people I know with a local music library of thousands of FLACs spent $0 on that content.
And then there's a massive chunk of the market that finds the tradeoff of ads for "free" access to music an acceptable tradeoff. A few dollars a month in cost for access to music is way more than they're interested in spending, even $10 for a CD is more than they're usually looking to spend to acquire content. They're the kind of people who maybe only bought a handful of CDs or cassette tapes back int the day total and got a lot of their content from the radio.
Most of the paying customers for digital music tend to be generally OK or even prefer streaming services. And generally speaking, those streaming apps work pretty OK. Most work better than the early streaming/subscription apps back in the day (like old Rhapsody and Zune Music and non-pirating Napster). I still remember how long it would take to go from clicking Play on Zune to the time it would actually start playing the song compared to Spotify which felt nearly instant in comparison. Not having to reconnect my Creative Zen every few weeks refresh the DRM from Napster. Having all that content on demand from my wireless portable device. Practically all of what is available today is quite a bit better than what was, in terms of "I don't want to bother buying all of this content, I'm OK with renting a lot of it" standpoint.
I've got a collection of music I own, things I really care about. Mostly physical formats, a few hundred songs exclusively digital files. But for a lot of music I consume, I don't really care if I have it locally or have it forever. Its like listening to the radio, that song may never play again, that's OK. Buying all that content legitimately costs considerably more than what I pay for a streaming service, so the streaming service makes a ton of economic sense for what I'm looking for. I'm mostly looking for something in between a radio and a privately curated music collection, which is exactly what streaming is.