1. They think people will pay for something they can get for free. When it comes to music, people pay for convenience in relation to what they listen to. Vinyl was more convenient than shellac because it didn't break as easily. Cassettes were better than vinyl because they were portable. CD's were better than cassettes because they were random access. MP3s were better than CDs because they were even more portable and you didn't have to pay for songs you didn't want. Streaming is more convenient than MP3s because you don't fill up your hard drive and don't have to pay for it. In other words, it's pretty easy to listen to whatever song you want for free now, why should you pay anything if there's not a compelling reason? Saying that, "An artist should get paid for their work," falls on the deaf ears of the public.
2. They overestimate people's love for artists. People that love music don't necessarily love the artists that make it, unless you're talking about teenage girls. Most people don't care if the artist can pay rent or not.
3. They still think piracy's a problem. When was the last time you read anything about piracy in the news? Streaming killed it dead. There's no need to steal something that you can get for free.
4. They underestimate the importance of music licensing. Getting music licenses is a difficult and costly process and it's not getting any easier as record labels become more digital savvy.
5. They think musicians, artists or music consumers want to do something that they really don't care about. The latest fad is online collaboration. Ask any musician which he'd rather do - play in the same room with real live musicians, or play with them over the Internet. One is considerably more fun than the other.
6. They think their social platform will revolutionize music. Social media is important for today's artist, and Facebook and Twitter are making it increasingly difficult to use those platforms as promotional tools, but a new startup with shallow pockets and few users provides little when it comes to helping artists reach their audience or build a new one. Besides there's so much more that an artist needs to be successful beyond social (branding for one, the good old fashioned basics of your website and mailing list for another). Providing just some of the tools isn't enough.
For more on that last point, go to Social Media Promotion for Musicians, a guidebook for using all your online resources to increase your audience.
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