The reason streaming legally exists can be tracked to Napster.
Napster for many was the first time they found out they can get music that sounds acceptable without going to a brick and mortar store and handing money over in return for a compact disc. When labels realised what's going on, the shut Napster down, but it was way too late. People realised MP3 was free. And this idea stuck.
I'm 37. I remember buying my first tape (Jason Donovan, I'm sorry), first vinyl (Madonna, not sorry), CD (Pet Shop Boys, still great). I have no clue what my first download was, but it was illegal for sure. Within years I amassed 1500+ CDs, 300 or so vinyls, 33.000 tracks in my iTunes library. And then streaming came along. So Apple Music has 30 million tracks. But I don't know which ones are good. The Apple Music recommendations are, to put it mildly, inaccurate. So the result is I use Apple Music either to listen to Beats One for five minutes, get irritated and switch it off, or to listen to a playlist occasionally and get irritated that I am being played music I already own. "The Human League: Deep Cuts" has four singles in it, and contains only one song I don't own. And by "own" I mean on CD.
A lot of small independent artists and labels don't even release their music on physical media anymore, because that costs money. Production, design, storage costs. This is also why most record stores went out of business by now. iTunes Store doesn't have a fraction of the costs your local HMV or Virgin had. Physicals often cost less than downloads (compare prices on iTunes and WOW HD). Profit margin on downloads is huge. But the younger generation has been raised in the post-Napster turf. For them, music is something that comes for free from the Internet.
What Apple Music, Spotify, TIDAL etc. have to offer that "free option" does not is 1) selection, 2) quality. Imagine I really want Madonna's Rebel Heart album, I download it from a torrent site and find out it's 96kbps. Then I download it again and discover it's all the demoes but no finished songs. How much easier it is to go to Spotify/AM/TIDAL and just play the deluxe version. Here, have my €4.99 per month, so that I can listen to the same 1000 tracks out of your 30 million selection over and over again.
@triptolemus : I think that while 90% of the market will belong to streaming, the market will be incredibly fragmented. Spotify have exclusives, AM have exclusives, TIDAL has exclusives, New Company will have the best live recordings, Other New Company will painstakingly collect all EPs and singles, Yet Another will digitalise vinyls, etc. Same as there were 50 record stores in Amsterdam (where I live). Now, if I am correct, three persist. I'm pretty sure Apple Music will survive because it's Apple, Google Play Music will survive because it's Google, and Spotify will survive because it came in first. But then, Google killed off Google Reader for no reason, so what's the guarantee they won't kill off Google Play Music? And as for my Spotify prediction, there was a time when everybody was on MySpace, used AOL to connect to Internet and Yahoo! was the best portal for everything.