No what they are banking on is this explanation. Pandora is going out of business based on the prices for content you are charging them. So don't compare our offer to theirs, because theirs is a temporary illusion. Now Pandora and Spotify have special places in the marketplace with investor capital can be used to fund the companies at a loss, potentially for a few more years. But eventually that ends. Apple is suggesting that this is price point where a real company can come in and resell the content and make money.
However, this is a crushingly low amount of revenue for the content. Only a fraction of this would ever make it back to the artist creating the song. Even if you had a hit that got played, for example, 100,000 times in a year. The artist would probably do better setting up shop in the subway with a hat on the floor for a week.
So basically it is unclear that streaming even works as a business model.
I agree, streaming and subscription business models for music seem like money losers. People are simply not willing to pay what it actually costs to have access to everything all at once. Remember those Zune Pass advertisements? For what was offered back then, it was a great deal and still people thought it cost too much, and most still do.
For all the people crying about how artists get screwed and raped with these rates, don't blame the companies actually exploring new ways to sell and deliver music. Call it innovation, call it copying the startups, whatever. It's something the record companies aren't doing.
Instead of gasping at how little Apple is offering, how about you gasp at how high the percent the record labels take for themselves. Record companies today offer almost no service of that much value.
A band can hire an engineer to master their recordings, record at an independent studio, and digitally distribute themselves to the various online stores, and run a social media campaign, for a tiny fraction of the cost of a major record label. The only thing a band can't get elsewhere is a loan for all that.