This was a distributor (ST Holdings) making the decision, not the record labels. Its bigger than just the one, though, because ST asked all 200 labels if they wanted their material off of the streaming services (this effects more than just Spotify) and all except four of them said yes.
That says that the labels and artists aren't getting paid via the streaming services like they think they should. The article mentions the $167 that Lady Gaga got paid for a million listens, and links to another article that "debunks" that. But even that article says she only got paid ~ $1800 for that million listens. Compare that with the $300,000 or so she would have recouped if every one of those listens was converted into a .99 iTunes download, and you can see the scale we are talking about.
Artists have two rights that I absolutely support. They have the right to control how their work is used and distributed and they have the right to transfer that right to someone else to use on their behalf. This decision, while crappy for streaming music users (I use Last.fm a lot, don't know the impact yet), ultimately reflects those two rights.
Someday we'll win this thing...