My stream of thought as I first read through this article is as follows...
Legal free on-demand internet radio with user-defined playlists? How is that possible? How is that legal?
Radio stations do it. The Internet can allow anyone to do it, right? That's brilliant! We don't need record labels anymore - they're just oppressors. This will put them out of business and make artists and listeners happier.
Wait a minute... radio stations do pay fees to the labels, don't they? And they pay for it with advertising. I guess it's not completely free. I guess I'm missing something...
And indeed I was missing something at first, although I had the general idea. Turns out that services are on the verge of popping up which would combine internet radio with file sharing in a way which is both legal and free.
It would function so closely to normal radio stations that I can see little legal recourse for the labels. Advertising would be inserted by the service, and that revenue would pay the fees that would otherwise be picked up by listeners paying for a subscription. The following statement speaks of one such service, Mercora.
Broadcasting fees are set by the U.S. Copyright Office rather than by the record labels and are relatively cheap--they come to about 1/7th of a penny per listener, or about $1,429 per million people. As a result, Mercora says it can afford to pay the fee on behalf of the broadcasters on its network, with the cost offset through advertising sales.
The music industry has fought in the past to put technical constraints (DRM) on devices which would allow recording of digital media, but doing so in this case would be no different from selling radios which disallow recording of broadcast music. Unless a law is passed, people will never buy the product, be it such a radio or listening codecs with embedded DRM. But, the broadcast flag law is already a reality, so I can already see a similar law passing for high-quality radio. Perhaps the days of recording songs free from the radio are over.