An interesting post on Silicon Alley Insider about the business model for advertising-funded music:

The basic economics: A song lasts 3.5 minutes. The majors have been asking for a penny each time one gets played. Let’s say the site shows a new ad every time the song changes. To break even the site needs to sell one ad per song at the rate of 1 penny a song, which gives you an effective CPM (‘eCPM’) of $10.

A $10 eCPM isn’t feasible. Sites don’t earn that kind of rate with 100% sell-through. And even if it were feasible, it leaves no room for the rest of the business.

…Sites that try to comply with label requests repel users and soon go out of business.