You're not considering a handful of other variables here:
(1) Convenience - There's limited market demand for royalty-free music that you have to manually edit and sort through yourself. By virtue of making it simple enough for consumers (vs. professionals) to use, the market got a lot bigger. By way of comparison, you could have said that there was limited market demand for mobile apps prior to the App Store. But the convenience the App Store offered with respect to finding and installing apps made all the difference.
(2) Licensing - This is proof of concept for the overall technology. You could view Jukedeck as a play to simply generate the sort of interest you need to get larger players interested in licensing tech, rather than an end-game in and of itself. E.g. you could imagine Apple licensing the tech for use in iMovie.
(3) Legal risk - It's one thing to say some random music track on the Internet is royalty free. It's quite another to prove it. There's no easy way to guarantee that the supposed original author of a track didn't copy it from someone else. This might seem like an edge case, but per the above points, if Jukedeck licensed their tech to companies like Apple, those legal issues become much bigger deals. Algorithmic music simplifies the legal question quite a bit.