I remain confused by why people believe that "the community" should be able to set price caps on artwork owned by corporations. If Warner Music wants to charge $5 a play for Mylie Cyrus, I'm certainly not going to pay it, but how is it "wrong"? I'm surprised and happy that Pandora and Last.fm can exist at all, but I don't understand what entitles them to exist. We don't have a "right" to consume major label music.
Go the route of a two-tier system, where users who listen to ad-supported music get to listen to music whose label doesn't demand more than $X, and to listen to music whose label demands too much you have to pay $Y per month, where Y must be calculated to cover the costs of the royalties. Pandora needs to realize that it's the future, and be confident about that. Relegate the music owned by extorting labels to the digital ghetto and be done with it. Eventually the great artists that are under a label will go independent, so you won't necessarily be killing off the best artists, in the long run. The important thing is that Pandora and it's investors have some balls.
This would work great for me, because the majority of the time, I don't really care all that much who I'm listening to, really; I'm after particular styles and sounds. Our current "system" of fan-dom is really just a way to keep track of what you like. If the Genome project is capable of keeping track of what I like for me,then I don't have to worry about who it is. This won't kill "fandom" either, because there will still be a handful of artists that I'll really like, and best of all, I'll discover them through the Genome's recommendations instead of ridiculous label promotions.