Pandora did get slightly better royalty charges. But the major reason for its success lies in numbers massive enough to attract advertisers. Early to jump on the smartphone band wagon, most of Pandora;s recent subscriber growth is com is mobile. And that's what Conrad call the 80% opportunity". Just 20% of radio listening happens at the computer and the rest is mobile.
In 2010 and beyond, expect to find Pandora available on every device that will host it. (I recently discovered Pandora on my Netflix Roku box.) More smart and cheaper smart-enough phones are on the way as is in car streaming.