These days even some pay as you go phones come with music downloads (although the less said about Nokia's Comes With Music the better). Most internet users stream music from Youtube even if they don't subscribe to any online radio stations. A recent study by Rajar has investigated the usage of online radio and found that its popularity is rising rapidly. Last month alone in the UK 4.5 million people listened to online radio compared to 2.9 million in October of last year.
Rajar's Measurement of Internet Delivered Audio Services (Midas) report also showed that listening to podcasts and to listen-again services such as the BBC iPlayer was also growing, but at a reduced pace.
One of the most popular online radio services is Spotify who allow users to stream millions of tracks in exchange for either listening to adverts or paying a monthly subscription. Spotify has some major flaws (its search function is basic at best and discovering new music is a struggle) but it allows you to choose what you listen to which means that it is under your control. Ideally Spotify would take some tips from Last.fm in order to become an interactive community.
Its clear to see why Spotify would be more popular than traditional radio, whatever you listen to chances are you will find something you like on Spotify. In this sense it caters for a much larger potential user base than any commercial radio station could without needing to appeal to everyone. What Spotify really needs in some user interaction so that it is easier to find new artists which are relevant to your tastes and get recommendations from people who like the same things you do.
