The interesting thing about the internet music model, as opposed to the broadcast model, is that the customer is the listener.

In over-the-air broadcasting, the advertiser is the customer, the audience is the product, and the individual listener is a supplier. Broadcast radio is all about giving away content "free" to listeners in order to supply them to advertisers.

Satellite radio, podcasts, and streaming music subscriptions seem to be more about pleasing the listener at an individual level. That is, treating them like a customer.

I haven't seen any examples yet of a successful business model that merges the two concepts: "listener as customer" vs. "advertiser as customer." I think that most subscription service listeners join because they want to be a customer instead of an audience to advertisers.

Though I haven't thought all the way through the subtle differences in the mind of the customer, I think that's exactly where the answer lies for a successful blend of the two revenue streams. That is, until we understand the psychology of the radio listener a little better, we can't mix advertising and pay services.

After all, if HBO, Showtime, Cinemax, and other pay TV channels started running commercial advertisements, wouldn't you rethink your $10 monthly payment for the service? It's a tough problem to crack.