Arrington is spot on, although this isn’t new news.  Not sure why this point wasn’t more widely reported back when these deals were happening.

The startup he mentions is no doubt playlist.com, which is the largest music service out there now apart from iTunes and Myspace.

On-demand streaming won’t work (legally) until the “star system” of the majors is done, because “free” on-demand streaming + ubiquitous broadband = near-perfect substitute for selling music (CDs or downloads).  And paid on-demand streaming (Rhapsody being the leader) has, after 8 years now, only garnered 775k subscribers - hardly a mainstream application.

In the near-term the only real potential for streaming is internet radio, which costs about 1/2 the price of on-demand streaming ($0.0018 per stream in 2009 vs $0.0040 per stream in best possible scenario).  These “cheaper” rates still make internet radio a tough model, but I’m cautiously optimistic that a reduced internet radio royalty rate may still be a possibility.