It's clearly a feasible business model. They've survived a long time, and haven't bled out. With some strict cost cutting, they can probably break even, and that's more the problem.

To be a prospering model, rather than a struggling one, they might have to raise prices on customers while trying to hold royalty payments to a steady %.

The biggest potential threat to Pandora, other than the labels killing them with royalties, is Apple and Google.