Ideas

You can do it with a blog and a winamp. Playlists are not the problem. DRM is :)

DRM isn't an obstacle. As this is a paid service, then it works like a radio station. It's perfectly legal broadcast audio and the artists get their royalties from the subscription fees.

For being an online muzik buff I thought this stuff was already done. I've treid Pandora which isn't bad but not as cool as its supposed 2 b (guess limited by what range of music it can play).

If there isn't a product out like u described it should get some traction. Sharing DRM songs maybe an issue (look at other mp3 sites that got shut down by those nasty RIAA guys - aka move offshore).
Several 'social' web 2.0 sites that are into "sharing" stuff incl music so maybe a potential there or they can b an avenue for u.
How u make $ ?

http://www.pandora.com

What henryb said is true, but: "We are deeply, deeply sorry to say that due to licensing constraints, we can no longer allow access to Pandora for most listeners located outside of the U.S. We will continue to work diligently to realize the vision of a truly global Pandora, but for the time being we are required to restrict its use. We are very sad to have to do this, but there is no other alternative."

http://www.last.fm works internationally as far as I can tell.

done way 2 much

...agrees with gr8 GUys up here!

yep, add http://www.radioblogclub.com to the lot.

There are way too many people already in this crowded market place to allow you to make an impact with a startup. I'm so bored with this whole thing now that this idea really makes me tired. Done to death, dude.

http://www.ilike.com

its been done ... u got to offer something more if u want to be noticed.

Another thing to consider besides DRM related issues is the cost of operating something like this. You can't just use a computer your neighbor gave you for a server. You need some processing power, a lot of it. And you need oodles of bandwidth. You would be lucky if you broke even, but more likely would be that your business would be deep in debt and be a prime candidate for future bankruptcy.

Now come up with a way to consume significantly less bandwidth or processing power, then you have the makings of a fighting chance. A peer to peer distributed network comes to mind as a possible work around to the bandwidth problems...

Despite there being existing services, I've yet to find one that works the way I like. I'm voting you up for this, there refinement to be done but I think it's got some potential.

http://www.finetune.com

As people have posted, that field is really satured. Music is experiencing a revolution with that, because if downloading music was bad, imagine displaying it instantaneously as many times as you want.
Advice: translate the same concept to other media worlds such as video, gaming, photo, text (books)..