Just heard about this for the first time today. Made the news in Canada's Globe and Mail:
How Spotify might save the Music Industry
I think the model will last. Whether it actually makes a difference with industry finances is a different story.
Case in point: my 15-year-old brother in law hangs out at my apartment a lot and brings his nifty iPod (the one that looks like an iPhone) and uses YouTube as a sort of defacto on-demand music player.