Jim, the point you make about it being more interactive is interesting. In a passive radio app the user mainly keeps it out of view, so display ads never get seen. Display ads have great CPM.
There are three reasons they’re not just selling ads like radio. One is that the highest rates in radio are for local radio and internet radio rarely has the reach in any given area for local businesses to be able to reach their customers. This keeps prices down. The second issue is that online radio pays 25-50% of revenues for royalties while terrestrial radio pays less than 5%. Third, online radio runs a lot less ads per hour, I think because the listener can switch away more easily.
So terrestrial earns more for an ad and pays out much much less for music.