They have deals with all the major labels. The labels are getting paid...no one is getting shut down.

It's a paid streaming service; there's no sharing the actual music with anyone else. It all comes from their servers. That's why there are still large gaps in availability; if they don't have a deal with the distributer, it's not there.

You might be sharing playlists with people on your Facebook friends' list, but it's limited to the music they have available. No difference from the newer US-based services like Rdio or Mog.

I still prefer rdio.

Playlist sharing aside, you can also send tracks to your friends. From my experience so far, they definitely don't have to be tracks on the Spotify servers. This is why I suspect the RIAA may eventually flip.

It isn't just the major labels, the indie/metal labels are on board as well.

Here's what Earache Records had to say about Spotify (European version):
http://askearache.blogspot.com/2011/06/spo…

In short, the record label endorses Spotify because the the record label gets paid from Spotify. End of story, really.

Take a Grooveshark, keep track of what's played, share the profits from ads and subscriptions with who's being played. And there ya go.