[nckpark]

Pandora's problem is that they are locked into paying royalties on every song they stream. So as their listenership and total ad market increases, so do their costs. So far they've managed to scale their profits with the rising costs, but that might not be possible in the future. From their S-1:

SoundExchange, has consistently established royalty rates that would, if paid by us, consume an unsustainable percentage of our revenue. If we are unable to reach a new agreement with SoundExchange for the period after 2015, our operating costs may significantly increase, which could harm our financial condition and inhibit the implementation of our business plan. [http://www.sec.gov/Archives/edgar/data/1230276/0001193125111...]

Earbits instead makes new agreements with artists and labels which allow them to stream music without royalty costs in return for marketing the musician. The important difference is their focus on independent, and the fact that they aren't selling generic ads against the music.