Most of these pay-by-the-month arrangements, be they ISP service, online access to news or games or satellite radio miss the point: The initial audience, geeks, simply do not have the money or the interest. Your average, garden-variety geek already has an MP3 player jacked into their existing car stereo, so a CD burned with their personal mix can play 13 hours of music, ad-free obviously, and it's THEIR mix.
You want me to pay for radio? Back-end it into the price of the car as an option, say $500 extra for life-of-lease or five years of service, give Ford or Volks a 40% cut for selling it, take the money and run. Otherwise, no way. Too easy to replicate for free or nearly free, I'm afraid.
Once again, engineers run amok. Just because you can do something doesn't mean people will pay money for it. Just ask the folks at Iridium.
The truth is, XM is failing not because people won't pay a subscription fee, or because they find free radio "good enough." It's failing because people already have a mechanism for listening to whatever kind of music they want to in their cars -- tape decks and CD players, which are standard in virtually all makes and models these days. In fact, other than traffic reports and baseball games, I hardly listen to radio anymore, and I bet most people don't, either. That's the real reason XM is struggling: It provides a service no one needs.
