Radio has always had competition for music listening from LPs, 8 tracks, cassettes, and now MP3/IPods. You could always get your music without listening to the radio. Obviously now it's become a lot more compact and anyone can carry around thousands of songs in the palm of your hand. Still radio's listening levels have not taken that big of a hit from the evolution of personal music listening.
While it seems that we in the industry, clients/advertisers, investors and industry pundits all seem to be looking at Pandora and other customizable music services we may be forgetting the real role that radio has developed with its audience. That role has evolved beyond music to entertainment through the personalities and the imaging as well as the local information (traffic, news, weather), the infotainment, and the promotions/community events that we bring to the audience. Really the music is not designed to be 'your personal favorite music' - it's a collection of the most popular songs in a given style (Rock, Pop, Country, Contemporary). This is 'Broadcasting' and it is different from individual casting.
Yes if the individual casters get their product to be more usable in the car and as easy to navigate as broadcast radio they can have more opportunities to take away time spent listening to music on the radio. But, the Pandora's and Slackers of the world are computer program driven systems to build personal streams and libraries of music for individual listeners.
Yes, radio should explore the new narrow casting - customizable media. Clear Channel moving into the Thumb Play world is a good thing as is CBS with Last FM. Just keep in mind that both CC and CBS will be gaining a lot more by developing the strengths of their long standing broadcast properties.