Pop & Hiss, the LA Times' music blog, conducted a Q&A with the renegade digital music CEO. It's a worthwhile read.
You say you have licenses to sell music because of the federal copyright law, but you don’t have any agreements with any record label?
No. We don’t transmit their recordings. We’ve created independent recordings that don’t require it. Even so, we do pay royalties to SoundExchange for the EMI content that we transmit, as well as to the publishers of the EMI content, which we perform.
To the untrained ear, the recordings on your site sound pretty similar to the original recordings.
They do sound similar, to some extent. If you actually listen to our 320 [Kbps MP3] recordings versus the actual CDs, you’ll hear a remarkable difference. They’re created with the intention of recreating a live musical performance. When you listen to them, they’re done in a virtual soundstage of using psychoacoustic simulation, and the intention is to create a live performance -- as if you are there listening to the actual performers doing the work as opposed to a copy or a phonorecord or CD of the work.