With last.fm, it was free, but you could upgrade if you wanted to. Until this point in time, it wasn't "free, but only if you're from the right country". Had that been stated in the beginning, they wouldn't have been as successful and probably wouldn't have been acquired by the CBS.
They basically did the worst thing possible. They've collected user data, which they needed for their recommendation engine. They got users to fill out information about the bands whose music was on the site. Now, they're cashing in.
As DHH and 37signals and various other people have said: Don't be afraid to charge for your product.
They screwed up and now they will face the wrath of the community.