Yeah this is definitely a severe blow for internet radio. I think you nailed it with the "pirate radio" comment. Something will fill the void because it seems there will simply be way too many people left hanging. Still, although it sucks, for me and most of my friends its not really a significant issue because there is so much other content available. From our own massive collections to various local radio internet streams, I think there are a lot of alternatives.

The main reason it will suck is because the niche stations will go down. Where am I going to go now when I want to listen to non stop jazz -infused-down tempo-nerdcore-trance?

Lately I've been listening to a lot of stuff on the NPR website. Its pretty nice because you can go directly to a particular story AND in their music section, they have a lot of full length concerts available for download. Worth checking out.