What it first needs is a way to compensate content creators
Agreed. This is why I wrote a proposal to fund musicians, and it's also why I'm adding crowdfunding support to Communick.
I have a Funkwhale instance set up and it is part of the services provided for those that subscribe to Communick. It does have some users, but to be honest I'm more interested now in making it more appealing for musicians who want to distribute/promote their own content, rather than use it as a "music locker" system.
It doesn’t have smart playlists
It has the "radio" feature, which sort of works like a smart playlist, no?
The streaming companies only start squeezing down on the "people sharing account passwords" for economic reasons, and I don't recall hearing of anyone being worried about a lawsuit over a clear violation of their ToS. I find it really hard to believe that it would ever make sense for the MPAA to go after someone because they were sharing their music collection with friends/family.