Online radio stations agree on royalty payments

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A number of radio websites reached a deal with Sound Exchange to pay royalties on music they were webcasting online.

The settlement means that the webcasters don't have to pay royalties for each song they play, but will have a different rate structure that lets them pay 25 percent of their revenues until 2015, or a lower play-per-rate tariff.

Pandora Media, a webcaster based in Oakland, CA, estimates that it will make $40 million in revenues during 2009.

The webcasters were engaged in a two year battle with Sound Exchange after a federal body said that they had to pay 0.19 cent per song when they streamed them.

That would have swallowed up most of the money made by the webcasters. The Recording Industry Association of America (RIAA) brokered the deal, indicating that it believes the internet may give far more to the record companies than it takes away.

The US webcasters face further problems, however. Pandora can't provide access to people outside the US because of individual licensing agreements in different countries. In some cases, deals have to be struck country by country - a difficult task for a nascent business.