Internet radio gets a reprieve

July 15 had been the deadline for a new set of royalty fees to kick in that would have raised rates for some Web-based stations by 300 percent or more. Many stations said they could no longer operate under the new fee structure, and some smaller broadcasters already have shut down.

But months of brinkmanship between Internet radio operators and recording industry representatives ended late last week with little more than a whimper as most stations kept running while negotiations progress toward a workable compromise. SoundExchange, the umbrella organization that collects royalty fees for the recording industry, agreed to continue negotiations on the new rates with hopes of reaching a deal that will please everyone.

Industry analysts believe the dispute, thought by some to be a potential deathknell for Web broadcasting, or streaming as it is often referred, is cooling off toward a mutually beneficial conclusion. They contend the true endgame could be an effort to target only the largest broadcasters while allowing mom-and-pop operators to continue under the previous and less onerous royalty structure.

"It's an interesting situation because SoundExchange has an obligation to maximize the royalties it collects and pays," said Cydney A. Tune, an entertainment and intellectual property lawyer with Pillsbury, Winthrop, Shaw and Pittman in San Francisco. "But it has to be careful because this is a new venue and new space. If you drive these players out of business, you're not going to be collecting any royalties."

Tune said negotiations are the most likely way to end the impasse, as legislation and litigation both look to be ineffective solutions.