Labels, Online Radio Stations Agree On New Royalty Rates; Pandora Will Limit Listening

After years of uncertainty, so-called “pureplay” internet broadcasters finally have a copyright deal that should give them enough breathing room to stay in business. The agreement announced today between the record labels and the online radio stations offers an alternative to the higher royalty payments imposed in 2007 by the Copyright Royalty Board — providing a form of revenue sharing and more detailed reporting in exchange for lower per stream rates. Earlier this year, settlement talks faltered at the last minute when the two couldn’t get past the idea of charging companies like RealNetworks (NSDQ: RNWK) based on their overall revenue, rather than streaming music alone.

This still doesn’t help Real, the company says, since it isn’t “pureplay” but Pandora, the poster child for the idea that the new rate could kill businesses, is pretty pleased even though founder Tim Westergren says the rates are “quite high” and that the free service’s top listeners face limits.

Westergren told readers of the Pandora blog that users of the free version will be limited to 40 hours a month; he estimates that will effect about 10 percent. They will be able to pay an opt-in fee of 99 cents when they hit the limit in a given month: “In essence, we’re asking our heaviest users to put a dollar (well, almost a dollar) in the tip jar in any month in which they listen over 40 hours. We hope this is relatively painless and affordable–the same price as a single song download.” Or they can upgrade to premium Pandora One.

For its part, the music industry isn’t letting go of the earlier ruling. John Simson, executive director of SoundExchange, stresses that this is an experimental formula and that the rates “the rates the CRB set were appropriate and fair.” The nonprofit collects royalties for copyright owners. This, Stimson said in a statement, “gives certain pureplay webcasters the opportunity to flesh out various business models and the creators of music the opportunity to share in the success their recordings generate.