SoundExchange, a group responsible for collecting music broadcasting royalties, on Friday confirmed it has proposed new terms for internet radio that could lower fees for some webcasters.

While limited in scope, Thursday's proposal offers a partial reprieve for smaller sites facing the axe Sunday when a payment scheme approved by the Copyright Royalty Board, or CRB, is set to take effect. Webcasters have said the fees would effectively force many services that personalize individual channels for listeners to close shop by the end of the weekend.

Under the new proposal, which must be implemented by the CRB, SoundExchange would cap the $500 annual per-channel minimum fee at $50,000 per year for webcasters. In exchange, webcasters could be required to provide more detailed data on the music that they play and make an effort to stop unauthorized copying from streamrippers – software that can turn ephemeral net radio streams into permanent recordings.

In addition to the minimum caps proposal, Webcasters were given assurances that negotiations would continue to work out breathing room for small and non-commercial broadcasters.

“We believe that this minimum fee proposal addresses webcasters’ concerns about the minimum fee affecting webcasters with hundreds or even thousands of stations,” said SoundExchange Executive Director John Simson.

A SoundExchange representative cautioned that the proposal did not constitute a formal deal, and added that neither SoundExchange nor Simson had ever promised not to enforce the current royalty scheme. Rather, the new proposal would take effect down the road only if it is approved, at which time it would supercede the current scheme.

Webcasters still owe payments under the new CRB rates as of Monday, but SoundExchange has stated it will not take immediate action to shut down sites that don't pay on time. Instead, fees and penalties such as interest will begin to accrue on that date. Larger webcasters, such as Yahoo and AOL, will be expected to pay on time, the group said. Amounts owed by smaller sites could change, although there is no guarantee that they will.

Under one likely scenario, small sites might be permitted to webcast under their old, percentage-based rates until 2010. Large webcasters will be spared the minimum fee-per-channel rates, but according to SoundExchange, the flat per-song per-listener fee for large webcasters is not subject to negotiation.

Although the proposal is provisional and limited in scope, one participant expressed relief.

"It was getting pretty close," said Tim Westergreen, founder of Pandora, one of the most popular webcasting services under threat. "I always had underlying optimism that sanity was going to prevail, but I was beginning to wonder."

Opponents of new internet radio charges had asked Congress to enact emergency relief legislation this week, pleading that "dead webcasters pay no royalties."

The call came after a federal appeals court refused to delay new royalty rates expected to bankrupt many webcasters. Affected stations had appealed for an emergency stay of the rates to the U.S. Court of Appeals for the District of Columbia Circuit, but a panel of judges declined in a ruling made public Thursday morning.

"We are disappointed that the court failed to acknowledge the irreparable and, quite frankly, devastating effect these new royalties will have on the internet radio industry," said Jake Ward, a representative of the SaveNetRadio coalition of webcasters, net radio listeners and artists, in a statement.

The royalty payments, set by the CRB and collected by SoundExchange, would be retroactive to the beginning of 2006, and could total tens of thousands of dollars even for webcasters that produce no revenues.

Webcasting royalty payments would total $0.0008 for each song played to each listener in 2006, plus $0.0011 for those played in the first half of 2007, applied against a minumum payment of $500 per-channel-per-year. The charges would instantly crush webcasters that offer personalized streams for each listener – a common feature on existing net radio services such as Pandora.

The per-listener rates would rise to $0.0019 per song by 2010.

Thursday's deal marks a sharp turnaround for SoundExchange, which told Wired News just hours before that the new online radio royalty rates are "etched in stone."

Observers credited lobbying by net radio listeners with helping bring pressure on SoundExchange. "This is a direct result of lobbying pressure, so if anyone thinks their call didn't matter, it did," said Westergren. "That's why this is happening."

The deal opens the door for longer-term solutions, including action from Congress. On Thursday, Rep. Ed Markey (D-Massachusetts) called parties representing record labels and webcasters before the House Committee on Energy and Commerce to try to broker a deal that would allow online radio stations to survive in something similar to their current form, while still paying labels and artists their due.

The as-yet-unpassed Internet Radio Equality Act proposes that webcasters switch to a percentage-based royalty system similar to the 7.5-percent-of-revenue fee structure enjoyed by satellite and cable radio broadcasters.

Under that scheme, webcasters that produce negligible revenues could escape payments altogether – a prospect that's unlikely to please the recording industry.

Webcasters could also work out individual deals with SoundExchange.

If a permanent deal is ultimately worked out between the two parties, it would most likely involve something other than a straight percentage fee, but something less onerous than the rates scheduled to go into effect.

Prior to Thursday's agreement, SoundExchange offered a deal to webcasters that would spare them from paying the minimum per-channel fees until 2008 or later, but few have jumped at the offer. Jon Potter, head of the Digital Music Association, has dismissed it in the past, saying "a billion-dollar 'minimum fee' is equally absurd in 2006, 2007, 2008, 2009 or 2010."