Mark Lam, founder of 365-live.com

SoundExchange, which collects royalties from Webcasters and distributes them to artists and record labels, said it would cap fees -- at $50,000 a year -- for online radio station companies that offer more than 100 channels to customers.

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A panel of three copyright judges earlier this year mandated that Webcasters had to pay higher royalty fees and a $500 fee 'per station or channel' regardless of the total number of channels streamed.

The ruling meant that large Webcasters, such as Pandora Media Inc. and Time Warner Inc.'s AOL that stream hundreds of channels, faced much higher payments to SoundExchange than in the past.

A message left for Pandora was not immediately returned while AOL could not immediately comment on the matter.

The agreement also calls for accurate reporting of what's streamed rather than the sampling that had been used in the past to determine fees. And

SoundExchange also wants Internet radio stations who accept the terms of the deal to cooperate on how to most effectively prevent illegal downloading of copyrighted streaming music.

SoundExchange said the agreement applies only to its members of some 20,000 recording artists and 3,500 record labels, including all the major labels.

Richard Ades, a SoundExchange spokesman, said it has been negotiating with several Webcasters for the past month and that the group hopes the new agreement will be adopted industrywide.

This deal comes two days after SoundExchange offered discounted royalty rates to small Webcasters -- with less than $1.25 million in gross annual revenue and a certain audience size -- through 2010. That offer, which expires Sept. 14, also only applies to SoundExchange members.

However, several small Webcasters said they plan to reject the offer because it is not economically viable, and they are hoping for further negotiations with SoundExchange on an offer.

The copyright judges ruled in May for the new system of sharply higher royalties and fees, replacing a system whose rates expired Dec. 31, 2005.