The future of streaming music over the internet was in debate for a long time after royalty rates that the streaming content providers had to pay were significantly increased. The rates would have reportedly consumed as much as 70% of the profits that streaming content providers make.

The News & Observer reports that a deal has been struck between online radio stations and record companies that will allow the online stations to continue operations. The deal comes after two years of negotiations between online radio providers and copyright holders.

The whole issue started in March of 2007 when the federal Copyright Royalty Board significantly increased the royalty rates internet radio stations had to pay artists and record labels. Among the most popular online radio destinations is Pandora. The firm has said that the new agreement will help ensure its survival as a streaming radio station.

Pandora's Tim Westergen said, "For us, it's hard to overstate how significant this is. It was either this or an ugly alternative."

The new revenue sharing agreement between SoundExchange and three smaller music webcasters -- radioIO, Digitally Imported, and AccuRadio -- was announced on Tuesday. SoundExchange is the non-profit organization that collects and distributes royalties for the recording industry from digital radio broadcasters.

Westergen says that Pandora will sign onto the new royalty plan and he believes that other streaming radio providers will also sign onto the agreement. The deal will see large streaming providers pay copyright owners up to 25% of total revenue or they can opt for a "per-performance" rate that is below the rate set by the Copyright Royalty board. Smaller streaming radio providers will pay either a percentage of revenues or a percentage of expenses. Details on exactly what those percentages are were not offered.

John Simson from SoundExchange said, "[The deal will] flesh out various business models" and "[allow copyright holders to] share in the success their recordings generate."

Congress has to agree to the deal since the internet radio firms operate under a government license. However, lawmakers are already praising the agreement and Congressional legislation making a deal reached between streaming providers and SoundExchange legally binding has already been passed.

Radio stations that broadcast over-the-air are exempt from royalties.