After two years of debate, Internet radio companies and the major record labels have reached a royalty agreement, paying the way for users to enjoy music online.

Tim Westergren, co-founder of Pandora, webcaster, which has about 30 million registered users, said, "If the rates weren't resolved, we were sunk. So this is a huge relief." However, the price of the deal will force Web radio station Pandora to limit the amount of free listening to 40 hours per month.

As per the fresh settlement, webcasters can avoid per-song royalty payments that were set in 2007 by a special federal court.

Large webcasters such as Pandora Media Inc. can opt for an optional rate structure in which they can pay lower per-song royalties through 2015, or 25 percent of their revenue.

According to the fresh settlement, per-song rates start at 0.08 of a cent per listener for each song played and increase to 0.14 of a cent in 2015, when the agreement ends.

Earlier in 2007, the Copyright Royalty Board started rates at 0.0762 of a cent but more than double to 0.19 of a cent by 2010.

SoundExchange is permitted by the Copyright Royalty Board to settle different rates on behalf of the musicians and record labels.

But under the settlement, Webcasters have something to lose as they must pay a ratio of all their revenue.