The basic issue hasn’t changed much from last year when the Copyright Royalty Board ruled that Webcasters must pay .08 of a cent per song for music played in 2006, .11 of a cent for 2007, .14 of a cent for 2008, .18 for 2009 and .19 for 2010.

As has been the recording industry’s mantra when it comes to inducing payments, the labels say their artists must be paid. In response, Web streamers have been trying to arrange some kind of rate based on a percentage of revenue instead of spins.

What makes Internet radio so enjoyable for listeners is also what is making the royalty issue such a hot-button topic. Unlike terrestrial radio playing one song at a time, or satellite radio playing one song at a time per channel, Internet radio produces multiple unique streams for each individual listener, thus making that .14 of a cent per song add up to real money real fast.

Webcasters at odds with the new rates have claimed the royalty hike will drive them out of business. Now, it looks as if one player – Pandora – may actually have to close its doors.

Pandora founder Tim Westergren recently told the Washington Post the new rates will amount to 70 percent of its projected revenue of $25 million, and his company may have to shut down.

“We’re losing money as it is,” Westergren told the Post. “The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money.”

Westergren and other Webcasters are hoping that Rep. Howard L. Berman (D-Calif.) will succeed in brokering a last minute deal that will appease all players. However, it appears money is the sticking point that will cause Web radio to come unglued.

“Most of the rate issues have not been resolved,” Berman said. “If it doesn’t get much more dramatic quickly, I will extricate myself from the process.”

There’s also the underlying suspicion, first voiced last year when the CRB announced the new rates, that the music industry does not want to see Internet radio thrive. Or that it doesn’t want to see as many players as the field contains, and that a smaller, more robust Internet radio industry would be more to the record labels’ liking.

The current Internet radio field, where small players compete on a somewhat level playing field with major companies like AOL and Clear Channel, gives listeners a much wider variety of music from which to choose, thus allowing that garage band down the street to compete against major-label recording artists. A “thinning of the Internet radio herd” could result in more major-label music being streamed over the remaining Internet stations to the detriment of artists on independent labels.

Of course, the labels are saying it’s all about their artists getting paid. However, if the new royalty rates do nothing but stifle Web radio, then no one is going to get paid and the labels might discover that they really have chopped off their noses to spite their corporate faces.