Yesterday was a day of celebration for Internet radio webcasters, as the Senate finally approved the bill according to which webcasters and copyright owners are entitled to establishing royalty agreements without the government’s interference. The Webcaster Settlement Act of 2008 will now go directly to the White House, after passing last week in the House of Representatives, and on Tuesday in the Senate.

The reaction from Pandora founder Tim Westergren was as expected, a very enthusiastic one, although he did admitted on his blog that they still need to finish the negotiations with copyright owners before declaring it a full victory.

Furthermore, Westergren mentioned that if it hadn’t been for the support of the listeners, as well as the support of some “terrific allies” on the Hill, such as Representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL), as well as Senators Ron Wyden (D-OR) and Sam Brownback (R-K), this wouldn’t have been possible.

The fact that the bill has now reached President George W. Bush is a sign that the negotiations between webcasters and SoundExchange may proceed as planned, in a direction that will hopefully allow Internet radios to survive.

SoundExchange, which is responsible for collecting royalties on behalf of sound recording copyright owners, has been held responsible by Internet radio owners and listeners for taking Internet radio down with overwhelming royalties. As an example, and by comparison with traditional radio stations that pay nothing, or satellite radios that pay 7.5% in royalties, Internet radio stations have had to pay up to 70 percent of their earnings in royalties, which makes it impossible for them to continue.

It's especially important that webcasters and SoundExchage reach an agreement, as the popularity and demand for Internet radio stations increase. Such services have been forced to end transmission for financial reasons, and even Pandora, which had over one million daily listeners, was forced to admit they were close to pulling-the-plug for the same reasons.

As Tim Westergren said in August this year, the radio station was losing money, instead of gaining. By taking into account the incredibly high royalties and the possible lawsuits resulted from not paying copyright owners their benefits, it became impossible for radio stations to continue the activity legally.

The consequences became very clear: while some radio stations shut down, others continued their activity illegally, and that simply because SoundExchage is collecting overwhelming royalties on behalf of copyright owners without taking into consideration the fact that Internet radio station are among the most efficient ways of promoting music.

Although there is still a long way to go, and webcasters will need to pass the hardest test - negotiating for appropriate royalties – this is definitely the good direction, and Internet radio might actually stand a chance. A final settlement between the two sides is expected to be reached by February 15, although it’s still hard to tell whether the worst part just ended or is about to begin.