A little soul searching might be in order for Internet radio's little guys, the streaming radio broadcasters that bring in under $1.2 million a year in revenues: Each one now has to decide whether or not to make a deal with record labels, or risk being on the hook for a lot more money.

On Thursday SoundExchange - the organization that collects royalty fees for record labels - reiterated its May offer to allow the small webcasters to keep until 2010 the same royalty payment system of 10-12 percent of revenues that they've had before. The catch? They have to sign a statement by September 14 agreeing that if they end up earning more than $1.2 million then they will pay the same rates as the bigger guys. Earlier this year, the Copyright Royalty Board issued an across-the-board per-song fee that webcasters say is way too high, and negotiations with SoundExchange to create more webcaster-friendly payments are still ongoing

On Thursday I talked with some folks that represent small webcasters, who said each small webcaster will have to decide now whether what they're doing is a hobby or a business.

"This was a fine deal in 2002, when everyone was just getting started and trying to figure out how to make money, and the audience wasn't huge," said attorney David Oxenford, who represents six small webcasters. "But now you basically limit the ability of the small commercial webcaster to grow its business, and you can't bring in investors to invest in new programming or new facilities or publicity. Who's going to invest in a business that can't get bigger than $1.2 million in revenues a year?"

Mr. Oxenford and the Save Net Radio coalition that represents large and small webcasters said they wouldn't be surprised if Internet radio hobbyists - the folks streaming radio online pretty much just for fun - accept the latest offer, but they framed this as something that's really not going to affect the ongoing negotiations with SoundExchange.

"I don't see it as a big deal if hobbyists sign on, but it doesn't apply to the majority of webcasters," said Jake Ward, a spokesperson for Save Net Radio. "I hope we'll have news for everybody soon."