For multichannel operators like Pandora.com, the situation is much worse, Hanson said. With Pandora.com, a user enters the name of an artist or a song, and the service makes a radio station that plays songs that share musical characteristics associated with the artist or song provided. From there, the user can fine-tune the station to his taste by giving Pandora feedback on the songs it plays. A user can make up to 100 unique stations.

Hanson said that under the new rate structure, Pandora would have to pay more than $3.5 billion because of the $500 minimum per channel. He said Pandora's 6 million users could set up as many as 100 of their own music channels.

Hanson said the new ruling would put the online radio industry out of business.

But SoundExchange spokesman Willem Dicke said Web radio operators have cried wolf before. He said they've been saying they would be going out of business since 2002. Meanwhile, he said, advertising revenues for Web radio operators have increased significantly over the past several years, from approximately $50 million in 2003 to $500 million last year.

"We see this as a fair and balanced decision," he said.