STEREO HITS, a radio station in Cobán, Guatemala, decided to go global last year. In an effort to boost revenue from its advertisers, which include Coca-Cola, Panasonic and PepsiCo, it began streaming its broadcasts over the internet, allowing anyone in the world with a connection to tune in. Raúl Najera Ponce, head of the station's online unit, estimates that this “webcasting” costs Stereo Hits just $100 a month, since it needs neither a frequency licence nor a transmission tower.

Mr Najera Ponce also keeps costs down by neglecting to pay royalties on copyrighted music. In theory, specialist agencies should collect fees for every song that radio stations play and distribute them to the owners of the copyrights. The result is a complicated web of contracts and payments among radio stations, collection agencies, record labels, composers, musicians and their estates. But Mr Najera Ponce chose a simpler way to remunerate musicians and labels. “If we need music from a band in London, we buy their disc—that's how we collaborate,” he says.

Collection agencies and the record labels they represent have long struggled to extract royalties from radio stations. The International Federation of the Phonographic Industry (IFPI), an industry group, estimates that half of Russia's radio stations fail to pay royalties, for example. But internet radio stations are even harder to corral, because they are smaller, more numerous and tend to be run by hobbyists who find it too complicated and expensive to pay their dues. IFPI estimates that just 10% of Russia's webcasters cough up.

Almost all of America's 14,000 or so webcast stations, which have 34m regular listeners and income from advertising, do pay royalties. Nonetheless, for several reasons America is where the big record labels and SoundExchange, the collection agency representing them, are fighting hardest to bring in more money. For one thing, America's traditional radio stations pay relatively little in royalties, thanks to a 1909 law that mandates fees for composers but not for performers. (Low royalties, radio stations have argued, are justified because playing songs provides performers with free publicity.) The frustrated record labels are anxious to establish a less generous system for webcasters. Moreover, America's strong legal system should make it easier to enforce their rights.

In March the record labels persuaded America's Copyright Royalty Board (CRB) to triple royalties for webcasters, to roughly a fifth of a cent per-song per-listener, with retroactive effect from the beginning of 2006. This will almost certainly put most webcasters out of business. They will also have to pay SoundExchange $500 for each channel they stream when the ruling takes effect on July 15th. This fee is likely to eliminate one of the most cherished features of online radio: the customised channels that listeners can concoct using software that produces playlists based on the names of favourite bands or songs. One popular webcaster, Pandora, creates customised channels for some 7m users. It cannot possibly afford to pay $500 for each one.

Outraged internet-radio fans have sent more than 400,000 e-mails, faxes and letters of protest to America's congressmen. In response, several of them drafted a bill called the Internet Radio Equality Act in the House of Representatives in late April. If voted into law, it will nullify the CRB's decision. On June 26th many American webcasters stopped broadcasting for a day and posted messages on their websites urging disappointed listeners to lobby Congress on their behalf. The two sides are also doing battle in the courts.

The quest for higher royalties may actually be doing record labels more harm than good. People generally do not buy music unless they have already heard it. Internet radio makes it easy to zero in on a preferred genre, so listeners are more likely to discover music they would want to buy. Many online stations even provide links to online music stores—free of charge.