The recording industry and operators of educational and noncommercial web sites have settled on royalty rates for broadcasting music over the internet, circumventing a looming arbitration battle, the recording industry said June 3.

The agreement spares the industry and webcasters a costly arbitration with the U.S. Copyright Office, which was scheduled to start at the end of June, the Recording Industry Association of America (RIAA) said in a statement.

Under the deal, noncommercial webcasters—including college and K-12 radio stations that stream music online—will pay much less than earlier...

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