It's been a bad week for online music companies.

First, Pandora, the popular online music service, said it might be forced out of business due to heavy royalty fees. Then, the much smaller Muxtape shut down, citing "a problem" with the Recording Industry Association of America, which later accused the site of hosting illegal content.

"Muxtape will be unavailable for a brief period while we sort out a problem with the R.I.A.A.," read a cryptic message on the site, which allows users to upload MP3 music files and share them in the form of a playlist.

According to an August 18 post on the site's blog, "No artists or labels have complained. The site is not closed indefinitely. Stay tuned." But as it turns out, the R.I.A.A., which represents the labels, has complained repeatedly in recent months.

The travails of Pandora and Muxtape are just the latest turns in the ongoing saga over how music should be distributed online and who, if anyone, should pay for it. The music industry's traditional business model of earning income from physical music sales is rapidly growing obsolete with the advent of digital music distribution, and rampant peer-to-peer music file-sharing.

The industry's total revenue, including both physical and digital sales, fell 11.8 percent to $10.4 billion in 2007. Since the industry peaked in 1999, more than $4 billion in revenue has gone up in smoke, as compact-disc sales have fallen off sharply and music piracy has filled much of that void.

But instead of aggressively pursuing new business models suited to the digital age, the industry seems content to play the sheriff in what feels like a quixotic attempt to stem the red tide flooding out of the labels' coffers.

In a way, Muxtape had it coming.

Since it launched earlier this year, Muxtape has had a big fat target on its back. Users upload MP3 song files in the form of playlists to the site, where others can listen to them. On the face of it, most experts believed this practice violated copyright law. But Muxtape didn't seem to care, much less heed what the R.I.A.A. says were its "repeated" attempts "to work with them to have illegal content taken down."

Today, online music services are caught between a rock and a hard place: Either play nice with industry, and fork over hefty payments for the right to offer copyrighted music, or resist, and find themselves shut down.

When imeem, an ad-supported music-based social network in San Francisco that has inked deals with all four of the major labels, signed its last agreement with Universal Music Group, the Financial Times reported that the company was forced to hand over a $20 million prepayment for the right to the label's catalog. Although imeem denied it made such a payment, there is no doubt that the labels are imposing heavy conditions on startups in exchange for access to their music.

In Pandora's case, the company said this week it is drowning under the weight of the royalty fees it must pay to the record labels and performers.

Last year, the Copyright Review Board more than doubled the per-song royalty fees that Web radio broadcasters such as Pandora must pay. According to Pandora founder Tim Westergren, the company simply cannot afford to pay the fees, which he said this year will equal 70 percent of its anticipated revenue of $25 million.

Muxtape is certainly not the first Web music company to feel the brunt of the R.I.A.A.'s tactics (remember Napster?). Earlier this year, the R.I.A.A. sued ProjectPlaylist, a similar service, for copyright infringement, charging the site "performs and reproduces plaintiffs' valuable works (and induces and enables others to do so) without any authorization whatsoever [and] without paying any compensation whatsoever."

In short, many music websites face a "damned if they do, damned if they don't" situation: Either pay the piper, or face the fat lady singing.