"The AFL's involvement is considered a key to getting the measure pulled, according to congressional and industry sources. Without the AFL's involvement, it would have been difficult to get enough votes lined up to stop consideration of the bill.

"This is like trying to turn chicken shit into chicken salad," Recording Industry Association of America chairman and CEO Hilary Rosen quipped when asked about the progress. "We've been trying to close a deal with the small webcasters for months. If this forces a resolution, then that's great."

While a deal seemed close late Monday, it fell apart over the definition of small and large.