The site, Fairtunes.com, has so far collected $821 American and $191 Canadian destined for artists ranging from Sara McLachlan to a Canadian garage band named The Noisies.
The first checks were mailed out to the artists this week, said Fairtunes co-founder Matt Goyer, a 21-year-old math student in Canada.
McLachlan will be getting $7, which she's apparently going to donate to charity. But the leader of the Noisies got $30, which he's going to keep, Goyer said.
Just a few weeks old, the site already is working with open-source programmers in Brazil to create a way for sites like Napster, Gnutella and Scour to use the Fairtunes payment plans.
The programming should be done in a few weeks. Goyer said. He's yet to make any firm plans with the file-swapping sites.
The site's lawyers said Fairtunes isn't doing anything wrong, Goyer said.
"If the Recording Industry Association of America (RIAA) wants to come down on us and sue us, we won't back down," he said.
A spokesman for the RIAA, which is suing Napster for alleged intellectual property theft, didn't comment.
The idea for the site came from inspiration by another band, the Tragically Hip, Goyer said.
Goyer heard that his favorite musicians had released a new album and so did what a lot of college students have been doing: He went to Napster and downloaded the album for free.
But then Goyer said the guilt set in. He wanted to compensate the band but without going through the record companies.
"If we buy a CD, the artist gets anywhere between 25 cents and a dollar," Goyer said. "Why can't I send my $16 directly to the artist?"