Universal Music on Thursday reached a settlement with Bolt.com, an online video site, that it believes will strengthen its hand in rights negotiations with other internet sites that feature its artists’ music and videos.

Under the terms of the deal, Universal agreed to drop a lawsuit against Bolt that it filed in October.

In return, the music company will take a multimillion-dollar share of the proceeds of Bolt’s recent sale to another site, GoFish, as damages for past copyright infringement, according to people familiar with the settlement.

Universal will also receivea small licensing fee each time one of its songs is played on GoFish in the future, as well as a share of associated advertising revenue.

GoFish will implement filtering technology on Bolt within 60 days, which will allow Universal to easily determine when its materials have been posted on the site.

While the deal is relatively small in size – the payment for past infringements is believed to be worth less than $10m – Universal executives believe that it will build on a precedent they set in an agreement late last year with YouTube, the internet’s most popular video site. Under threat of lawsuit, YouTube, which Google later acquired for $1.65bn, ultimately agreed to give Universal tens of millions of dollars of company stock and also share advertising revenue and pay licensing fees.

At the moment, Universal is still locked in legal battles with two other websites that feature online video and user-generated content – Sony’s Grouper and News Corp’s MySpace.

Doug Morris, Universal’s chief executive, has taken a particularly hard line against internet sites and even technology giants, such as Microsoft, in an effort to force them to pay for traditional media content.

Mr Morris said Universal was happy to reach an amicable settlement with Bolt and added: “While our preference is to work out similar arrangements with other user-generated sites so that we can bring our music to the widest possible audience, we will continue to be vigilant in protecting our rights and those of our artists and songwriters.”

Aaron Cohen, Bolt’s chief executive, said the agreement would allow the companies to work together to create programming and new content tailored to the internet.

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