The past several months will go down in history as a period Grooveshark and parent company Escape Media would rather forget.
In November 2011, Universal Music, the world’s largest recording label, sued the music streaming service in a copyright infringement lawsuit claiming hundreds of millions of dollars in damages. In December, Sony and Warner joined the action and in January this year EMI sued over a contractual dispute.
Just last month a group of entertainment companies in Denmark obtained a court order forcing an ISP to block Grooveshark at the DNS level, a punishment previously inflicted on The Pirate Bay after prolonged legal argument.
So when the recording labels claim that Grooveshark has cost them hundreds of millions of dollars and when headlines refer to the music streaming service in the same breath as The Pirate Bay, are those statements and associations fair?
According to a source close to Grooveshark who spoke to TorrentFreak under condition of anonymity, the differences are not only palpable but the accusations made by some in the recording industry are just plain false.
Our source insists that Grooveshark has aggressively pursued licenses across the globe, gone directly to artists and has built (and continues to build) systems to help rights holders manage their content and receive revenue shares. But sometimes Grooveshark’s ideals run counter to the labels’ preferred route to the market.
“Grooveshark wants to keep the platform Open. That is to say, even after all the deals are inked, the company wants artists to be able to share without having to go through a label. That’s Grooveshark’s definition of open,” TorrentFreak was told.
Another perceived area of conflict is that Grooveshark want to keep their platform and musical offering unlimited.
“That doesn’t mean that users don’t have to pay and it certainly doesn’t mean that record labels don’t get paid, but users might pay with their attention or their interaction, or (and I know this is controversial) with their data,” our source explained.
Grooveshark’s 35 million users are a rich source of information which the company believes could be of immense value to the record labels. A comment from a company exec quoted in the Universal lawsuit suggested that in some instances that value could cover the costs of music licensing. In some instances and in a practical sense, information may be the only currency users have to trade for music.
“If a 13-year old kid can’t get access to music because she or he doesn’t have a credit card and Grooveshark can earn enough money to pay a record label off of a few survey questions then that should be net positive for the label, the artist, the user and Grooveshark,” our source noted. “The alternative is piracy.”
Of course, stopping piracy is something the labels are striving for every day, but they also want to do business on their terms and maintain control over their product. Grooveshark, it seems, may be being perceived as problematic in that area.
“As far as I can tell, it’s not that labels don’t want money. It’s that they don’t want Grooveshark’s type of money. They see that model as a slippery slope,” our source explains.
“The last thing they want is for artists to be able to make a living in a way that undercuts the 1-to-1 value of recording to dollar. It’s seen as an attack on their power base, which is not what Grooveshark set out to do.”
TorrentFreak has learned that Grooveshark’s creators initially believed that the labels would not only embrace the company’s technology, but seeing value in new artist revenue streams would also be the first to invest. That seems unlikely now.
But the company still firmly believes that long-term viability coupled with equity and revenue sharing can bring in more money than traditional streaming models for the labels. However, for reasons best known to Universal, Warner and Sony, the litigation route has been selected instead and Grooveshark will now have to fight its corner in a civil lawsuit, presumably protected by the DMCA.
“The DMCA Safe Harbors are not a loophole,” our source insists.
“They are necessary for the progress of society and are meant for situations EXACTLY like Grooveshark’s. It’s not something to use for protection or to hide behind. It’s meant to allow the development of technologies that are potentially revolutionary. That doesn’t mean that if you operate within them, you shouldn’t be expected to reward content creators for their work and that’s not what we want them to mean.”
But because of the position Grooveshark finds itself in, the company has been left with a dilemma.
“When record labels use threat of criminal prosecution as a negotiating tactic you are left with two choices; Continue working to improve the user experience, build tools for those rights holders that do want to participate and do your best to walk the straight and narrow of the law. Or stop innovating in an industry that is desperate for innovation.”
“Which is the principled position?”