From Wired:
EMI has dropped its copyright infringement lawsuit against the music streaming service Grooveshark, opting instead to license its sound recording and publishing catalogs to Grooveshark in the United States under undisclosed terms.
“We now have a licensing deal with [EMI],” Grooveshark vice president of communications Isaac Moredock told Wired.com, and both companies confirmed to us that the lawsuit has been dropped. EMI’s sound recording and publishing catalogs represent “about 26 percent of the music that’s out there,” said Moredock, “so it’s a step in the right direction.”
EMI, which confirmed the deal to Wired.com, seems satisfied. “We think services like Grooveshark offer great music discovery options for fans,” said EMI Music’s global head of digital business development Mark Piibe in a statement. “In turn, Grooveshark offers a new revenue stream for our artists and will help us learn more about how we can better connect different types of fans with artists.”
Like Spotify in Europe, Escape Media’s Grooveshark is a freemium music service, meaning that you can hear any song in the catalog on-demand and save any of them into playists without paying a cent. The service generates revenue from visual ads embedded in the free version of the service and $3 monthly payments from premium users who pay to remove ads from the service.
When asked whether Grooveshark’s deal involves handing over equity to EMI, Moredock said, “We can’t go public with [details about the deal] yet, just because we’re going to try to use this as a template to go and sign all the other major labels, and we’re hoping that they agree to similar terms. But until we have other major labels onboard, we can’t really get into the specifics of the terms - one, for overall safety, and two, because we’re trying to keep it ahead of Spotify.”
Grooveshark hopes to beat Spotify, pictured here, in the race to launch a free, comprehensive on-demand streaming app in the states.
Grooveshark hopes to beat Spotify, pictured here, in the race to launch a free, comprehensive on-demand streaming app in the states.
In order to beat Spotify in the race to launch an on-demand streaming app in the US, Grooveshark still must sign Sony, Warner, and Universal, not to mention independent aggregators like Merlin and The Orchard. MoreDock told Wired.com that Grooveshark hopes to sign deals with the remaining majors in the next six months.
“We are dead set on signing those agreements with the [remaining] labels to start getting copyright holders and creators of that music paid, because at the end of the day, that’s kind of what it’s all about — making sure the propagators of this art form are actually getting paid,” said Moredock. “We want to effect a legitimate change in the musical landscape, because bands aren’t making that much money anymore, and we want to change that.”
(Another competitor, imeem, has had an ad-supported music streaming service in the US for years, but it encourages users to visit a separate web page for each song rather than presenting its entire catalog in a single iTunes-like interface, the way Spotify and Grooveshark do.)
Grooveshark is also readying an iPhone app that, like Spotify’s, will include an offline mode that caches music on the iPhone or iPod Touch for high-quality playback regardless of a mobile device’s internet connection. According to Moredock, mobile access to the entire catalog will cost $5-$10 per month, which either way would be less than what Rhapsody or Spotify charges for mobile on-demand music. And unlike those services, Grooveshark hopes to experiment with a free, limited-functionality mobile app as well.
Spotify, already a big hit overseas of course, recently pushed its U.S. launch back to as late as early 2010, while Grooveshark’s surprise deal with EMI gives it a lead in the U.S. And when it comes to independent bands and labels, Grooveshark has a more inclusive approach than Spotify, which requires bands to sign to a label or aggregator in order to be included in the service. Instead, Grooveshark permits anyone to upload their own music and receive half of the revenue generated by their music, regardless of whether they have a distribution deal.
But there’s no question that Spotify has a big advantage of its own - a massive war chest it can use to sign label and publisher deals, a peer-to-peer architecture that saves on bandwidth costs, a critically-praised downloadable app feels more like iTunes than Grooveshark’s web-based service does and can save files locally in the premium version, and an iPhone app that’s already winning over fans in Europe.
Then there’s the question of copyright infringement, which led to EMI suing Grooveshark in the first place. The Grooveshark service currently boasts six million songs, all of which were uploaded by the million-strong community (the EMI deal doesn’t involve the label sending over its catalog, for instance). As such, plenty of unlicensed music appears on the site, such as the Beatles’ “I Dig a Pony,” embedded to the right. To deal with unlicensed music, Grooveshark relies on the Digital Millennium Copyright Act’s takedown provision, which requires it to remove content upon being notified by a copyright holder.
Moredock says the recent Universal vs. Veoh ruling supports Grooveshark’s copyright policy, but a courtroom is not a negotiating table. Before it can sign the other three majors, Grooveshark could face pressure to implement audio fingerprinting technology to help keep unlicensed songs off of the service, the way YouTube did to fend of its lawsuits. In that sense, Spotify has another advantage: its “ask for permission first” approach to licensing likely sits better with the labels than Grooveshark’s crowdsourced, DMCA-reliant approach.
Regardless, Grooveshark has licensed EMI for U.S. streaming and Spotify has not. So the score as things stand now when it comes to launching a freemium on-demand music application in the U.S. is Grooveshark 1, Spotify 0.
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