October 10, 2007

P2P Music Sharing Service Grooveshark Ups Compensation

Duncan Riley

22 comments »

P2P music sharing and sales service Grooveshark has raised their level of compensation for sharing music from 10 cents to 25 cents a track, their entire profit on each sale.

Grooveshark is an interesting service that we’ve not covered previously, but has been reviewed by CrunchGear. Users upload their music to Grooveshark, and any member can listen to those tracks for free. If they want to download a song, they can purchase it DRM free and the user who uploaded the song gets a cut of the sale; previously this was 10c and now its 25c. The remainer of the 99c sale goes to the record companies; the service is legal and Grooveshark has agreements with the record companies to provide the service and to cover copyright obligations.

James Davis, VP of Communcations for Grooveshark told TechCrunch that the new deal was about gaining exposure for the service: “We are so confident that we have a good product that people will enjoy using, that we are willing to give away our entire profit margin to prove it.”

In a sales related special, Grooveshark will be covering the Copyright portion of every song download from noon to midnight this Friday (PST). All music on Grooveshark will be sold for 29 cents for the 12 hour period, a good offer considering that Groveshark has 3.5 million songs in its catalog.

Sphere It

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FVB>Grooveshark = Legal P2P or Napsitunefacepedia

October 11th, 2007 at 11:04 am

DRM-free music for 29 cents per track, 12 hours only

October 11th, 2007 at 10:38 pm

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October 12th, 2007 at 8:24 am

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April 26th, 2008 at 4:13 pm

Comments

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Deals and Coupons

October 10th, 2007 at 9:11 pm

nice concept! anything for drm free.
Israel LHeureux

October 10th, 2007 at 9:16 pm

This is the start of a fantastic idea: Align the interests of fans and artists.

We’ve been talking about this for a while: fans have always been the best distributors of music, so reward them as DISTRIBUTORS when they share. Don’t give walmart or iTunes 20 points of margin, if it was my friend who turned me on to the song. Reward my friend, instead.

There are a few kinks to work out regarding who should get paid–should it first person who exposed me to the song, vs person I downloaded it from (e.g. who closed the sale), vs. person to upload it first–but these are solvable.

Congratulations to GrooveShark. I hope we see many players in this space. More players in this space will help the music industry as a whole, and reward fans of music with an enduring and richer catalog.
Steve Ballmer

October 10th, 2007 at 9:29 pm

P2P = theft = iPod users = less money for industry = jail when we catch you!

http://fakesteveballmer.blogspot.com
Noah

October 10th, 2007 at 10:18 pm

How did you not cover this company before? I haven’t tested its service yet, as it takes 24 to 48 hours to be granted a beta account, but if does what it promises, it is pretty damn sweet.
Paul

October 10th, 2007 at 10:52 pm

They’re not the only ones jumping on the P2P monetization. PeerIT has been around since late June. Their selection is not as awesome but the market is also not as crowded.

Definately a site to watch in the realm of GrooveShark. I think PeerImpact is another site that does something similar. Although PeerIT is the only one I know where you can sell anything, host it, and set your own price and payout.

PeerIt is more the eBay model than GrooveShark I think.
Duncan Riley

October 11th, 2007 at 12:11 am

Noah
good question, and it wasn’t until a Twitter contact emailed me about it that I was aware of them. It’s a really good idea…I wonder what the market will be for the 30+ Frank Sinatra albums I have will be
Adrian

October 11th, 2007 at 12:45 am

There is a list of 70 music sites on my blog:
http://blog.wajsbrem.com/index.....sic-sites/
John

October 11th, 2007 at 2:19 am

I don’t really understand this, what happens when all of the existing music is uploaded, the only thing left to upload is new albums as they get released…and you have users competing to upload the same music. And I have a hard time believing that if I upload a Madonna track I’m going to be paid for it LEGALLY, with no question as to where my Madonna mp3 originated! If that’s the case, then cool! I just have a hard time believing it!! It just looks similar to a music store, where the store’s cut of the pie is in fact transferred over to the uploader. Sounds like a good platform for artists to sell their own music though (and their logo’s hella cool!).

John
http://www.gigatribe.com (yet another legal p2p app!)
Skeptic Scott

October 11th, 2007 at 4:43 am

Is this an advertorial or a piece of journalism?
Has anyone bothered to read Groovesharks Terms of Service?
They are not obvious in your face like most ToS’s on websites, rather they are squirrelled away, impossible to find before you have signed up and require serious reading stamina as well as a barrack room law degree.
In short, by joining Grooveshark, you agree you are personally liable and that you will indemnify, hold harmless and defend Escape Media Group “EMG”, (Groovesharks parent company) and their respective directors, officers and employees, from any liability, including legal fees for any claim brought by any 3rd party.

So if you offer a song for sale for which they do not have the agreement of the copyright holder, you are liable, not them.
Grooveshark has no filters, it allows you to offer all music and any other user can buy that music from you.
So you it is your responsibility to know which artists have signed agreements with grooveshark. 70 have so far, no majors. (there are at least a couple of million)

Vincent Castellucci, the VP from Harry Fox, the worlds leading royalty collection and enforcement agency , sits on the board of EMG. (Escape Media, who is trying to ESCAPE?)

Those Terms of Service, which we casually click through on every website we visit, secure in the knowledge they are probably unenforceable anyway, have in the hands of Groovy Shark lawyers, become Weapons of Mass Destruction for the RIAA and anyone else with a vested interest in maintaining the status quo of existing copyright laws.

If Grooveshark are offering a legit P2P service, why is it that, their Terms of Service, state that I, the user, indemnifies, holds harmless and defends Grooveshark including attorneys fees and legal costs should I inadvertently offer for sale some music for which Grooveshark have not received permission from the copyright owner. (99.9% of music on ANYONES hard drive.)

Shouldn’t that be the other way round? By offering a “Legal P2P Service”, should Grooveshark not indemnify, hold harmless and defend it’s users, including attorneys fees if we are sued for using Grooveshark??

tereastarr@KaZaA at least could plead ignorance, itwasntme, still got fined $120,0000. But with Grooveshark they have got you bang to rights, you have agreed liability all they have to do is buy a single track from a user and you have accepted payment and facilitated illegal distribution. That is a lot more serious than Jammie Thomas!

Come on TECHCRUNCH, as you say, you have reported on Grooveshark before, are you simply going to go along with this and entice your readers to commit to these terms? Or are you going to act like journalists and ask some real questions?
Andrew Wise

October 11th, 2007 at 6:14 am

Hey guys, I do work for Grooveshark, and us being a tech company, not many of our employees wake up this early so I felt obligated to respond

@John We are building our site around the Wiki-model wherein you can basically edit anything on the site, and in turn opening up the site for fans to write all they can about their favorite artists, review every song, tag every song, etc. etc.

So, say we have two fans with the same 30 year old Frank Sinatra song, then we determine who is going to get that $.25 based on the amount of contribution they have made to the community.

We don’t want to reward people just for dumping 10 TB of data on us, we want to encourage and develop a community enriched by its members.

@Skeptic Scott

Scott, great point! Our users are our lifeblood, and the last thing we want is to see them face any legal action, so we guarantee you we are doing everything in our power to keep you protected, here is a blog post addressing this same issue with the EULA.

http://www.grooveshark.com/blo.....-the-eula/

We are working on changing this EULA, and no it’s not just a “quote working on” where I’m trying to pull a sheet over your face, we are truly concerned about this and want to get the best lawyers and the best money to get it right.

I don’t want to clog up the comments with my pandering, so, anyone with questions, please direct them to me:

andrew dot wise at grooveshark dot com
It's about time

October 11th, 2007 at 7:59 am

I just played around with the site and it’s very much imeem without the users. I like the pay it back model - just wonder how they can deal with opperating costs, at 0% margin, if they are storing and streaming 10TB of data. I think it’s a good site in a difficult space.

http://www.newsplays.com
Jarrod

October 11th, 2007 at 9:13 am

Hey guys… I have been lucky enough to have had a grooveshark account for a little while now, and I can say that it has completely wiped away my use of any other music service. Its fantastic. I use it everyday at work to listen to my playlists. The only shortcoming of the service I see so far is that its music library is completely tied to the libraries of it’s users, therefore making some tracks hard to find. However, as the service grows, this will improve.
phenom

October 11th, 2007 at 9:36 am

I can download music for free with few google hacks, why bother to use any P2P applications.

http://vidsonly.blogspot.com
Braydon JM

October 11th, 2007 at 9:51 am

Our company is offering a legal p2p solution and is confronting the content licensing/EULA issue head-on. Here is my take:

1. Without a signed and explicit licensing agreement from a content owner, whoever does the sharing is on the hook for $150,000 per infringement. And if they make money off it, I would guess the cost is higher, but this is not as well documented.

If Grooveshark puts that responsibility onto the user via the EULA, it’s a business decision (you decide if it’s a good one). If they take responsibility for sharing, then they are on the hook for the infringements, and have to have deep pockets to pay the law suits, or will have to change their business to filter out all non-licensed content (which dramatically changes their value proposition), or get a license.

2. However, while waiting for a license, escrowing the royalty payments isn’t legal, it’s still $150,000 per infringement without a license. And assuming $.65 - $.75 per track royalty payment is super risky.

3. Further, streaming full tracks without a license is also $150,000 per infringement. See 1 above. Although here you can pay mechanicals at least; I suspect this is where the Harry Fox relationship has come into play - they are responsible for handling Mechanical payments.

***

Our solution is to show all tracks that everyone has, offer for download/stream all tracks for which we have a license and offer CD purchase for anything else. Early on we made the decision to not expose our users, or our company to legal risk. The law is actually really really clear on the licensing of content for distribution and it’s been proven over and over again. You (and I) may not like it, but from a commercial standpoint that’s the way it is right now. Let’s change it of course, but let’s also not get ourselves sued into the ground.

So we have licensed around 1 million tracks for p2p download and streaming in DRM-free, 320Kbps MP3 format. We’re actively signing agreements with content owners and it seems to be working well.

http://www.rvibe.com
funksicle

October 11th, 2007 at 1:32 pm

Skeptic Scott highlights some of the questions I have had about the service. I have friend in the industry and he mentioned this new serivce to me. So, I poked around. Sounds pretty cool, but there are some potential issues.

First, it is entirely unclear wehther they are paying performance royalties to master recording owners (record labels) and featured artists, via Soundexchange, for streaming sound recordings. One could debate whether Sound Recording Copyright Owners (SRCO’s) and ffeatured artists should receive performance royalties, but currently the law provdes for this in regard to digital performances.

Second, as Skeptic Scott, outlines effectively in his comments, there is no filter that blocks content from SRCO’s that have not agreed to include their material on the service and the liability appears to be all yours as a user. Here, as Braydon JM points out, it seems ridiculous to think that most users will read and understand the ramifications of the EULA and then if they do, scrupulously abide by them. A filter that automatically blocks unapproved/unlicensed content seems feasible technically and advisable. That plus the EULA should free Grooveshark from liability as well as protecting SRCO’s that haven’t agreed to let their content be traded on the network.

If they can address some of these issues, I think I’d like to give them a whirl.
Luke

October 11th, 2007 at 2:24 pm

It seems to be forgotten that the money owned to the rights holder will be in an escrow account awaiting their call, since none of the profits are going to GS. So, if a label filed a suit it would be hard for them to claim that they weren’t compensated, or at least had the ability to be compensated if they desired. I’m not saying this would stop a lawsuit but it would surely mitigate damages, and as long as their share is reasonable and industry typical, I would be surprised if labels didn’t just take their share instead of paying attorney’s fees. But, then again, with the recent RIAA lawsuits, I guess anything is possible.
iamshimone

October 12th, 2007 at 3:34 pm

Grooveshark has been tech-crunched. 504 Gateway Timeout. Not a good sign for a social network that should be able to handle a significant load.
Christian

October 13th, 2007 at 8:53 am

Grooveshark had some credit card processing issues yesterday during their 29 cent promo. I couldn’t add $ to my account.