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EMI terminates deal with Grooveshark

By | Published on Wednesday 4 April 2012


EMI has terminated its contract with Grooveshark, meaning the often controversial streaming music service now has no deals in place with any of the major record companies.

As much previously reported, Universal, Warner and Sony are all suing Grooveshark, claiming that, while the digital firm says all the music on its streaming platform is uploaded by users, actually the company employs people to upload unlicensed tracks itself. The Grooveshark company strongly denies those allegations.

Of course, the majors’ real gripe is that, because it operates a takedown system, Grooveshark can claim protection under US copyright law even when its users upload unlicensed music files.

Many in the music business reckon the company operates a deliberately shoddy takedown system to ensure it has music from most artists available at all times (knowing users will quickly replace tracks even when it does remove them at the request of rights owners). Though takedown system obligations are a bit of a grey area in American law, and generally the courts haven’t set the bar particularly high when considering such systems previously.

Therefore the majors reckon suing over allegations that Grooveshark staff upload infringing content themselves is a safer bet because, if that can be proved, technicalities around the Digital Millennium Copyright Act will not apply.

EMI, however, is not currently part of that lawsuit, it having sued Grooveshark for copyright infringement much earlier in 2009. That litigation was settled out of court, and resulted in EMI licensing the streaming platform. But in January EMI Music Publishing said it was suing the digital firm, which, it said, was in breach of their 2009 agreement, and then yesterday it emerged that the EMI recordings division was terminating its licensing agreement with the Groovesharkers. The music major has also seemingly applied for a summary judgement on its January lawsuit.

Speaking to Billboard, Grooveshark confirmed it had “parted ways” with its one major label partner, though whereas EMI’s litigation claims unpaid fees, the digital firm says it was moving goal posts that brought the two company’s partnership to an end. The streaming outfit told the US trade mag: “Grooveshark was recently forced to make the difficult decision to part ways with EMI due to EMI’s currently unsustainable streaming rates and EMI’s pending merger with Universal Music Group, which we consider monopolistic and in violation of anti-trust laws”.

Billboard observes that EMI’s streaming rates would presumably have been set in the 2009 agreement, and it’s not clear why they have now been deemed “unsustainable”, while noting that to bail on an agreement based on the as yet unconfirmed sale of EMI seems odd, given it’s very much business as usual at the mini-major for the time being. And while it is true that if Universal and Sony do manage to acquire the two arms of EMI between them that would cause problems given their ongoing legal battle with Grooveshark, both of those deals are still to be approved by European and US regulators.

Some are speculating that the collapse of Grooveshark’s relationship with EMI is basically financial, in that it can’t keep up with previously agreed license fee obligations (which may or may not have been fairly priced), and the Universal/Sony/Warner lawsuit is make raising new finance tricky, even if that litigation is ultimately unsuccessful. Whether there is any truth in that remains to be seen, though fighting major label litigation will be expensive in itself, aside from any impact it has on a company’s ability to raise investment, all of which could result in a perfect storm. Which, cynics and Grooveshark sympathisers might argue, is what the majors are hoping for.

Elsewhere, Grooveshark recently stepped up the advertising side of its operations, forcing freemium users to more overtly consume advertising before listening to music.