Grooveshark’s toothless business strategy revealed in stream of internal emails

Chairman of in-hot-water streaming site Grooveshark said "We bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission" in a private email.

29.11.11

Words by: Charlie Jones

Grooveshark, a streaming service based on user-uploading is currently being sued for a lot of money by Universal. The site works like YouTube, where users upload songs they may or probably may not own the copyright for, and visitors then play, free of charge, whether or not they are allowed by the label.

Grooveshark’s legal grounds for doing so resting on the Digital Millenium Copyright Act, which states that if someone happens to use a site for distributing intellectual property, the uploader, not the site, is the criminal party. However, this defence rest on the fact that uploading was not done by Grooveshark staff members. If such a fact was proved, the site would be eligible to pay up to $150,000 for each song.

Now, Universal Music are currently taking Grooveshark to court for over 100,000 songs, meaning that the possible costs to Groovesharks would top $15 billion, which, for a sense of scale, more than British Petroleum spent cleaning up the Gulf of Mexico disaster and more than the entire annual cost of the War On Drugs by the US Federal Government.

So, to summarise, a lot of money, even for owners of a site of 30 million users, rests on how naive Grooveshark were to the sharing of music on their site. Which is what makes the release of two emails, in which, though not admitting to uploading Miley Cyrus’s back catalogue himself, Simantob reveals his fairly scandalous business strategy, so astounding.

In 2009, he wrote: “The only thing that I want to add is this: we are achieving all this growth without paying a dime to any of the labels…we use the label’s songs till we get a 100 (million) uniques, by which time we can tell the labels who is listening to their music, where, and then turn around and charge them for the very data we got from them, ensuring that what we pay them in total for streaming is less than what they pay us for data mining. Let’s keep this quite [sic] for as long as we can.”

He then decided to go further, providing a fantastic quote: “We bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission… When EMI sued, everyone thought it is the end of the company. Once we settled that suit everyone said EMI was weak anyway so the real Goliath to beat is [Universal Music Group]. Well it took the boys a bit before they could re-group but I think these guys have a real chance to settle with UMG within a year and by that time, they’ll be up to 35 million unique and a force to be dealt with.”

The case continues.