But this one has a twist or two. The media company is Grooveshark, an increasingly popular music service that’s also being sued by all of the major music labels.

And Grooveshark doesn’t want information about alleged lawbreakers. Instead, it wants details about an anonymous user who posted comments on Digital Music News, an industry news site.

Paul Resnikoff, the site’s owner, publisher and primary writer, writes about the subpoenas (and posts them in their entirety) here. And Ben Sisario of the New York Times has a good summary of the story. So I’ll try to do my version very quickly:

• Universal Music Group, the world’s biggest label, is suing Grooveshark over copyright violations, and has cited an Oct. 2011 story that Resnikoff published, along with comments made by one more readers, in its case.
• The story concerned claims by musician Robert Fripp and his team, who argued that though they didn’t want Fripp’s music on Grooveshark, the company wouldn’t take his songs off its site.
• The comments in question came from someone who said they were a Grooveshark employee, and that they had specific instructions to upload music from the big labels to the site, without permission from the labels or artists. “And,” the commenter adds, “to confirm the fears of [Fripp], there is no way in hell you can get your stuff down.”
• Grooveshark is demanding that Resnikoff hand over “any and all correspondence or other communications” between himself and Universal Music over the story. They also want “any and all documents concerning the identity of the First Anonymous Commenter, including, without limitation, that person’s name, address, telephone number and e-mail address, and the IP Address and ISP associated with that person.”

Resnikoff says he won’t comply with the subpoenas. He tells me that even if he wanted to hand over information about his anonymous commenters, he couldn’t. He says that as a matter of policy his site routinely “flushes” any information about anonymous commenters within two days of their posts.

And Resnikoff says that even though the comments in this case contained explosive allegations about Grooveshark, he never tried to verify the commenter’s identity: “What the world sees is what we have.”

In his post, Resnikoff suggests he’ll be protected by whistleblower laws when he fights Grooveshark’s demands. But he tells me that his legal team isn’t sure what laws they’ll cite yet. “We’re just incredibly committed to protecting any informants or sources of information,” he says.

This fight has plenty of interesting gray areas. For instance: What kind of legal responsibility does a news site have for claims that its commenters make? But I’ll let media law experts weigh in on that. For me, the notion that a Web publisher that isn’t directly involved in a legal suit can be forced to cough up names and addresses of contributors makes me shiver.

That scenario also strikes me as similar to some of the worst-case scenarios that SOPA/PIPA opponents have been making in recent weeks — this is a Web site faced with big legal problems over the actions of a single user, right? So I’ll be interested to see if they jump on Grooveshark over this one.

But Grooveshark doesn’t seem to think anyone will get riled up about this. This afternoon, I received an unsolicited email from Edelman, its PR firm. The email contained a copy of the subpoena, and a statement Edelman wants attributed to Grooveshark: “Grooveshark reaffirms its confidence that it will prevail in this litigation and that this filing represents the next step in reaching that end.”

(Image courtesy of Shutterstock/photobank.ch)

The music companies, Sony Corp.’s Sony Music Entertainment and Access Industries Inc.’s Warner Music Group, joined in an amended complaint to a suit filed last month by Vivendi SA’s Universal Music Group in U.S. District Court in Manhattan.

Read the rest of this post on the original site »

My favorite story related to our case is the story of a kid who appears in front of the judge for sentencing for the crime of having murdered both his parents saying judge have mercy on me cuz I am an orphan.

– Grooveshark chairman Sina Simantob, from a series of internal emails from 2009 that were made public as part of Universal Music Group’s copyright lawsuit in federal court against Escape Media Group, Grooveshark’s parent company

As I noted last week, the new Nook will (reportedly) boast more speed and memory than Amazon’s tablet, and the assumption is that Barnes & Noble will argue that those specs are worth the extra money.

But unless Barnes & Noble has kept this part a real secret, the bookseller won’t offer a cloud service that’s anything like the one that Amazon has built.

Amazon is building up a semiclosed ecosystem, which will work best if consumers rely on it for access to not just books, but music and movies as well. Apple is building its own take on this idea, and Google is headed this way, too. But Barnes & Noble seems like it will ask consumers to rely on third-party services, like Hulu and Grooveshark, for access to songs and videos.

It’s entirely possible that all of these distinctions will be lost on people looking for a cheap-ish gadget that will let them read books and surf the Web. And presumably* both the Nook and the Fire do just fine when it comes to that.

But it will be interesting to see how Barnes & Noble treats the “C” word this morning. We’ll have live coverage starting around 9:45 a.m. ET.

*It’s important to remember that Amazon didn’t let any of the press that attended its Kindle Fire unveiling actually touch the device, so most of us are still fuzzy about how the thing actually works. I’m guessing that Barnes & Noble, which is (supposedly) going to start shipping its devices within a week, will let us feel up the Nook a bit today.

When the dust finally settles between the artists, labels, and distribution companies, everyone will finally realize fans are more valuable than recorded music. As traditional monetization models for recorded music sales slowly fade away, new monetization methods centered on the fan will emerge.

How do we know music will become free? The stats point to this trajectory. Total revenues for CDs, vinyl, cassettes, and digital downloads worldwide dropped 25 percent from $38.6 billion in 1999 to $27.5 billion in 2008, according to the International Federation of the Phonographic Industry (IFPI). The same revenues in the U.S. dropped from a high of $14.6 billion in 1999 to $10.4 billion in 2008.

As the stats show, sales of recorded music are headed one way — down. Sure, digital music sales have been on the rise in recent years, but they have only partially replaced physical sales, so the overall sales figures are still headed south. And it surely isn’t because people are listening to less music. It’s simply because the old adage holds true: why pay for something that you can get for free? In addition, artists, the ones with the talent, aren’t making money off digital sales. Artists get about $0.09 per song sold digitally on iTunes or Amazon. So for a million downloaded hits, an artist earns $90K. Subtract manager, lawyer, agent and other “fees”, and an artist selling one million downloads would barely make minimum wage off of the recording.

Source: CNN, Forrester

Already, there is a deluge of great (and legal!) sites providing free music — including Pandora, YouTube, Spotify, Grooveshark, MOG, Rdio, and other online destinations. This is a big change from the early days of online music, when free meant illegal. Today, music start-ups have caught on to the profit potential in “giving it away.” Companies like Pandora, which generated $67M of revenue in 2011 Q2, and Spotify with over two million paying users, don’t charge for entry-level service. Instead, these music innovators found a way to monetize music indirectly through advertising and other means. Music still comes at great cost — start-ups still pay high licensing fees to labels — but as the economics shift, licensing fees are likely to decline. (Yes, labels will do a lot of kicking and screaming.)

So how will labels offset the decline in recorded music revenue? How will artists capture more value for their creative work? The clear answer is from their fans. Musicians have really never engaged their fans, maybe every three years while they were on tour, but otherwise they just released albums and expected fans to buy them. Myspace was the first experiment with direct musician-fan engagement, and it started a trend that has continued. Now, over 300,000 musicians have BandPages on Facebook. Just about every musician has a Web site, e-commerce site, and a web strategy. Many are putting their music “out there” for discovery and promotion before it’s ever part of an album. Soundcloud has seven million users who upload their music and recordings, for example. YouTube’s most popular videos are music-related. Bands, managers, and labels understand this trend and are finding new and innovative means to monetize fans.

We anticipate a lot of “creative destruction” and changes to the value model based on fan-driven music marketing models. There are ways to make money from the music experience, and those channels — new and old, low- and high-tech — are creating opportunities for artists, labels, and music start-ups.

Here are some of the ways the music industry will make money going forward.

• Live Music
  While recorded music sales continue to decline, live music revenue has increased in the past few years. The industry has been following this trend closely and focusing more and more on live tours and events. There really isn’t a way to replicate or pirate the live experience. As cellist Zoe Keating joked about piracy at the recent SFMusicTech conference: “Go ahead, try copying me! Just try!”


Source: CNN, Forrester as above

• Patronage
  In the Elizabethan era, artists were supported by wealthy patrons; we’re headed back toward that world. Two models are possible here, and will probably coexist as supplements to the live music monetization. The first is corporate sponsorship, which is already used widely. Take the OK GO music video “This Too Shall Pass,” in which the band discreetly thanks State Farm for making it possible, or the somewhat distasteful product placements ($500K worth) in Britney Spears’s “Hold it Against Me” video. The Black Eyed Peas have become so intertwined with brands that The Wall Street Journal dubbed them the “Most Corporate Band.”

  The other sponsorship model is direct fundraising from fans – also known as crowdsourcing. In 2007, Radiohead released its album “In Rainbows” for free, asking fans to pay as much or little as they pleased. And more recently, Nataly Dawn from Pomplamoose used a Kickstarter campaign to fund her forthcoming solo album. She set out to raise $20,000 but fans overfunded her project by $104,788. This may not seem like a huge sum, but crowdsourcing will make all the difference for indie artists worrying how to pay their rent.

• Curation, Discovery and Network effect
  MP3 players were around for years before the iPod took them from the technophiles to the masses. Likewise, music services spread when they are easy to use and approachable. Pandora has managed to attract tens of millions of users to its radio service because of the KISS principal (keep it simple, stupid). While this sounds easy, it took them years to develop the music genome and “taste” algorithms that analyze billions of thumbs up/down votes to offer effortless music curation.

  Upstart Spotify made access and friends the top priority for its music service, and has unseated Rhapsody as the top dog in on-demand listening. Others like Turntable let listeners do the heavy lifting — letting anyone be a DJ and mix tracks via a competitive, social, cartoony environment. And still others, such as the Hype Machine, rely on the old-school expertise of hardcore music junkies, letting bloggers curate their own selections. The ad-supported model is all about building audiences, and it’s an ongoing cat-and-mouse game where new methods continue to emerge.

• Whales
  One dirty little secret in the free-to-play online gaming world is that “whales” — to use a Las Vegas term for big spenders — often account for a significant portion of the revenue. In many examples in the free-to-play world, the top 10 percent often contribute 50 percent or more of the revenue for virtual goods, game play, tokens, premium versions and more. In one recent example, one happy gamer spent more than $76K on a single social game buying the accessories he needed to build his fortress. Would “whale” fans of Arcade Fire spend tens of thousands of dollars to sit in on a studio recording session? Yes, and I’m offering!

  And beneath the mega-whales, there is a larger base of dedicated fans willing to pay to be a part of the experience, even if they don’t have thousands to spend. “Baby whales” mostly tend to buy merchandise: T-shirts, caps, branded toys, etc. These baby whales are still a small share of any overall fan base, but collectively, an extra $50 each from a small percentage of fans can really add up.

• Unique Experiences
  People love to engage with unique experiences — things you just can’t replicate — and will often pay top dollar for them. Concerts are one kind of unique music experience, but there are others. Nataly Dawn’s Kickstarter campaign offered big donors rewards, like their choice of a song for her to cover, early prerelease access to her album, and even a private in-house concert. In addition, there are now countless apps that let you be a part of the music, from the T-Pain auto tune app to ShapeMix’s tool that lets you remix songs yourself with isolated melody/bass/drums/vocal stems and post those to your friends. While, selling these extra experiences may not be a major monetization method, such methods do allow indie artists to generate income, and top artists to experiment with new avenues to engage and grow their fan bases.
• The Bottom Line
  Music is getting closer and closer to free. Distribution is becoming commoditized, so monetization must change. To this end, artists will have to pull out the stops to engage with fans more directly, and actively seek out fans and benefactors willing to pay more than usual for their work. The music startups that will make money over the long term are those that will connect artists with fans, help people filter and discover new music they love, and offer unique experiences. People will never stop listening to music — they’ll just change how they find it, hear it, and pay for it.

Hany Nada is a founding partner of GGV Capital (www.ggvc.com), a $1B venture capital firm with a dual focus on China and the U.S. Some of GGV’s investments include Alibaba Group, Pandora Media, YY, RootMusic, Buddy Media, Tudou, SuccessFactors, Square, and 21ViaNet.

Either way, Assistly helps companies deal with our problems by providing a Web-based customer service and support platform that combines more traditional methods like email, chat and phone with Twitter and, as of today, Facebook. The idea is to make support more efficient and coordinated.

So now, if you post about your problems on the Facebook walls of Assistly customers like 37signals, Vimeo, Rdio, Grooveshark and even Twitter, you might get a quicker and better-delegated response from employees there. (Though the new Assistly Facebook option just rolled out today, so they may not be using it yet.)

There are many (so, so many) social media management tools, but Assistly is more competitive with customer support providers like Zendesk. (Both Zendesk and Assistly already offer Twitter support, but Assistly is first to offer Facebook. Twitter itself uses Zendesk for customer support via email and Assistly for customer support via tweet.)

Assistly CEO Alex Bard and members of his team have been working on customer support software dating back to 1996 with eShare Technologies, followed by eAssist Global Solutions, founded in 1999. More recently they made the Goowy widget analytics platform that was bought by AOL in 2008. Their current company has raised about $5 million from investors True Ventures and Social Leverage.

For its own customers, Assistly starts at $39 per month per full-time user, but it also has an hourly rate so companies can spread the responsibility for customer support across all their employees.

Hope you have a happy one.

Now Lala’s gone. Apple shut it down last night sometime after 2 am Eastern. And there’s nothing in its place. Just this message:

Free streaming music hasn’t completely left the Web: You can still get it at MySpace Music and in various forms at sites like GrooveShark and HypeMachine.

But the big music labels, which own a piece of MySpace Music, aren’t happy with this arrangement. And the other services are in a legal gray area–they’re not fully licensed, but the labels aren’t trying to sue them out of business, yet.

Meanwhile Spotify, which delights European music lovers with its free service, has yet to get permission to operate in the U.S. If it does, it’s almost certain to cut back on gratis tunes in favor of a subscription offering.

So what about a cloud-based model, whereby you access music you own from anywhere you can get a Web connection? Apple (AAPL) seems interested in the idea, and so does Google (GOOG). But I have a hunch we’re not going to see anything like this soon.

Still, maybe Steve Jobs has a surprise up his sleeve. Perhaps he’ll tip his hand tonight, when the Apple CEO sits down for an interview with Walt Mossberg and Kara Swisher at D8. We’ll have live coverage beginning around 6 pm Pacific.

This one isn’t a total shock, as EMI and Grooveshark had supposedly been close to a deal prior to the lawsuit. And it wouldn’t be the first time that a label sued a Web company: See Warner Music Group (WMG) and Imeem, as well as Universal Music Group and News Corp.’s (NWS) MySpace, among others.

No details on the deal from EMI or Florida-based Grooveshark, which offers free streaming music, a la MySpace Music, Imeem, Spotify and others. Unlike those services, though, Grooveshark doesn’t appear to have licensing deals with three of the big four labels and plays their music anyway. But with the exception of the EMI suit, it has remained unmolested. Interesting.

For the record, here’s the release (Inside baseball note to Grooveshark guys: Please don’t attach press releases as PDF files. Really cumbersome. Thanks.):

Music streaming service Grooveshark signs deal with EMI Music and EMI Music Publishing
Gainesville, FL–Today, digital music service Grooveshark.com announced it has entered into agreements with major label EMI Music and EMI Music Publishing that will give Grooveshark users access to content from EMI’s roster of current and legendary catalog artists and EMI Music Publishing’s songwriters.

Grooveshark offers music fans the ability to stream songs for no fee from a vast catalog of music. Fans can enjoy Grooveshark’s music without having to download client software or register. The basic service is free to fans and supported by visual advertising. Fans who opt for a $3 per month premium service can enjoy unlimited ad-free streaming music. The site was recently named the best way to listen to music on the web by Rolling Stone, and just surpassed one million registered users.

“EMI Music and EMI Music Publishing have collaborated with us to create a mutually sustainable deal which represents the future of digital music,” says Grooveshark CEO Sam Tarantino. “We will continue to deliver the best music service on the Internet to our users, and we will expand our capacity to strengthen fan-to-artist connections through our technology.”

“We think services like Grooveshark offer great music discovery options for fans,” said Mark Piibe, EMI Music’s Global Head of Digital Business Development. ”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.”

My story about EMI’s lawsuit against Web music start-up Grooveshark elicited this email from Ben Patterson, who runs indie Web music distributor DashGo, about his experience with the service.

I think Patterson’s remarks are useful because they spell out Grooveshark’s business plan, or at least part of it: Charge labels to promote their acts on the service’s search engine. And I think it’s also helpful to hear an obvious but little-voiced argument about the “free Web music = valuable promotion” thesis: It works best when the act or label is playing along. With Ben’s permission, I’m publishing his entire email.

I’ll caveat this by saying they are nice guys and big music fans and I’m always rooting for new music services that work for bands and music fans alike.

Back in 2007 DashGo signed a deal with Grooveshark that basically amounted to a digital download service delivered via P2P. Users who used Grooveshark’s P2P service to search for songs would be presented with a download / buy link and the revenue would be split between fan hosting the file, Grooveshark and the band.

A couple months later we got a nice packet–a t-shirt, letter and wax-sealed, yes, wax-sealed, envelope with a check for $0.59 in royalties. (Coconut Records “West Coast” I think)

Then I didn’t hear much for 6 months. No checks, no real action. At the end of 2008, they reached out and told me about their new music search engine at listen.grooveshark.com–basically Seeqpod / Songza / all other stream song aggregators…not what we licensed for, but not egregious enough to get huffy.

Of course, that was before they offered to sell me advertising for my bands as the default search keyword. For $0.05 per search, I could make the default phrase “DashGo Band Name” instead of “Search here.” I had to ask–am I getting paid per play? No of course not. Because “[they] are not profitable and can’t afford to share that advertising revenue.” So I’m paying, not even for a play, but for a search term on a service where they have users and can sell ads ONLY because people can listen to music, and because it’s free, what incentive is there EVER to buy the song?

So we don’t deliver there anymore.

I’ll tell you why all these free streaming music services are broken–because they rely on music advertising to pay the rent but give away the advertisers product. If I got free McDonald’s and Budweiser by watching the Super Bowl, why would I buy the food? As an advertiser, why would I pay a CPC to advertise streaming music and promote listens when the per stream rate a existing subscription services is AT BEST $0.02 per play?

It sucks to get sued. I’m sorry Grooveshark, but really..what did you expect? You’re soliciting labels and bands to pay your bandwidth, rent and operating costs and giving away the product.

While I’ve got this soapbox out, let me preach one more gospel; offering free music accessible via a search engine is NOT promotional if the band hasn’t opted in.

If a user SEARCHES for the music and listens to it for free in an environment where someone ELSE has posted the music and the band doesn’t have the option to ask for an email address or even pitch a tour or merch or actual album; then the service is just ripping off the band by giving free content to someone who asked for it–not promoting it to a new fan or adding a filter that helps expose and distinguish music.

[Image credit: Mrs. Logic]

Digital music start-ups seem to come in two flavors these days: Those being sued by the major music labels and those with expensive licensing deals they can’t afford.

But for some reason, plucky Grooveshark, which runs a very nice, free streaming music service, has stayed out of both of those buckets until now. I’ve confirmed that EMI Music Group is suing the site–whose motto is “Play any song in the world, for free!”–for copyright violation.

The label filed suit against Gainesville, Fla.-based Grooveshark in a New York court on May 8. I don’t have a copy of the complaint yet, but if you feel like sharing, hit me at peter@allthingsd.com or use the blind tip box here. No comment from EMI, but Grooveshark sent me a very long statement, which I’ve printed at the bottom of the post.

The takeaway: Grooveshark says it was working on a licensing deal with EMI and now finds itself in court instead. The company does refer to deals with “many artists, labels and publishers,” but as far as I can tell, it doesn’t have deals with any of the other three majors–Warner Music Group (WMG), Universal Music Group, or Sony (SNE)–either.

Grooveshark started out as a peer-to-peer file-sharing start-up in 2006, and has since morphed into a streaming model. When I talked to marketing VP Joshua Bonnain in May, he told me the company was primarily funded by friends and family–most of the company’s employees are either students at or graduates of the University of Florida, he said. But he also said the company had received a “substantial investment from a large party” that he wouldn’t identify.

Bonnain said the site, which generates at least some ad revenue, planned on splitting half of it with the copyright owners of the music it played. But I was never clear about how that was going to work since Grooveshark doesn’t have deals with the majors. Then again, Bonnain didn’t tell me that the company had been sued a few days before we talked, either.

In the music world, negotiations don’t preclude suits and vice versa; Warner was, at one point, suing iMeem, but then became an investor in the site. Same thing with Universal and News Corp.’s (NWS) MySpace. The only real question I’ve had is why the big guys haven’t gone after Grooveshark yet. I’ve been asking label folks about the start-up since November and I’ve only gotten shrugs for an answer.

Anyway, as I said, it’s very nice service, and it would be a shame if the labels can’t figure out a way to work with it or help it survive. But the odds of that happening, based on the unpleasant history of digital music start-ups to date, are very low. So enjoy this themed playlist I created with the site’s help, which features music from all four majors, while you can. Grooveshark’s statement is below.

For the past year, Grooveshark has been in talks with EMI Records and other copyright holders to negotiate licensing agreements for the use of their content. We are pleased to announce that over the past few months Grooveshark successfully concluded mutually bene?cial agreements with many artists, labels, and publishers that we hope to be a template for other such agreements with additional copyright holders.

Recently, EMI Records chose to abandon the template we’ve built with the help of other major copyright holders and opted for their traditional intimidation tactic of ?ling a lawsuit as a negotiating tool. We ?nd the use of this negotiating strategy counterproductive, as Grooveshark has been willing to conclude an agreement with EMI Records that is economically sustainable for both EMI Records and a start-up company the size of Grooveshark.

Grooveshark is run by a group of young and passionate musicians. We love music, we make music, and we believe that the use of all music should be paid for. We adopted this core philosophy at our inception and to date have concluded agreements with hundreds of record labels, major US performance rights organizations, and thousands of independent artists who support Grooveshark’s business model. (See: Grooveshark Artists)

As musicians, we support the rights of copyright holders and strive to sign sustainable agreements with all content owners, ensuring that all artists get paid– or we agree to remove content from our system in accordance with our DMCA Takedown Policy. We hope that EMI Records eventually follows the lead of the many forward-thinking labels we are already working with, who would rather get their artists exposure and a fair share of our revenue than block content access and force customers to illegal networks.

We understand that the economy of the digital music business is in a state of ?ux, and we hope to help ease this transition by providing the required new tools and services that lead to the next generation of the music industry. We respect the ownership rights of the major labels and publishers, and our core mission has always been to compete with piracy by offering a service that is genuinely better than what illegal networks offer, while also ensuring fair payment to copyright holders. Our next important step on our road to success is to conclude a mutually bene?cial agreement with EMI Records that is sustainable for both EMI and Grooveshark.