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]

Well, here’s a good reason not to write off Joost quite yet: When the London-based company officially debuts its new Web-based service in mid-October, it will have some pretty hot content with its half-dozen seasons of the former NBC hit, “Friends.”

Also, there will finally be no more irksome plug-ins.

In other words, anyone with an Internet connection can watch streaming television shows and movies on Joost, with advertising embedded in various forms.

There will also be social-networking elements–you can see what your friends watch and form groups, make comments with cool tools and the rest of that sort of thing.

While all this is not going to make up for the lost time the online video service has wasted with its annoying P2P-based desktop client download, going to a Web-based, all-Flash service with more robust content is certainly the right way to stop rival service Hulu from continuing to clean Joost’s clock.

Joost was first out of the gate last year with a giant slug of funding, fancy founders (Janus Friis and Niklas Zennström, who were also founders of Web phenoms Skype and Kazaa) and blue-chip investors (Sequoia Capital, Index Ventures, as well as CBS, Viacom and wealthy Hong Kong investor Li Ka-shing).

In any case, Hulu quickly grabbed the lead in terms of press praise (I ate my words even!), ease-of-use and, most importantly, user numbers.

In the most recent stats, for example, Hulu had more than 100 million monthly video streams and 3.3 million unique monthly visitors. (But since Joost has just soft-launched its new Web-only service, it’s hard to make comparisons just yet, although the competition is now clearly afoot!)

And, although it has been written off by some, I do not think it is too late for Joost.

First, it is still early in the premium online video game.

Second, success will depend on having increasing amounts of quality content. And Joost–with CBS, Warner Bros., Sony and other unusual content like anime–certainly can keep up with Hulu’s programs from its partner parents, News Corp. (News Corp. is the owner of Dow Jones and this Web site) and NBC Universal.

Lastly, despite decent consumer uptake, the business is still in its nascent popcorn-stand stage of revenue and profit generation.

And while spending too much money and having too many employees did not help Joost, it seems as though CEO Mike Volpi has finally gotten control of the start-up beast.

Thus, while in London this week, I stopped in at the offices of Joost (near the famed King’s Cross train station, where, of course–to no avail–I tried to make it through the wall at Platform 9 3/4!) to chat with Volpi about all the changes at the much-hyped company.

Here’s a longish video, in which the always-well-turned-out former Cisco exec talks about all that and more:

At the Music Matters confab in Hong Kong, McGuinness slagged broadband Internet service providers, accusing them of aiding and abetting music piracy while CD sales and royalty payments to musicians plunge. “The recorded music industry is in a crisis, and there is crucial help available but not being provided by companies who should be providing that help–not just because it is morally right, but because it is in their commercial interest,” said McGuinness, adding that Internet service providers have been “turning their heads” away from the music industry’s troubles. “One way or another, ISPs and mobile operators are the business partners of the future for the recorded-music business. But they are going to have to share the money in a way that reflects what music is doing for their business. The music business once had to bear the accusation that it was full of dinosaurs who looked back to an old business model rather than embracing a new one,” McGuinness said. “Today, though, it is the music business that is charting the way to the future. If there are dinosaurs around today, I think they are the Internet free-thinkers of the past who believe that copyright is the great obstacle to progress, that the distributors of content should enjoy profits without responsibilities and that the creators and producers of music should simply subordinate their rights to the rights of everyone else.”

By Internet free-thinkers, McGuinness presumably means those crazy longhairs in Silicon Valley whom he accused of destroying the recorded music industry in another keynote address back in January. “Embedded deep down in the brilliance of those entrepreneurial, hippy values seems to be a disregard for the true value of music,” he said at the time. “I suggest we shift the focus of moral pressure away from the individual P2P file thief and on to the multibillion dollar industries that benefit from these countless tiny crimes: the ISPs [internet service providers] the telcos [telecom companies], the device-makers. … We must shame them into wanting to help us. Their snouts have been at our trough feeding free for too long.”

Out of the car, longhair …

This morning the company, which once terrorized the music industry with free peer-to-peer file sharing, launched what it claims is the world’s largest MP3 store. An OS-agnostic shop, Napster’s new storefront offers more than 6 million tracks encoded at 256Kbps and priced at 99 cents apiece. The tracks are free of digital rights management protections and playable on virtually any device–including the iPhone and iPod.

With 6 million songs, Napster (NAPS) has the largest DRM-free catalog of any online retailer. Its selection is about three times the size of Amazon’s (AMZN), and while Apple’s (AAPL) iTunes also boasts a catalog of over 6 million songs, only a fraction of those are offered free of copy restrictions.

But really, does that even matter? Because as compelling as Napster’s new MP3 store might be, it doesn’t have nearly the reach or mindshare of iTunes–which, at last check, was among the most ubiquitous pieces of software around. And how do you compete with ubiquity? Certainly not by failing to support Apple’s Safari browser, that’s for sure.

Broader issues? Like reasonable network-management practices? The responsibility to deliver traffic fairly? Service disclosures? The sort of issues that might figure prominently in a “P2P Bill of Rights?”

Guess not.

Anyway, Comcast has already scrapped its policy of deliberately slowing some traffic flowing over BitTorrent and other P2P networks, so there’s really no need for Federal Communications Commission Chairman Kevin Martin to bust its chops anymore. As Mitch Bowling, Comcast’s senior vice president and general manger of its Internet service, told the New York Times, Comcast’s new policy is to slow traffic based on usage pattern, not application. “[Our new technique] will be based purely on individual consumption by consumers,” Bowling said. “Anything in addition to that is outside the scope of what our network management goal is.”

So the company plans to throttle traffic to the customers that use the most bandwidth. Hmmm. I wonder who those might be? The folks who use the Internet for email and Web browsing or those who use it for downloading digital media?

Broader issues? Like reasonable network-management practices? The responsibility to deliver traffic fairly? Service disclosures? The sort of issues that might figure prominently in a “P2P Bill of Rights?”

Guess not.

Anyway, Comcast has already scrapped its policy of deliberately slowing some traffic flowing over BitTorrent and other P2P networks, so there’s really no need for Federal Communications Commission Chairman Kevin Martin to bust its chops anymore. As Mitch Bowling, Comcast’s senior vice president and general manger of its Internet service, told the New York Times, Comcast’s new policy is to slow traffic based on usage pattern, not application. “[Our new technique] will be based purely on individual consumption by consumers,” Bowling said. “Anything in addition to that is outside the scope of what our network management goal is.”

So the company plans to throttle traffic to the customers that use the most bandwidth. Hmmm. I wonder who those might be? The folks who use the Internet for email and Web browsing or those who use it for downloading digital media?

Back in February the cable company claimed it was perfectly reasonable for it to throttle or degrade the performance of peer-to-peer file-sharing services on its broadband network. But when Federal Communications Commission Chairman Kevin Martin suggested the agency was mulling action against it, Comcast had a moment of clarity. In March, it said it would work with BitTorrent to develop P2P-friendly network capacity-management techniques. And today it announced plans for an industry-wide effort to create a “P2P Bill of Rights and Responsibilities.”

The document–which is to be created with the help of other Internet service providers, P2P companies and content providers–would specify how ISPs should manage P2P applications running on their networks and how consumers should use them. Said Tony Werner, Comcast Cable’s Chief Technology Officer, “By having this framework in place, we will help P2P companies, ISPs and content owners find common ground to support consumers who want to use P2P applications to deliver legal content.”

And by announcing its plans to create this framework right before the FCC hearing on its P2P-throttling techniques to be held at Stanford (in Palo Alto, Calif.) Thursday, Comcast is hoping the agency won’t take action against it for violating its Net neutrality rules.

Back in February the cable company claimed it was perfectly reasonable for it to throttle or degrade the performance of peer-to-peer file-sharing services on its broadband network. But when Federal Communications Commission Chairman Kevin Martin suggested the agency was mulling action against it, Comcast had a moment of clarity. In March, it said it would work with BitTorrent to develop P2P-friendly network capacity-management techniques. And today it announced plans for an industry-wide effort to create a “P2P Bill of Rights and Responsibilities.”

The document–which is to be created with the help of other Internet service providers, P2P companies and content providers–would specify how ISPs should manage P2P applications running on their networks and how consumers should use them. Said Tony Werner, Comcast Cable’s Chief Technology Officer, “By having this framework in place, we will help P2P companies, ISPs and content owners find common ground to support consumers who want to use P2P applications to deliver legal content.”

And by announcing its plans to create this framework right before the FCC hearing on its P2P-throttling techniques to be held at Stanford (in Palo Alto, Calif.) Thursday, Comcast is hoping the agency won’t take action against it for violating its Net neutrality rules.

It’s a Comcastic day for BitTorrent. This morning the cable provider, under fire for degrading the performance of the peer-to-peer file-sharing service on its broadband network, announced plans to develop better ways to manage peer-to-peer traffic. To that end, Comcast (CMCSA) will work with BitTorrent to develop a network capacity-management technique that is protocol agnostic.

Said Tony Werner, Comcast’s chief technology officer, “This new architecture would enable many new and emerging applications and will be based upon an open, nondiscriminatory framework that could interface with or support multiple technologies. We believe that P2P technology has matured as an enabler for legal content distribution, so we need to have an architecture that can support it with techniques that work over all networks.”

Of course you do. You just didn’t realize it until FCC Chairman Kevin Martin pointed it out, right?

Anyway, like most such corporately altruistic pledges, this one has the potential to do more good than bad–or more bad than good. “… We must recognize that these are two commercial entities whose goals are, in the end, to make sure that their networks and technologies are as profitable as possible,” writes Public Knowledge’s Jef Pearlman. “One can conceive of a world where an ISP and an application developer band together to make a proprietary system in which sanctioned application data gets preferred treatment, the ISP gets greater control of the application running on your computer, and both companies are happy in the exact situation we want to prevent. Time will tell what this partnership actually means.”

Turns out Benjamin Disraeli was wrong. There are four, not three kinds of lies: lies, damned lies, statistics and Motion Picture Association of America piracy figures.

The MPAA this week admitted that a 2005 study that blamed a significant portion of the film industry’s domestic losses on college movie pirates was erroneous. Touted as “the most accurate and detailed assessment of the film industry’s worldwide losses to piracy,” the study (PDF), described piracy as “the biggest threat to the U.S. motion picture industry” and attributed an astonishing 44% of MPAA company losses in the U.S. to college students.

Hollywood was quick to seize on that statistic and used it as the foundation of a campaign against file-sharing on college networks that would ultimately result in the Curb Illegal Downloading on College Campuses Act, the demonization of the “Top 25 Piracy Schools” and the Higher Education Reform Act, which ties federal higher-education funding to efforts to combat piracy.

Trouble is, that 44% figure was a gross overstatement. In fact, the MPAA now says, just 15% of the movie industry’s domestic losses can be attributed to campus piracy. How did it happen that the study nearly tripled that figure? “Human error,” says the MPAA.

Ah. Well that explains it, then. Makes you wonder about all those other sky-is-falling piracy studies we’ve been bombarded with over the years though, doesn’t it?

“If the reports are true that the new, corrected numbers are way below the initial and highly publicized earlier numbers, then the MPAA owes an apology to the campus community,” Kenneth Green, director of the Campus Computing Project, told Inside Higher Ed. “The corrected MPAA numbers clearly confirm what many of us have said for a very long time: that P2P piracy is primarily a consumer broadband issue, not primarily a campus network issue, and that colleges and universities are more concerned and far more engaged in efforts to stem illegal P2P activity than are consumer broadband providers.”

Turns out Benjamin Disraeli was wrong. There are four, not three kinds of lies: lies, damned lies, statistics and Motion Picture Association of America piracy figures.

The MPAA this week admitted that a 2005 study that blamed a significant portion of the film industry’s domestic losses on college movie pirates was erroneous. Touted as “the most accurate and detailed assessment of the film industry’s worldwide losses to piracy,” the study (PDF), described piracy as “the biggest threat to the U.S. motion picture industry” and attributed an astonishing 44% of MPAA company losses in the U.S. to college students.

Hollywood was quick to seize on that statistic and used it as the foundation of a campaign against file-sharing on college networks that would ultimately result in the Curb Illegal Downloading on College Campuses Act, the demonization of the “Top 25 Piracy Schools” and the Higher Education Reform Act, which ties federal higher-education funding to efforts to combat piracy.

Trouble is, that 44% figure was a gross overstatement. In fact, the MPAA now says, just 15% of the movie industry’s domestic losses can be attributed to campus piracy. How did it happen that the study nearly tripled that figure? “Human error,” says the MPAA.

Ah. Well that explains it, then. Makes you wonder about all those other sky-is-falling piracy studies we’ve been bombarded with over the years though, doesn’t it?

“If the reports are true that the new, corrected numbers are way below the initial and highly publicized earlier numbers, then the MPAA owes an apology to the campus community,” Kenneth Green, director of the Campus Computing Project, told Inside Higher Ed. “The corrected MPAA numbers clearly confirm what many of us have said for a very long time: that P2P piracy is primarily a consumer broadband issue, not primarily a campus network issue, and that colleges and universities are more concerned and far more engaged in efforts to stem illegal P2P activity than are consumer broadband providers.”

At a hearing yesterday by the House Committee on Oversight and Government Reform, Chairman Henry Waxman (D., Calif.) declared P2P networks a “national security threat,” claiming they’d caused federal employees to accidentally share sensitive or classified documents. “We used the most popular P2P program, LimeWire, and ran a series of basic searches,” Waxman said, referring to a bit of research done by his staff. “What we found was astonishing: personal bank records and tax forms, attorney-client communications, the corporate strategies of Fortune 500 companies, confidential corporate accounting documents, internal documents from political campaigns, government emergency-response plans and even military-operation orders. … It is truly chilling to think of what private information an organized operation or a foreign government could acquire with additional resources.”

Certainly is. But not nearly as chilling as the idea of government employees installing P2P software on government-issued computers holding classified government documents. No wonder the government got a C- on its 2006 Federal Computer Security Report Card.
The FBI is losing laptops like baby teeth, the Transportation Security Administration is misplacing hard drives with the Social Security numbers and bank account information of its employees, and now federal employees are jeopardizing the security of government emergency-response plans and military-operation orders by messing around with P2P clients.

Don’t try telling that to committee members like Rep. Jim Cooper (D., Tenn.), though. During yesterday’s hearing, he drew and quartered the lone representative from a peer-to-peer software company in attendance: LimeWire Chairman Mark Gorton. After suggesting that Gorton’s own home computer was likely leaking sensitive documents, Cooper lambasted him as “one of the most naive chairmen and CEOs” he’d ever encountered. “I’d feel more than a shade of guilt at this point, having made the laptop a dangerous weapon against the security of the United States,” Cooper said. “Mr. Gorton, you seem to lack imagination about how your product can be deliberately misused by evildoers against this country.”

Evildoers, huh. Is that a euphemism for federal employees doing government work on computers connected to peer-to-peer networks?