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]

There are two schools of thought about Twitter’s decision not to sell itself to Facebook, as it did not in the fail-whale of a deal that BoomTown reported on yesterday.

Here’s my favorite quote from an Internet exec who thought the microblogging service’s decision to turn down $500 million in stock (and some cash) in the hot social-networking site was–how can I put this delicately?–stupid:

“If Twitter turned down 500m in stock, they should go see a shrink.”

But, others disagreed, with another big Web player noting: “Why should Twitter hitch itself to Facebook’s horse, when they don’t have to?”

Debate raged, depending on your point of view, with change-averse Twitter users mostly seeming relieved.

I am more toward the middle of the road, not knowing–who really does?–what was the best move. Thus, I would agree with a sentiment in an email sent to me yesterday from yet another digital guru:

“I think strategic buyers are going to be considered as options for all venture backed companies going forward. Additional rounds of financing are not the given they have been in the past few years. Liquidity is at a premium I’ve never seen before.”

Yes, indeed, as in all things, it always comes down to money and means and time.

In other words, Twitter has made the big bet that it has plenty of all of it, to transform itself into a real business and killer app before others catch up to it.

Right now, its business is deadly simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

But that single feature has allowed the San Francisco-based Twitter to grow to about six million registrations, as reported in October, up 600 percent over the last year.

And that’s why Facebook–for all its powerful online social connections–has watched carefully as Twitter has raced past it in innovating in the “status update” arena.

And that is also why Facebook wanted to acquire it, to be able to check that important feature off its list, so it could move onto other issues (like finding an advertising model that pays off big).

According to many I spoke to about the now-ended discussions between Twitter and Facebook, both sides got along well, felt the fit was a manageable one and the union of the two made sense on many levels–and still does.

But, for Twitter, the chance to make a run for the prize was paramount, with a feeling among its investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

As for Facebook, it apparently plans to keep the pedal to the metal too, in terms of growth and acquisitions–powering through these bad times economically, in order to emerge victorious when the tides turn.

In a prescient piece last week, in fact, BusinessWeek’s Spencer Ante outlined the Facebook do-or-die strategy.

Wrote Ante:

“As gloom descends on Silicon Valley, most startups and giants are growing cautious and cutting back. But not Facebook. The social-networking Web site sees a bleak economy as all the more reason to press ahead with aggressive plans for growth. ‘This is not the time for tech companies to be cutting back; this is the time to be hitting the accelerator,’ says Peter Thiel, a Facebook board member and investor.”

Of course, this was the very same Peter Thiel, who told me in a video interview a year ago that “there was absolutely no bubble in technology.”

Well, with tech valuations now in the basement (as well as Thiel’s own hedge fund returns) from peaks last year, he’s right–that bubble has surely been popped.

As I said before, you just never know, a kind of equivocation that Hamlet spoke about so eloquently in his famous soliloquy in Act Three, Scene One, of William Shakespeare’s classic play.

It’s in text and video below–the Laurence Oliver version, of course!–because we all could use a little more insight than 140 characters or a post on a digital wall gives to any of us these days:

To be, or not to be: that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die: to sleep;
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to, ’tis a consummation
Devoutly to be wish’d. To die, to sleep;
To sleep: perchance to dream: ay, there’s the rub;
For in that sleep of death what dreams may come
When we have shuffled off this mortal coil,
Must give us pause: there’s the respect
That makes calamity of so long life;
For who would bear the whips and scorns of time,
The oppressor’s wrong, the proud man’s contumely,
The pangs of despised love, the law’s delay,
The insolence of office and the spurns
That patient merit of the unworthy takes,
When he himself might his quietus make
With a bare bodkin? who would fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscover’d country from whose bourn
No traveller returns, puzzles the will
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all;
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.