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]

Welcome once more to Weekend Update! I’ll be filling in today for your regular host, Beth Callaghan, who’s on vacation.

And what sane person wouldn’t be, after the slew of Silicon Valley silliness inspired by April Fools Day this past week? Digital pranks were the name of the game as Google (GOOG) and others heaped so many tepid hoaxes upon us that we wanted to call April Fold so as to quickly end this round of gags.

But no bag of tricks was needed for one Web site to April Fool itself into crying wolf about an imminent Google (GOOG) acquisition of Twitter, when a real story around the corner was aboutGoogle turning Turbo Tax tweets into ads.

Meanwhile, one of the biggest jokesters of them all, The Onion, won one of the biggest awards in journalism, a Peabody, meaning that the best sense of humor goes to that panel of judges. And to Stephen Colbert, who was willing to entertain (for a while) Twitter spokesmodel Biz Stone’s biz-model-less thoughts in an interview on “The Colbert Report.” Also on BoomTown this week: Facebook’s former CFO Gideon Yu is out, as was a leaked memo from Mark Zuckerberg about Yu’s departure and the company’s situation.

A sense of humor is certainly an invaluable feather to have in your cap these days. Digital Daily wrote about the most recent doom-and-gloom predictions and events to happen in this econalypse, like analysts’ predictions of YouTube losing $470 million in 2009, the barren IPO-less wasteland VCs are bemoaning and a major global slump in semiconductor sales. Other headlines weren’t quite so dreary: Google’s foray into VC land, the folks at BlackBerry HQ celebrating surprisingly good fourth-quarter results and the world’s worst-kept secret, the anticipated merger between IBM (IBM) and Sun (JAVA).

There was a similar mix of dark clouds and silver linings over at MediaMemo. The National Collegiate Athletics Association forced Twitter and partners AT&T (T) and Federated Media to take down one of its first ad campaigns, “March Tweetness,” crying copyright foul. Also running afoul with big companies in legal waters, free music Web site Seeqpod filed for bankruptcy. And video site Veoh laid off a significant amount of staff and kicked out its old CEO, replacing him with founder Dmitry Shapiro and refocusing the company on its “Video Compass” browser plug-in.

Online video is generally a turbulent space these, but the waiting is the hardest part for Hulu when it comes to the rumored Disney deal in which Disney (DIS) seems to be playing the field. Other gems of the week were URL-shrinking Web service bit.ly’s raising of $2 million and media mogul Rupert Murdoch’s Kindle envy.

In a new Mossblog, Walt Mossberg gives us his first impressions of the BlackBerry App World store in which Research in Motion (RIMM) takes a bold step into what was formerly the sole domain of Apple (AAPL). In Personal Technology, Walt reviews a network hard drive from Western Digital (WDC) that makes the technology gloriously simple for everyone. And in Mossberg Solution, Katherine Boehret takes a look at several laptop trays, designed to protect the–ahem–family jewels and family members in general from laptops’ scorching undersides.

Finally, our exciting Woz-watch, after many weeks, has come to a sad end: Steve Wozniak was voted off “Dancing with the Stars” this week after one misstep too many. Down, but not out, the Apple co-founder swore that the “geeks shall inherit the earth”… just not the dance floor, any time soon. Please.

More next week.

Seeqpod, founded in 2005, has raised either $5 million or $7 million since then (I can’t vouch for either number). But its Chapter 11 filing lists assets of just $2 million, and debts of $1.6 million.

I’m used to seeing bankruptcy filings where the debt number is much bigger than the asset number. But as Seeqpod bankruptcy attorney Scott L. Goodsell patiently explained to me last night, companies frequently seek Chapter 11 specifically so they can stay pending litigation.

In this case, Seeqpod is trying to get a breather from lawsuits filed by Warner Music Group (WMG), and, more recently, EMI Music Group. Both music labels say the search engine violates their copyright by offering users streaming music it hasn’t licensed.

Seeqpod says it’s protected by the Digital Millennium Copyright Act, but at this point, Seeqpod’s legal arguments don’t matter nearly as much as its bank account.

It already owes Farella Braun + Martel, its lawyers in the copyright cases, $424,235.06, according to the filing. That’s four times more than what it owes Level 3 Communications (LVLT), its bandwidth provider.

Meanwhile, as battered as the big music companies are, they can certainly afford to keep paying their lawyers. Warner’s stock price is hovering in the $2 range, but it threw off $160 million in free cash flow in the last quarter.

Even in the good old bubble days, it would be hard for a site like Seeqpod to find investors willing to back it in a legal fight where it was that badly outgunned. Seems unlikely that it will find a champion willing to pick up the tab now.