Grooveshark has spent years fighting major record labels and music publishers. Now the Florida-based streaming service is taking a different tact: a DMCA-compliant Internet radio service called Broadcasts.
According to a report from the Wall Street Journal, Grooveshark is planning to launch Broadcasts in January. (Broadcasts the app is not to be confused with Broadcast, the user-created radio feature Grooveshark launched last year.) The advertising-free service will be priced at 99 cents per month, a bargain compared to similar offerings. A company spokesperson did not respond to Billboard’s request for comment.
Grooveshark has spent years defending — in both the courtroom and the court of public opinion — its business. The company has incurred lawsuits from all three major labels for operating without licenses. The labels scored a major victory in September when a judge in a U.S. District Court in Manhattan ruled that Grooveshark had infringed on thousands of their copyrights and, because of their specific actions, were not protected by the fair use clause of copyright law. Taratino told Billboard in October that the company plans to appeal the decision.
No negotiations with record labels are required for Broadcasts. The commercial-free service will use the statutory license — also used by Pandora — that allows non-interactive webcasters to play recordings as long as certain rules are followed and specific royalties are paid. Since the statutory license covers only streaming within the United States, Grooveshark would need negotiated licenses to operate Broadcast in other countries.
As for the musical works, Grooveshark will need to obtain licenses from the three performing rights organizations in the United States: ASCAP, BMI and SESAC. Licenses from ASCAP and BMI are easily obtainable — their consent decrees with the Department of Justice mandates they cannot withhold licenses. That leaves a negotiation with SESAC, which is not bound by such an agreement with the government.
The statutory license gives Grooveshark a path to a legal service. But will it succeed in a crowded market?
Chief executive Sam Tarantino told the Wall Street Journal the service could “change the ballgame” in Internet radio. He reasons the app’s price of could lead to impulse purchases while generating revenue.
In charging for its radio app, Grooveshark pits itself against numerous services that offer free mobile apps. Pandora, iHeartRadio, iTunes Radio, Songza and Slacker are available on mobile devices at no cost — but with advertising. Although consumers can pay to remove the advertising, most prefer not to pay. To that point, Pandora’s 3.3 million subscribers are a small fraction of its 76.5 million monthly users.
Free apps are also used to drive users to paid services. Similar to Broadcast are Spotify and Rdio, both subscription services that offer free mobile apps, scaled down versions meant to attract paying customers to its full-feature tier. Grooveshark could employ the same tactic to funnel users from Broadcast to its $9-per-month streaming service.
The greatest question about Broadcast might be the health of its creator. Penalties in Grooveshark’s copyright infringement lawsuit have not been set. With a top penalty of $150,000 per infringement, the market viability of Broadcasts should be the least of Grooveshark’s concerns.