They weren't licensing anything. They were relying on DMCA safe harbor provisions to protect them from infringement suits. The problem is that the executive e-mail indicates plain as day that they were ineligible for that safe harbor in at least two ways: they knew of and were profiting from infringement.

Who could have guessed that basing a business on copyright infringement might get you sued for copyright infringement?

The email says "we use the label’s songs", "the data we got from them", "we pay them".

This suggests they were getting the label's data from the label and paying the label.

That seems like a license to me.

The e-mail implies that their plan was to knowingly infringe for months/years before negotiating a license.

They could then use the data gained from (infringing) streaming/uploads as a bargaining chip while negotiating the license.

I think the email is ambiguously worded.

I read it as, "we license their songs, and then we license the usage data back to them at a higher rate once it reaches some threshold."

You apparently read it as, "we infringe until we have enough usage data, and then we negotiate a contract where they pay us."

The few ambiguous parts are,

1. Whether "we use the label’s songs" means to license or to infringe.

2. Whether "the data we got from them" is licensed or infringement.

3. Whether "what we pay them" means what they had paid in license fees up to that point, or the terms of the negotiated license.

You're missing:

  > we are achieving all this growth without paying
  > a dime to any of the labels

and

  > In our case, we use the label’s songs till
  > we get a 100 (million) uniques

Combined these statements make it less ambiguous.

I read "not paying a dime" as referring to their net with the labels

In their business plan, they take a loss for licensing up front, but eventually net positive by licensing the data back to the labels.

Contrast with, e.g., Spotify, who nets a loss with the labels.

if that were the case, why would they then say:

"Let’s keep this quite for as long as we can."

also,

> they take a loss for licensing up front

doesn't seem like the correct interpretation, because they say

"we are achieving all this growth without paying a dime to any of the labels"

That's exactly what he meant, they don't pay a dime because they offset it by selling data.

To me, the phrase "let's keep this quite [sic] as long as we can" implies you know you're doing something wrong.

No it doesn't. It implies that you don't want people to know about it. But there's plenty of things in business that are legal and ethical, but you still want to keep quiet. For example, Google kept their search revenue quiet for a long time and intentionally did so. Were they doing something wrong? I'm sure Apple would like to keep their supplier deals quiet.

If you're getting a good deal with competitive advantage, you often want to keep that quiet -- and it doesn't imply you're doing anything wrong. Now if they statement ended with, "or we could all up in jail" then that would imply they were doing something wrong. This just sounds like they found a sweet deal and wanted to make sure they could milk it with as little cost for as long as possible.

I don't know about that, but I guess we'll find out soon enough. I'd give them the benefit of the doubt since this is all on Universal's words, they provide an amazing service, have license agreements with EMI and lots of smaller labels.

Is there a list somewhere of all of the actual artists Grooveshark has legal agreements with? I'd love to see the percentage of streams of unlicensed artists vs. licensed artists and how much each contributes to their total stream output per month.

Grooveshark didn't start licensing anything from major labels until extremely recently. They built their userbase on unlicensed music.

Everything in the second paragraph is happening in the future. This isn't immediately clear, but it's a common enough writing style. Just pretend they wrote "we will use", "we will pay them", and "they will pay us".

The second paragraph, if I'm reading it correctly, details how they don't report streaming data to the labels until they have enough data to guarantee that they can charge labels more than the cost of streaming the songs. I imagine the labels don't particularly care for this behavior, and history (specifically Grooveshark's history) seems to have borne this out.

> they don't report streaming data

What do you mean? How did you arrive at this conclusion?

Whether they are obligated to "report streaming data" is up to their contract, not ethics.

> Whether they are obligated to "report streaming data" is up to their contract, not ethics.

There is no contract.

Users upload the music the service is streaming to everyone. Most of that music is copyrighted and the company has no license (or any other contract) allowing them to stream it.

They expected to eventually be sued by one or more labels for doing this. They also expected to have enough data by then to use it to negotiate a contract where they actually make money while legally licensing the music.

> the company has no license

Did I miss this part? Source, please.

> Source, please.

Common sense, Wikipedia, previous lawsuits against the company, this lawsuit in question. Feel free to Google. It's not all unlicensed, but their catalog is built upon user uploads (and from previous court cases, from their own execs uploading music they have no license to), not just a database of music they licensed like a legal music store/service.

The UMG lawsuit alone alleges Grooveshark employees uploaded over 100,000 files they had no license to. There was no contract then, they just expected to have enough listening data to make a profitable licensing deal on that music... which might've worked if it didn't come out in discovery of a year old lawsuit that it was Grooveshark employees and not users that uploaded so much of the music. No DMCA protection for that.

Well, that's what UMG alleges based on a comment in a blog. If you look at http://blog.grooveshark.com it's evident they have deals with plenty of labels.

They already said Grooveshark intends to fight this battle before the Court, not in the press, so we are threading on thin assumptions here.

They have deals with lots of tiny independents. They do not have deals with the big boys. Guess whose music forms the bulk of their streams?

EMI is the world's 4th largest record label. Interestingly they are selling it to Universal, so now UMG has both a licensing deal and a lawsuit with GrooveShark...