And just like that, Grooveshark has a serious problem with the entire music publishing community. And potentially, another big lawsuit on its hands.
The sticking point is the mechanical license, which Grooveshark appears to be blatantly skipping. Which is why the National Music Publishers’ Association (NMPA) is considering its options very carefully.
“It is unquestionable that interactive streaming requires a mechanical license (and payment!)” NMPA president David Israelite told Digital Music News. “That’s why the activity is covered in the section 115 regulations. NMPA is looking at the matter and is also aware there is already litigation initiated by the RIAA and some of our member companies. We clearly consider them bad actors who steal from songwriters.”
But why is this surfacing now? You can probably thank Tunecore CEO Jeff Price, who unapologetically and vociferously raised the issue as part of a broader complaint this week. After a negotiation impasse and repeated frustrations with Grooveshark, Price excoriated the company in a lengthy blog post for failing to properly compensate artists, while unfairly exploiting loopholes in copyright law.
That quickly spilled into the invite-only PHO executive email list, where Price called out Grooveshark EVP Paul Geller for blatant non-payment of said mechanicals. The email boxing match featured a pissed-off Price battling a somewhat circular and evasive Geller, with occasional participation from ex-Grooveshark legal counsel Marshall Custer.
Throughout, Price expressed disgust that Grooveshark isn’t paying mechanicals, even though this is a compulsory and statutory license that doesn’t require a special negotiation or deal. “Grooveshark claims it has no way to administer the mechanicals, then states it does not use [rights administration service] MRI when it does, then dances around why it won’t pay artists and songwriters the money, then blatantly refuses to pay mechanicals despite Tunecore offering to do all the work,” Price stated. “Grooveshark [is] a company that takes artists’ music without their permission, makes money off it, hides behind the DMCA, and pays the artists nothing.”
A point of confusion is whether Grooveshark is actually using the services of Music Reports, Inc. (MRI) to assist its song matching and licensing-related needs. Geller says a relationship no longer exists, though Price produced correspondence from Custer stating that a relationship indeed exists. Custer departed fairly recently, and the notes seemed at least a few months old (and oftentimes, older).
So then, is Grooveshark still an MRI client? On Wednesday, Digital Music News unsuccessfully attempted to reach top MRI executive Les Watkins through email and phone. We did notice that MRI had tweeted about a Grooveshark promotion back in August, though Grooveshark is not currently listed as a client on the MRI site.
Updated: MRI executive Les Watkins told Digital Music News on Thursday afternoon that a deal was not in place. “We do not work with Grooveshark,” Watkins relayed, while declining to discuss any earlier relationship.
Perhaps that’s just a superfluous detail. In earlier emails, Custer claimed that Grooveshark does not owe mechanicals, a ridiculous assertion to Israelite. “Grooveshark does not need to pay mechanicals for the interactive streams at Grooveshark,” Custer flatly asserted in January of 2011, according to email correspondence ‘outed’ by Price.
Israelite and the NMPA seem to be weighing the various options. In the industry case against Limewire, publishers ultimately filed suit and secured ‘well over $10 million,’ according to an earlier statement by Israelite, though the majors grabbed $105 million. In the current scenario involving Grooveshark, the majors are pursuing damages in the billions.
The publishing problem is part of a broader debate about Grooveshark’s ethics as it relates to artists and rights owners. Sympathizers point to a DMCA-compliant model, and a need to change laws, not the companies playing by them. The flip side is that Grooveshark is knowingly exploiting loopholes at great expense to artists, or merely cheating the DMCA according to major label complaints.
Ethics can be a tricky discussion, though this note from Marshall Custer to Price seemed telling. “I do not think your anger with Grooveshark is unfounded, nor do I completely disagree with the contents of your blog post,” Custer noted. “You bring up a good and important discussion; that being, the legitimacy and ethics of Grooveshark’s business model.”
The circumstances surrounding the Custer departure are unclear.