Netflix, a Paid Streaming Service, Is Financing Grooveshark, a Free Streaming Service…

Netflix pays millions to license and produce content legitimately, and is willing to pay millions more.  Yet their very existence is threatened by studios and channels that won’t give them their stuff, at least at rates that make sense.

Shark Feeding

Shark Feeding

So why, given these issues, would Netflix sponsor Grooveshark, a company that bypasses all of these problems with a free, loophole-based streaming alternative?  Especially when this same company could just as easily expand into video with the exact same approach?  A company that is paying pricey lawyers right now to win that right?

Why would anyone feed a company that not only disagrees with your core principles, but might become a serious competitor in the futures.
netflixgrooveshark1

 

Top image: beactive (CC 2.0 Generic)

26 Responses

  1. Visitor
    Visitor

    Netflix might have to adopt Grooveshark’s business model if the studios don’t get off their dick. So I see this more like “funding a friend”.

    Reply
  2. Define Irony.
    Define Irony.

    Dear Paul,
    I think we all get it. You enjoy feigning ignorance when it comes to the definition of ad networks. I’m sure it generates a ton of traffic and it obviously gets the natives frothing at the mouth.
    However, you might wanna check the sidebar ad on a little website called DIGITAL MUSIC NEWS that is advertising placing songs on Grooveshark.
    You’re better than this, dear friend. Let’s get back to writing things of substance and try harder to not be such a silly goose.
    -Ron

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      Okay Ron, I’ll bite.

      “You enjoy feigning ignorance when it comes to the definition of ad networks. I’m sure it generates a ton of traffic and it obviously gets the natives frothing at the mouth.”
      Actually, I’m not feigning anything, because I genuinely don’t buy the ‘cybernet’ logic that states that ad networks somehow cannot be controlled. Answer me this: if these brands can somehow stay off of x-rated sites (or way worse) but stay on mp3 download sites, how is that the not controllable?
      Similarly, I challenge you to find one piece of real, pornographic content on YouTube. So why, if x-rated material can be so easily scrubbed off of YouTube, other infringing content cannot?

      “However, you might wanna check the sidebar ad on a little website called DIGITAL MUSIC NEWS that is advertising placing songs on Grooveshark.”
      My advertisers don’t have to agree with my editorial. They can support companies I don’t like. Other writers like Helienne can (and do) disagree with me. That’s the system I set up.

      “You’re better than this, dear friend. Let’s get back to writing things of substance and try harder to not be such a silly goose.”
      Thanks Uncle Ron.

      Your turn.

      Reply
      • Uncle Ron
        Uncle Ron

        Nephew Paul,
        I assume you’ve done your research on the porn thing so I will just take your word for it.
        First: Why would anyone feed a company that not only disagrees with your core principles, but might become a serious competitor in the future?

        Then:
        My advertisers don’t have to agree with my editorial. They can support companies I don’t like. Other writers like Helienne can (and do) disagree with me. That’s the system I set up.
        While I understand you’re not ostensibly competitive with Grooveshark, aren’t they trying to shut you down or something? From what I’ve read it seems like a pretty heated…competition with the very future of this blog at stake.
        So what’s the point then? Being super open-minded to your advertisers? What’s the benefit there? The money? Making Heliene mad? You have to admit that there’s a fine line between “a company you don’t like” and one that you’ve written about ad nauseum and lamented their attacks on you. It’s a horse of a different color in my mind, but to each his own.
        Just seems a little unfair to Netflix.

        Reply
        • Paul Resnikoff
          Paul Resnikoff

          I’m mostly asking a business question. This is a serious ad that’s been running for awhile. Cost to Netflix? Hundreds of thousands, millions… more? The answer is: a lot of money!
          So, why would Netflix do that? The obvious answer is to capture a coveted demo, like 18-24 males or something (they know their objectives, I’m guessing here.)
          But at what cost? Spotify is expanding into video, so why can’t Grooveshark? Remember, Grooveshark is desperate right now, they’re hemorrhaging cash to lawyers and the meter’s running hard-n-fast. This is how major labels kill companies they don’t like.
          But what if they win against Universal? If this isn’t a Veoh situation, then there’s a reasonable expectation that talent will return, financing may come into play, etc. There’s a massive userbase, there’s code that works, etc.
          But wait: you realize that lawyers are expensive, right? A recent research report pegged the cost in these battles as high as $150,000 a month. VCs hate these types of companies, because the money they give would only go to lawyers, not to building a business. Which means, either there’s a Russian billionaire in the background somewhere, or these guys are trying to hold on for dear life.
          Which means, the money Netflix is giving them is like bread to a starving man. They are keeping the patient alive, they are helping it survive.
          Now why would you do that, and increase the chances of creating a serious competitor in the future that doesn’t play by your rules, can get all the content, and even your content (House of Cards, etc., which reportedly costs several million an episode to produce)? And can beat you with its free content workaround?
          And, risk ticking off the content community, from which you legitimately license.
          It’s short-term thinking on Netflix’s part.

          Reply
          • Visitor
            Visitor

            You are implying that Netflix can’t somehow go into the same business as Grooveshark. The fact is, Netflix entire business is tied to the whims of a few very large corporations who already made threats in the past of pulling their content. Who wants that kind of existence? Netflix probably sees Grooveshark as a helpful ally in a larger fight between technology industry and the content industry, in which Netflix, business partners or not, belongs more in the former.

      • Visitor
        Visitor

        Simple.
        The fact that a video has adult content is a property of the content. A video has a cat in it or it doesn’t. Regardless of who or how someone makes a copy of that video, it will always have the cat in it. It is part of the content.

        Infringement is not a property of the content. That is I can have a song from iTunes on my hard drive, and it is not infringement. But my roommate might come in the room and start playing that very same song, and that might be infringement because he didn’t pay for it. Or it might de minimis infringement.
        A content owner can not determine infringement, otherwise I can claim the whole world just infringed me and my word would be law because I’m the content owner.
        So what what is infringement? Copyright infringement is a legal determination done by the legal process involving courts and judges.

        Reply
      • Financing
        Financing

        It’s clear you don’t understand the definition of “Financing.” Being someone who strongly dislikes the entire Grooveshark organization – you’re inapporpriate use of “Financing” is just annoying.

        This is clearly a CPA model and GS is clearly only getting paid if Netflix signs up a paying user, in which case, the studios (who are these days entirely different than labels, although they share names) also getting paid.

        Reply
  3. Visitor
    Visitor

    Please can we not (again) get into a lengthy argument about how internet advertising functions. The question to end that debate is: Do you think the average consumer knows how internet advertising works or even cares.
    After all is said and done the banner ad on grooveshark gives the impression to the consumer that Netflix is a proud sponsor of grooveshark.
    Is that Netflix intention?
    Is it Netflix responsibility to monitor how it’s advertisng is placed?
    Is it in Netflix best interest to monitor how it’s trademark is being used?

    Reply
      • Paul Resnikoff
        Paul Resnikoff

        Actually that’s a very good point that I should probably clarify, because I think there’s a misconception that this is an ad being spit out by some network.
        No, it’s not: this is (like you said) a full blown takeover wallpaper ad that appears in similar fashion across grooveshark.com. It is not a randomly-generated scrap of inventory from an ad network. Instead, it was purchased directly.

        Reply
        • Mike C.
          Mike C.

          Is it possible Netflix is looking buy Grooveshark? If Spotify is getting into the video business, maybe Netflix is thinking of getting into the music business. Perhaps this giant ad by Network was a “fee” to take a peek at Grooveshark’s plumbing. Netflix would acquire a network of users and music, now all they would need to do is go get the licenses, their speciality.

          Just a guess. Agree with everything else you pointed out. It makes no sense for Netflix to throw Grooveshark a life raft. There are plenty of other sites to reach the same demographic while not ticking off content owners by funding GS’s legal expenses. They say that pirates are most likely to go “legit” if you give them an easy way to subscribe, but still. By that logic we’d see Netflix ads on Pirate Bay.

          The only other thing i can think of is the ad agency representing and buying for Netflix is clueless, and Netflix is truly unaware they are adverstising on Grooveshark.

          Reply
  4. Greg Laeur
    Greg Laeur

    Every other article you publish is about Grooveshark — and they are all negative. I’m about to stop reading DMN because of this biased hatred.
    As a veteran journalist you will never make the leap to a legitimate ‘digital music publisher’ unless you withhold your biases. Very amateur. Very immature.

    Reply
    • Music lawyer
      Music lawyer

      Was the substance of the article flawed or factually incorrect? If so, as a “veteran journalist” one would expect you to base any criticism on that, not on ad hominem accusations about the author’s agenda. If the article has merit and you’re still making personal accusations, then I’m not sure Paul is the one with the axe to grind.

      Reply
      • Greg Lauer
        Greg Lauer

        The article has zero merit. I’d say loophole is an improper word to use, as Grooveshark is protected under law – not a loophole – a law that protects the freedom of distribution of content across the internet. I do question this writer’s agenda because it seems he has a personal vendetta against Grooveshark. If he does (which is obvious), maybe he should stop writing for a 3rd tier publisher like DMN, and start working for the labels. With that being said, DMN has now been removed from my RSS.
        I appreciate your incite though “Music Lawyer”…

        Reply
          • Music lawyer
            Music lawyer

            Not defeat. I have no horse in this race. Greg stated his reasons, which were fair enough. He zinged me at the end, so I zinged him back. It’s all in good fun.
            Here’s how I see it. Greg’s right that an online service provider can avoid copyright infringement liability if it is fully compliant with the relevant requirements of the DMCA. Of course, as I understand it, the labels suing Grooveshark argue that is it not compliant with the DMCA, and if they are right then GS would not be “protected under law.” So Paul’s characterization of GS as a “loophole-based service” might be injecting his own bias, but it’s not an unreasonable characterization that indicates Paul is “amateurish” and “immature.” Looking at GS’s web page, lots of copyright owners allege that GS is not DMCA compliant, which would mean it drags on an unlicensed service seemingly indefinitely while others try to prove its noncompliance. If that’s what’s going on, then that certainly seems like operating within a loophole that the statutory scheme was never intended to provide.
            Even if GS is technically compliant, there are allegations (again according to Wikipedia) that as soon as it removes content per a DMCA notice, the content reappears, sometimes “within seconds.” If that happens it seems fishy, and is not the state of affairs the law intended, even if it’s not technically a violation. So again, to say GS is operating within a loophole doesn’t seem like an over-the-top biased characterization to me. Some might even say Paul is writing with restraint.

  5. Martin
    Martin

    I guess I cared if I used grooveshark but I stopped a while ago because I found a better music streaming service called Torch Music. Has anyone heard of it? It’s really cool you can build playlists and stuff.

    Reply

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