Grooveshark startup Plans to Pay Music Pirates

The people behind Grooveshark, the groundbreaking new P2P music download service, answer the tough questions like what benefits users will get from contributing, what content they can contribute, and what the they think of the RIAA and the IFPI.

Last week I wrote an article describing the upcoming start of a revolutionary new P2P music downloading service called Grooveshark.

What makes the new service so revolutionary is that it will apparently compensate BOTH copyright holders as well as participating members of the Grooveshark community.

It will broker music transactions between members, charging for the songs exchanged, and compensating copyright holders and users while providing the convenience and selection of P2P file-sharing in an online music community.

“Our bottom line is value. By bringing the convenience and selection of a peer-to-peer network together with the recommendation power of a community of friends — all the while removing DRM — we can generate revenue to compensate both copyright holders and users,” said Sam Tarantino, 20-year-old founder and CEO of Escape Media Group, the parent company of Grooveshark.

Songs will vary in price, but none will cost more than 99 cents. Grooveshark will then pay the appropriate royalties to music copyright holders by taking commissions from users’ transactions and then also compensate users with free music for community participation such as uploading songs, fixing song tags, flagging unwanted files or reviewing music. Members will be rewarded based on their level of contribution to the Grooveshark community. Additionally, all Grooveshark files will be DRM-free, allowing users to play the songs they purchase on any PC or portable digital music player.

But, what hasn’t been mentioned are the answers to the tough questions like exactly how users will be compensated, what users can contribute, and what the people behind Grooveshark think of how the RIAA and the IFPI will view their new business model.

I had a chance to ask team member Michael Vroegop recently these very questions, and his responses were even better than I had hoped.

How will users preexisting music libraries be incorporated into Grooveshark, and will there be an effort to scan content for pirated music?

There will be a *very* small java-based plugin which will index each user’s music files locally and facilitate p2p file transfers. It will be very simple, as the online parts of the system will do most of the work. Imagine Āµtorrent’s behavior, with a web-based interface, connected to a rich user-driven community and a host of other features.

How our users originally acquired their music won’t matter to us; all that matters to us is that the copyright holders get appropriately paid for their work within our marketplace. We are embracing the power of p2p while enabling copyright compensation to occur. In a sense, we are legitimizing files that were once deemed “pirated” once a file enters Grooveshark, any transactions of that file within our system will be legal, paid for, and will compensate the copyright holders.

Precisely how will users be compensated for contributing content to the service for others to download, and how will the prices for that contributed content be determined?

They’ll receive a set percentage of the proceeds from each transfer credited to their account, which can then be spent in the system on more music, as well as associated purchases like concert tickets, band shirts, and merchandise.

Users are chosen for compensation based on our user ranking algorithm that sorts users by their contribution to the community. The more a user tags songs, reviews music, and recommends music to others, the higher that user will be ranked, which results in a higher priority for compensation in a transfer.

It has been said that a roll out date for Grooveshark is expected to be sometime in the First Fiscal Quarter of 07,’ are you able to be more specific, and will this be a BETA testing phase or a “street” phase?
Our beta release will slowly add onto existing core functionality from our alpha phase in the next few months, expanding into planned features like event mapping and scheduling, merchandise stores (for artists and us), and ticket sales.

We plan for our private beta release to be available to users who are signed up on in early spring.

Is there any indication as to the position of the RIAA or the IFPI thus far, and if not what, in your opinion do you think it will be?

The RIAA and the IFPI’s purpose is to protect the interests of record labels, which includes protecting their profits. So far they have been somewhat inefficient at curving down piracy, and in fact, most record label execs assume file-sharing as lost profit when discussing new business models. Although they have been moving slowly towards new models and means of digital music distribution, their efforts are dwarfed by the impact of actual file-sharing.

This may come as a surprise to some, but it’s clear to us that when you impose DRM, there’s little chance of success there is no motivation for someone to pay for a restricted song when they can easily get the same song unrestricted (not to mention for free) on illegal networks.

That’s where we come in instead of policing or punishing file-sharers, we seek to reward them, while at the same time pay the copyright holders, whether it be major/indie labels or independent artists. We are firm believers that a successful business is that whose focus is the customer, and we do this by providing a higher value to our customers which will consequently lead to increased sales for the labels.

Is there a anything else you’d like to mention, follow up on, etc.?

We’ve got lots going on here, and frequent updates will appear on our blog at .

What I found really fascinating from the interview is the fact that they don’t care how “…users originally acquired their music…all that matters to (them) is that the copyright holders get appropriately paid for their work within (the Grooveshark) marketplace.

This really could drastically alter the face of the music file-sharing landscape in a way that all of its predecessors have failed to do, and that is in at last providing a real alternative to piracy.

Although iTunes is by far the world’s leading online retailer of digital music downloads, reports that a mere fraction of the music on an iPod has been legally purchased means that larger issues are at work, namely selection and DRM concerns.

Not only will Grooveshark’s music be DRM-free but, it will also feature the power of using the combined contributed content of all of its users. Think about that for a minute. Instead of users being limited by what content offering deals Jobs or whomever is able to cook up, Grooveshark users will be able to access a virtually unlimited amount and type of digital music made available by its users. The sky really is the limit.

Also, it can have the effect of actually drawing in users who may lean towards getting their music via BitTorrent or other illegal P2P file-sharing networks with the lure of reaping a tangible benefit (i.e. concert tickets, shirts, other merchandise) benefit for their offerings.

This is, in my opinion, probably the biggest groundbreaking news that Grooveshark has for the world as it means that not only will copyright holders finally get a cut from previously pirated music but, it also has the effect of finally introducing pirates to a legal music downloading service that is actually palatable.

Could Grooveshark finally have the winning combination that has proved so elusive to other online music download services?