A new breed of shark in the sea?

The following is a feature article I wrote based on Grooveshark.com
not really a blog post…

The music industry has encountered a lot of significant changes over the last two decades. A complete move from analogue to digital media has inspired portable music players which can now hold upward of 10,000 songs, and the introduction of the internet has made significant changes to distribution channels. All of this – especially the internet – has made music easier, not only to buy, but also to steal.

Piracy!

Many attempts have been made to try and stop the piracy of digital media. In 2002, the first mainstream music sharing application ‘Napster’ was sued into eventual bankruptcy for their facilitation of music piracy. Since Napster, many other file sharing applications have risen to popularity– most of which are just as illegal as Napster. Many have also been sued heavily by such organisations as the Recording Industry Association of America (RIAA) which has taken it upon itself to put an end to piracy and safeguard its sales figures.
So how bad is music piracy? The RIAA estimates that the music industry loses $5 billion per year due to piracy worldwide. This hurts the consumers, the artists, the retailers and the record companies. So what is being done to stop piracy other than just suing the enablers and any users caught in the act? The RIAA has tried using Digital Rights Management (DRM) technologies, which have received a strong negative reaction from the media. And now the public are being targeted as well as the companies facilitating piracy. The fear of being sued is just creating further resentment towards the RIAA and doing little to hinder the extent of illegal file sharing. The industry appears to be fresh out of ideas.

 

DRM

Digital Rights Management is a term that refers to access control technologies used by copyright holders in the music industry. A CD with DRM features on it prevents the user from copying the content onto their computer or their portable music player by attempting to make the files unconvertible.

Many users claim that DRM prevents fair use of the content of the CD, and the system has been publicly criticised by many technology reporters and is referred to as a bad way of going about preventing piracy.

Pirates have already developed technologies to counter DRM.

 

 

Sharks> Pirates?

Two Florida students, Sam Tarantino and Josh Greenburg, believe they have come up with a possible solution to internet music piracy through their new business ‘Grooveshark’. They have developed an online peer to peer (P2P) network and website that rewards the users for their contribution to the site, providing incentives to use the legal service over the illegal alternatives. Unlike current online file sharing where music is shared with no money changing hands, Grooveshark offers up the user’s music collection for sale to other users. The proceeds from the sales are then split between the artist, the record company, grooveshark.com, and the user. Everyone gets paid.
The theory is that the majority of people are happy to pay for music provided it is: on offer at a reasonable price; it is in a format the buyer approves of; and, the buyer knows what they are purchasing. Grooveshark allows users to stream all of the music available from the website for free, so users can check the quality of the file and whether or not they like the song before they buy it. Grooveshark has declared that all the music on their site will be DRM free.
Another advantage of Grooveshark over piracy is the moderation of the content. Users get paid not only for uploading music, but also for editing the content and providing album art, writing bios, and cleaning up the tags on the music. Therefore, the downloadable content from Grooveshark.com will, in all likelihood, be of a higher standard than that of the content available from illegal P2P networks, which have no moderation.

So how does it work?

When a user buys a song from Grooveshark.com the revenue is split multiple ways. For example, if a song costs US$0.99c, approximately US$0.30c goes to the artist, US$0.30c goes to the record label, US$0.20c goes to Grooveshark, and the remaining US$0.19c is split amongst the users who have contributed to that file in some way, whether it be uploading the song or editing its details.
The system keeps track of which users have edited which songs in what way, so a user who goes from song to song making errors will be flagged as a bad editor and will be left out of the payment loop. Whereas users who make it their mission to correct the details of every song they find will build themselves a good reputation and be duly compensated.

Will it work?

The one thing this whole system hinges on in order to legally ‘work’ is getting the record companies to agree and sign on with Grooveshark. Currently Grooveshark has agreements with roughly 400 minor and indie labels. However a quick scan of the list of ‘on board’ labels revealed that all of the four ‘big’ labels (Sony, Universal, EMI, and Warner) are yet to sign on. These four labels collectively make up approximately 70-80% of the world’s music market. Until one of these labels signs up, the service will be selling copyrighted material without permission. Discussions with Grooveshark staff have revealed that all money that would be owing to an unsigned record label or artist will be held in escrow until such time of their signing. This, however, does little to make the sale legal.
Sam Tarantino believes that once one of the four big labels sign, the others will see how much money is made from the venture and will quickly follow.

Is it safe for me to use?

In an interview with CNet on the 4th of October, 2007, Tarantino stated that Grooveshark would indemnify its users, protecting them from RIAA lawsuits. However the Grooveshark End User Licence Agreement (EULA) states that Grooveshark cannot be held liable: where does that leave the users?
Further reading of the EULA reveals that all users have agreed not to share files that are copyrighted and not represented by a signed label. This rule has certainly been broken by a large majority of users as currently there are well over 100,000 songs available at Grooveshark.com, amongst these one can find tracks from ‘The Beatles’, a group famous for having never allowed their music to be sold online by anyone. So, despite their good intentions, Grooveshark users are still in fact breaking the law, whether they know it or not.
Grooveshark is however still only in its BETA phase and will undoubtedly address some of the issues regarding legality prior to the final release, until then, I will be watching the list of signed record labels with interest. Tarantino really does appear to be on the right track with regard to tackling the music piracy issues – and indeed profiting from it.