Grooveshark Shuts Shop in Germany

Pulkit Chandna

Just as tens of thousands of sites were getting ready to plunge themselves into darkness to (successfully) protest the proposed SOPA and PIPA anti-piracy legislations, music streaming service Grooveshark went dark in Germany on Wednesday. It too was protesting against something. But that’s where the similarities end. The company, a bête noire of music labels, has decided to shut down its German operations due to the “unreasonably high” licensing costs being demanded by music performance rights outfit GEMA , which claims to represent “64,000 members (composers, lyricists, and music publishers), as well as over two million copyright holders all over the world.”

But GEMA feels otherwise. This is what it said in a statement sent to Billboard : "Grooveshark did not end its services in Germany due to high operating costs, as it reported on its web site and in the media. Grooveshark is generally refusing to pay any remunerations of any kind."

Considering Grooveshark’s history and avowed emphasis on being legal rather than properly licensed, GEMA’s rebuttal certainly appears to be within the realm of plausibility. The company’s  Sr. VP of External Affairs Paul Geller is on record as saying that the music streaming service is “completely legal because we comply with the laws passed by Congress, but we are not licensed by every label (yet).”

The company’s  CEO Sina Simantob went even further in detailing this strategy in an email sent to a venture capitalist in 2010 :  “We bet the company on the fact that it is easier to ask for forgiveness than it is to ask for permission. When EMI sued, everyone thought it is the end of the company. Once we settled that suit everyone said EMI was weak anyway so the real Goliath to beat is [Universal Music Group]. Well it took the boys a bit before they could re-group but I think these guys have a real chance to settle with UMG within a year and by that time, they'll be up to 35 million unique and a force to be dealt with."

But that “real Goliath” has been giving Escape Media, the company that owns Grooveshark, a very tough time lately. In a recently filed lawsuit, Universal Music Group has accused Escape's executives and employees of themselves uploading thousands of songs owned by the record company without prior permission. Let’s see if it can once again masterfully execute this ingenious upload-first-ask-later business strategy and settle with music industry leviathan Universal — and now German performance rights group GEMA — to emerge as a force to be reckoned with.

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