Making P2P pay: Grooveshark review

Gordon Finlayson [ http://www.downloadsquad.com/bloggers/gordon-finlayson ]

September 26, 2007

Grooveshark [ http://grooveshark.com/ ] is a radical new service that attempts to fuse community services and P2P music file sharing with a product that will motivate users to share music files and simultaneously accrue credits towards music purchases from the process. Subscribing to Grooveshark turns your own personal library of music into a music store available to family, friends and any other passing consumers that you can draw in. The service is an ambitious attempt to commercialize a P2P distribution distribution with social networking model of distribution.

Grooveshark requires the user to download a Java app that interfaces between the Web service and your library of tunes. The site operates like a music laundering service, no questions are asked as to where the tracks came from, but when one of your contacts chooses to download the track from your computer, Grooveshark will bill your contact for the full cost of the track and then pay a share of the money to the label and credit a portion to your account against future purchases.

The planned model will see users uploading tracks which they can trade with other users, regardless of the source of the track, once exchanged on the site the copyright holder will be compensated for any transaction made with the track. According to Grooveshark Chief Technology Officer, Josh Greenberg, the site will work on a 50/50 revenue model split between the site and users once deductions for costs have been made.

"The revenue sharing model works like this: Grooveshark splits its profit with the users 50/50 after the royalties, fees, and other expenses for a given download have been paid out. For example, if a user downloads a $.99 track, we may have to pay $.60 in licensing fees and $.03 in transaction fees, leaving $.36 to be split evenly between Grooveshark and the user who is "recompensated" for the download. The system determines which user to recompensate based on things such as purchase history, community contributions, and number of songs uploaded."

According to Greenberg, Grooveshark will start selling tracks at a 99c price point, but will introduce a variable pricing model over time. "Later on, we're going to be working out a variable pricing system that allows less-popular music to be priced lower, but that part of Grooveshark is still under development. We also plan to allow for Creative Commons and other free-licensed music to be downloaded on Grooveshark for no charge."

In order to monitor sales of tracks through a P2P network, Grooveshark have developed an additional reporting system, titled 'MoneyShark' in order to provide relevant data to record labels, artists and other rights holders. Greenberg said that the system will work in conjunction with their accounting team to ensure that both verified and unverified tracks can be identified.

"There is an entire separate system (dubbed 'Moneyshark') that we have developed to allow for labels, artists, and other rights holders to manage their content within Grooveshark," Greenberg said. "Through this system, copyright holders can manage their metadata, which is what we use to match against our existing song database."

One of the difficulties of establishing a service such as this is getting rights holders on board. Joshua Bonnain, marketing director of Grooveshark, said that the company has been working towards signing up labels in order to support the commercial launch of the service.

Bonnain said that they had signed up labels such as "Sheridan Square Music Group, V2 UK, Naxos, Nettwerk, Magnatune, as well as a good number of other independent labels and artists... all told, we've convinced a total of 71 labels that Grooveshark is going to help change the music industry for the better - forever."

At this early stage it is hard to see if the model will be successful, much of the success of Grooveshark is likely to be dependent on user adoption, music industry acceptance and the development of the software over time. At the present time Grooveshark has an ambitious business model which proposes to incentivise users for their use of the system. The Interface is easy to use and though at the moment the inventory is a little lacking Grooveshark is definitely a system that is worth testing out whether it will be challenging iTunes for supremacy any time soon is another question altogether.

If you want to try out Grooveshark for yourself, Download Squad has a ton of invites so just drop me an email at gordon.finlayson@downloadsquad.com and we'll arrange for an invitation to be sent to you.

11:00AM