New Lawsuit Means All Major Labels Are Suing Grooveshark

Ben Sisario
Media Decoder

January 5, 2012

Grooveshark, a popular digital music service that is being sued for copyright infringement by three of the four major record companies, now has problems with the one big label that it has a licensing deal with.

On Wednesday, EMI Music Publishing filed suit against Grooveshark’s parent company, the Escape Media Group, for breach of contract, saying that since striking the deal in 2009, Escape has “made not a single royalty payment to EMI, nor provided a single accounting statement.”

In the suit, filed in New York State Supreme Court in Manhattan, EMI seeks unspecified damages. But in a series of recent e-mails and legal correspondence included with the filing as evidence, EMI asks Grooveshark for at least $150,000 in royalties.

In a statement, Grooveshark said: “This is a contract dispute that we expect to resolve.”

Grooveshark lets users upload songs to the company’s servers, which other users can then stream free. Founded in 2006, it has signed up 35 million users and attracted major advertisers like Mercedes-Benz.

With the music industry coming to rely more and more on fully licensed services like Spotify and Rhapsody that stream music by subscription, EMI’s suit highlights the legal gray zone in which Grooveshark operates.

Grooveshark says its service is legal under the Digital Millennium Copyright Act, a federal law that protects Internet companies that host third-party material if they comply with take-down notices from copyright holders.

But the company has repeatedly run afoul of the big music companies. EMI made its licensing deal with Grooveshark only after it settled an earlier copyright infringement case. And late last year, the Universal Music Group, the largest label, filed a federal copyright infringement case against Grooveshark, with Sony Music and the Warner Music Group later joining the suit.

Last year, a consortium of investors led by Sony made a deal withCitigroup, EMI’s owner, to buy the company’s publishing division for $2.2 billion. Universal, owned by the French conglomerate Vivendi, agreed to buy EMI’s recorded music division for $1.9 billion. Both deals are subject to approval from government regulators.