Grooveshark croaks in Germany

Controversial streaming site Grooveshark has pulled out of the German market, blaming royalty demands from collection society GEMA. But GEMA says the reason offered is false – and no negotiations ever took place, Billboard reports.

GEMA has played hardball on behalf of its members with overseas music services, prompting Google to take YouTube videos offline three years ago.

But societies like GEMA find themselves between a rock and a hard place... The organisations are a little like trade unions: they’re member-owned, and are negotiating collectively on behalf of their members. If the society negotiates away the music too cheaply, the members are entitled to wander off and find another negotiator – or negotiate their own.

Tense negotiations in Elbonia
© Scott Adams

That’s what’s happened to digital music publishing rights in Europe. Publishing is one area of the music industry that’s healthy – it even grew in 2011. But the rights are now very, very fragmented. The majors have withdrawn their digital rights from the collecting societies; Europe is determined to make national societies ‘compete’ – rejecting their own ‘one-stop shop’ proposal known as the Santiago Agreement. Publishers and composers are justifiably anxious about the prospect of a race to the bottom. Imagine if the lowest royalty rate in Europe was offered by Elbonia – which only pays songwriters in mud.

Of course negotiations are something that never bothered Grooveshark, which notoriously launched first, and asked permissions later. A lawsuit filed by Universal in November last year alleges that the startup had a staff incentive programme that rewarded them for as much music as their staff could upload. None of which had a licence.

Grooveshark denies the allegation, and points out it was made in anonymous comment to trade site Digital Music News. It has subpoenaed DMN to find out the identity of the source.

You wouldn’t think Universal Music would base a key part of their case on an anonymous comment, would you? It shouldn't have to. Universal's director of digital business, Olly Barnes, was formerly SVP of European operations for Grooveshark. ®