Part 1:  Introduction:  Will Consumers Ever Get What they Want?

As many you already know (from Brandon Gee’s good article in The Tennesseean), a group of local songwriters have recently sued the operator of Grooveshark for copyright infringement.  (You may view the complaint here.)  Grooveshark, of course, is just the tip of an internet digital-music iceberg.  In addition to Grooveshark, we have Pandora, Spotify and Amazon’s “music locker” service, and we are looking forward to the public release of Turntable.fm, Apple’s iCloud service and Google’s “music locker” service.  These services represent a pretty significant leap forward* over the forms of online music services that dominated the last decade:  Apple’s iTunes, Rhapsody and the various forms of peer-to-peer file-sharing services.

We have banned the word paradigm from this series of blog posts.  Not every significant change in technology is a paradigm shift–not even if it takes place on the Internet!

These new services are responding to consumer demand for greater flexibility in listening to music on-demand, while keeping costs low.  The ideal service might be a on-line “radio station” that played a wide variety of music on demand (i.e., plays your requests), while allowing the listener to discover new music.  Thus, we see most (but usually not all) of the following features in these new services:  (1) portability (ability to listen to music anywhere there’s an internet connection), (2) on-demand (ability to listen to specific music titles), (3) introduction to new music (ability to predict and deliver titles that the listener would probably like), (4) an extensive catalog of quality music, and (5) low cost (preferably free).

The fact that Grooveshark is being sued–for the third time–suggests that there must be at least a plausible argument that Grooveshark isn’t legal.  (Grooveshark thinks otherwise, of course.)  This got us to thinking:  what about the legality of the other new services?  Why haven’t they been sued (or will they be sued)?  We can think of few business models that rest so heavily on an educated guess about what is and isn’t legal.  It’s not very often that a business person who isn’t a crook can legitimately say, “I can make money at this, but is it legal?”  Usually you have a good sense of what’s legal, and most sane people don’t push the envelope of legality.  But digital online content is different.  Nobody really knows with any certainty what’s legal, and it may not always be possible to make money without getting at least close to the edge of legality.*

*  Recall what one panelist said at the Secondary Liability panel at the Stanford eCommerce Best Practices Conference, which I blogged about recently:  from a new-business standpoint, it makes more sense to seek forgiveness than permission, because you’ll run out of money before you secure all the permissions.

With that in mind, we’re going start a series of blog posts discussing the legality of the leading new forms of online music services.  First, we’ll set forth some guiding principles about how copyright law governs (and doesn’t govern) online digital content.  Then we’ll look at the various services, drilling down on each, starting with Grooveshark, about how their business model and technology (as far as we can determine them) fit within these guiding principles.

In the end, we hope you have a better sense of the legal forces that enable and constrain business models that rely on online digital content.  And why you’re unlikely to get everything you want from an online digital music service (but might be able to get enough).

Next time:  some guiding principles.  Thanks for reading!