‘SEVERE HARM TO COMPETITION AND CONSUMERS’
Like other startups before it, Grooveshark, which launched in 2007, has been seeking licensing deals with record labels of all sizes. In 2009, the company inked its first (and so far, only) agreement with a major label EMI.
But Universal has never been keen on Grooveshark. Instead of cutting a deal, Universal has accused the new service of copyright infringement and repeatedly sued, most recently in late 2011 for $17 billion — roughly 850 percent of what they agreed to pay for all of EMI, and more than double the annual sales revenue of the entire U.S. recording industry.
In January of this year, two months after agreeing to the Universal merger, EMI changed its tune, claiming that Grooveshark had missed a $100,000 payment on its licensing arrangement, and terminated the contract. EMI then sued the startup for copyright infringement as well. Grooveshark, which declined to comment for this story, noted at the time that it had paid EMI $2.6 million to date under the licensing arrangement. After settling the intial lawsuit, EMI has filed new infringement cases against Grooveshark, and the two companies remain embroiled in litigation.
Grooveshark is still functioning, but its days may well be numbered. And its current situation may be a harbinger of what’s to come if the FTC approves Universal’s acquisition of EMI.
“In simple terms, the post-merger firm would have a strong incentive and increased ability to exercise market power to undermine, delay and distort new digital distribution business models, in a market that has been a tight oligopoly for over a decade,” said Mark Cooper, director of research for the Consumer Federation of America. “The FTC must take steps to prevent this severe harm to competition and consumers.”
And just as Don Henley pointed out to Congress in 2001, for musicians looking to make money in the digital age, the best hope remains new music services. The existing regimes are simply not profitable for artists. Only a tiny fraction of the money that labels extract from digital providers ever makes its way into musicians’ pockets. As The Root detailed in 2010, the average artists sees just $23.40 for every $1,000 in music sold.
The convenience of downloading and listening to music online isn’t going away. You’ll still be able to download “Call Me Maybe” — or whatever the next big major-label smash may be — with a single click. But while services like iTunes and Spotify have changed the music market, the next generation of innovation, along with the ability to obtain more obscure music tailored to your tastes, remains jeopardized by major label dominance of the digital sphere.
Article Appeared @http://www.huffingtonpost.com/2012/09/20/universal-emi-merger_n_1897901.html