The great white hope

It’s Christmas 2011 and Sam Tarantino and Josh Greenberg have finally made it. Grooveshark, the online music hub they founded in 2006, has been included in Time’s list of ‘50 Best Websites’ and Forbes has just ranked the pair among their ‘30 Under 30’, a group of bright young sparks to watch in the future, listing them alongside the likes of Taylor Swift and Mark Zuckerberg. Tarantino and Greenberg’s vision seems unstoppable – if only Universal Music’s lawyers wouldn’t keep demanding $15 billion in royalty payments, life would be near perfect. Still, they’d survived worse…

Band of brothers

Three years earlier, Christmas had been far less merry. It was a week before the holiday and Tarantino and Greenberg had just informed Grooveshark’s 30-strong team in Gainesville, Florida that December’s payroll would not be made. The money, they said, was about to run out.

Young web developer Skylar Slade was one of those 30 and remembers the anxiety of that day well. “I had about $400 in my checking account and $1,600 in savings, which meant I could pay the following month’s rent, but not the month after that,” he says. The upcoming holidays had effectively been cancelled and Tarantino and Greenberg told their staff that they understood if anyone needed to walk away. But to the small team who gathered round them, Grooveshark was more than just a business. They were, as ex-chief revenue officer Isaac Moredock puts it, “a band of brothers”.

And so the entire team went back to work, redoubling their efforts, putting in extra hours and trying desperately to bring in much-needed income for the business. “We were literally calling companies around the clock and the world to try and sell them ad space,” says Moredock. “The only positive was our user growth, and it… kept us all dreaming of a better future.”

Slade’s journal entry from Wednesday 17th December 2008 typifies the mood: “I called mom and said I wouldn’t have any money to give them gifts. But I still felt good about today, despite or perhaps because of this. I think it brought everyone together – we’re all in this together.”

Slade’s words echoed the youthful idealism that Grooveshark had fostered since its earliest days. It’s what took the company from a couple of dorm-room dreamers to a globally recognised brand – before obliterating it in ignominious courtroom battles and billion-dollar lawsuits.

Tarantino and Greenberg were creatures of the digital age. As children they’d seen tech empires rise and fall during the dot-com bubble, and they valued the example of resilient maverick entrepreneurs such as MP3.com’s Michael Robertson and Napster’s Shawn Fanning. The pair’s friendship was formed in a club for young entrepreneurs during their first year at the University of Florida, and between them they developed a joint venture (Escape Media Group, the parent company of Grooveshark) that aimed to revitalise digital music.

The nineties had seen a paradigm shift in music technology, and by the mid-2000s physical sales were in steady decline as digital formats began to storm ahead. The music labels were failing to catch up at a sufficient pace and their shortcomings had given rise to an explosion in illegal filesharing. The US’s Digital Millennium Copyright Act (DMCA) of 1998 had criminalised technology intended to bypass established copyright laws. This meant that peer-to-peer networks such as Limewire, Kazaa and the pre-2000 version of Napster (as opposed to its current, legal incarnation which shares the same branding but is very much legit) became seen as Robin Hoods of the industry, placing music directly into the hands of the public.

“Sam and Josh were passionate about providing an alternative when
digital music was dominated by illegal networks”

Tarantino and Greenberg came up with an early iteration of Grooveshark in 2006, which attempted to follow in the footsteps of peer-to-peer sites such as Limewire, but as a legal service. “Sam and Josh were passionate about providing an alternative when digital music was still dominated by illegal networks,” says Moredock. The idea was simple. Users would upload music from their own collections and in turn pay to download files from others. In basic terms, it meant that Grooveshark would split its profit 50/50 with its community, after paying labels and royalty fees. It was an almost utopian concept, encapsulated in their aspirational slogan at the time: ‘Everybody Gets Paid’.

Andrew Wise, who was Grooveshark’s chief marketing officer, remembers the optimism of those days. “We were all really young back then. I was 21, while Josh and Sam were 19 or 20. It was basically like a frat house,” he says. “We’d met with some early investors who expressed regret that [the pre-2000 version of] Napster wasn’t able to make a legal go of it,” he says. “But Grooveshark had the opportunity to be a legal service, something that revolutionised the industry.” Slade echoes the same feeling: “When I look back it’s through rose-coloured glasses,” he says, “but it was a once-in-a-lifetime experience that I’m incredibly thankful to have had.”

The paid peer-to-peer concept may have been bold, but it failed to take off, leaving consumers confused – not least because they could get the same product elsewhere for free. But this only strengthened Tarantino and Greenberg’s resolve to create something viable. “There was definitely an us-against-the-world mentality, which brought us together and kept us going,” says Wise. So they went back to the drawing board and looked to one of the most popular sites on the internet for inspiration.

YouTube was making headlines in early 2007 when it was caught up in a $1 billion lawsuit with Viacom, which accused the site of massive copyright infringements. YouTube was arguing (and eventually won) protection under a clause in the DMCA known as ‘safe harbour’, which provided liability protection to websites that relied on user-uploaded content. It sparked an idea in Tarantino and Greenberg, who believed they could successfully apply the YouTube template to Grooveshark. “We wanted to create a music service that would move people from peer-to-peer into an environment where they could be monetised, and use the data created to connect bands to fans,” says Moredock. The old Grooveshark model’s flaw was a reliance on users being online at the same time in order to access tracks. The new system saw uploaded songs placed onto Grooveshark’s centralised servers, thus allowing anyone with an account to access the entire library at any time, regardless of how many users were online.

The revised service would go ahead without agreements in place with the major labels. It was a risky strategy, summed up in a private email written by Escape Media’s then-executive chairman, Sina Simantob, and later read out in court: “It is easier to ask for forgiveness, than it is to ask for permission.” Grooveshark relaunched in 2008, just a few months ahead of Spotify’s European launch, with a new tagline: ‘Better Than Free’.

Shark-infested waters

The world embraced the new Grooveshark and registered accounts would go on to top 30 million. But success brought a new level of scrutiny. The shift from a peer-to-peer model to an on-demand service increased levels of suspicion from major labels. EMI came after Grooveshark in the summer of 2009. A settlement was reached and for a while the company enjoyed far calmer waters.

In 2010, Spotify hadn’t yet launched in the US because it was proving challenging to strike deals with the major record labels. By bypassing the labels, Grooveshark capitalised on its position as the biggest fish in the pond. Its user base continued to grow, especially on its unlimited free service which boasted a vast library of songs, a web-based interface and visual adverts that didn’t interrupt the music. It was around this time that the company also launched Grooveshark University, a web programming course, and an internship programme, Summer With The Sharks, that fostered talent and recruited future employees.

But this was a house built on sand. With few licensing deals in place, the company wasn’t paying for much of the music it offered and as a result found it difficult to raise investment. Those deals it did have (with EMI and indie label publisher Merlin) had been gained through out of court settlements. Inside the company, however, it seemed like Tarantino and Greenberg were doing everything right. Slade says that at the time his understanding was that the duo approached the labels early on and tried to cut deals, but they were told to come back once they had a larger audience. The labels, he believed, would work with Grooveshark when it could offer a greater reach.

“Grooveshark became a trophy for the labels, and that trophy was more valuable than keeping another music streaming service on the market”

His understanding did not prove to be correct. Universal Music Group sued in 2010, resulting in a crackdown on the Grooveshark app, which saw it removed from Apple’s App Store and then, in 2011, from Google Play. Slade, who was the lead developer on the Android app, remembers the day he read the email telling him it had been removed from Google Play. “It was 1st April, so I wasn’t sure right away if the ‘you’ve been kicked out’ email was a joke or not,” he says. The loss of their apps meant a drop of almost 20 million users.

Grooveshark readied its troops for battle. “I remember, we would have meetings every Friday,” says Slade. “Frequently they would begin or end with Sam playing a clip about a WWII fight on the projector. Some people made fun of Sam for this but I never did. He was sincere, it was us against them.”

But the company suffered a killer blow when a whistleblower claimed to shed light on the inner workings of the company from deep within the comments section of industry tech site Digital Music News. The anonymous commenter, allegedly a Grooveshark employee, claimed that Tarantino and Greenberg had directly ordered staff to upload music and boost the site’s library. If the claims were true it would invalidate the DMCA’s ‘safe harbour’ clause, behind which Grooveshark had sheltered since 2008. Grooveshark strenuously denied the claim – and went so far as to subpoena Digital Music News for the name of its anonymous source – but by that point the comment had taken on a life of its own. When asked about the truth behind these claims, Slade declined to comment, and would only go so far as to say, “There was certainly never a policy that demanded we do that.”

The online comment was all the justification Universal needed to go back to court, a move that happened so quickly that details of the lawsuit appeared on tech news site Cnet.com before Grooveshark was even aware that it was being sued. Universal would soon be joined by all the major players in the music industry, seeking damages over copyright infringement and unpaid royalties. “Grooveshark became a trophy for the labels,” claims Moredock. “And that trophy was more valuable than keeping another music streaming service on the market.

This time round the lawyers were armed with documents from the previous Universal vs Escape Media trial, which revealed damning evidence including database files of uploads, records that proof had been destroyed, and internal memos including one from Josh Greenberg urging his staff to upload as many songs as they could to the service. Other evidence was presented suggesting that Grooveshark had removed songs when presented with DMCA takedown notices but had reuploaded them shortly afterwards.

Increased legal costs meant a swathe of cuts had to be made. By 2012 Grooveshark’s staff had ballooned to over 150 employees, spread between Gainesville and New York, but offices began to shut rapidly and its staff was more than halved in under a year. “Everyone understood, for the most part, where the company was financially, but when those cuts affected your friends it was upsetting,” says Slade. “It would leave everyone in a stupor for a few days afterwards, just trying to get used to our new reality.” Tarantino encapsulated this time most succinctly when in an interview with tech site Mashable in 2013, he described it as “a year of getting punched in the face 10,000 times”.

But Tarantino and Greenberg were determined to keep Grooveshark moving forward. And while the case was ongoing Grooveshark tried one last attempt to rebrand as an online radio station, which required only a single blanket licence and worked in a similar style to internet radio website Pandora.

But it was too late: the shark had already beached itself. A Manhattan district court ruled against Grooveshark in September 2014 and the damages allowed for by the judge – totaling $736 million, representing $150,000 for each of nearly 5,000 songs – were eventually dropped on the basis that Grooveshark would disband, effectively suing it out of existence.

All that was left of Grooveshark was a note, posted on its homepage on 30th April 2015, apologising to users for the “very serious mistakes” that the company had made. “As part of a settlement agreement with the major record companies”, it said, “we have agreed to cease operations immediately, wipe clean all the data on our servers and hand over ownership of this website, our mobile apps and intellectual property, including our patents and copyrights.”

In the digital age the margin between success and abject failure can be tiny. When Greenberg and Tarantino graced the pages of Forbes’ ‘30 Under 30’ issue, Spotify CEO Daniel Ek was on the cover, despite his company having fewer users than Grooveshark at the time. A few weeks after Grooveshark closed for good, Spotify was valued at $8.4 billion – more than the entire US music industry put together.

Postscript

On 19th July, Grooveshark co-founder Josh Greenberg was found dead at his home in Gainesville, Florida. The toxicology reports have yet to be returned at the time of press, but the police have said that there is no evidence of foul play, drug use or suicide. Josh Greenberg was 28 years old.

Posted on Monday, October 16th, 2023 - Categories: #19 - Apr-Jun 2015, App Issues.