Controversial music-streaming service Grooveshark abruptly shuttered its service Thursday after settling a copyright infringement lawsuit filed by the major recording labels.
Escape Media, the parent company of Grooveshark, agreed to cease operations and surrender ownership of its website, mobile apps and intellectual property in the settlement, according to the Recording Industry Association of America. Escape Media had faced the possibility of paying hundreds of millions of dollars in damages to Universal Music Group, Sony Music Entertainment and Warner Music Group.
"This is an important victory for artists and the entire music industry. For too long, Grooveshark built its business without properly compensating the artists, songwriters and everyone else who makes great music possible. This settlement ends a major source of infringing activity," said a statement by the RIAA, the industry trade group that represents the major labels.
Launched in 2007, Grooveshark's service allowed its 30 million web and mobile users to search for and stream an unlimited number of songs produced by major record labels. But the serviceafter several record labels argued that Grooveshark lacked the necessary rights to upload the copyrighted songs.
In court papers, plaintiffs called Grooveshark the "linear descendant" of file-sharing services Grokster, LimeWire and Napster, all of which were shutdown over copyright infringement. Record labels claim they lose billions of dollars in revenue each year as a result of online music piracy.
In September, a New York federal judge ruled that Grooveshark co-founders Samuel Tarantino and Joshua Greenberg had uploaded almost 6,000 songs for which they had no licenses and that the two men had destroyed evidence of the uploads. At a maximum of $150,000 in damages per song, Escape could have been forced to pay more than $736 million in damages at a new trial that started this week.
Grooveshark also tried to win over mobile users with dedicated create and access custom radio stations.and apps for its streaming service, but both of those apps were taken down following complaints from the record labels. In December, Grooveshark announced plans to launch an online radio station app that would let users
Instead of negotiating with each record company separately, Grooveshark would pay government-mandated royalty rates, according to the Wall Street Journal. That's the same process used by Pandora to serve as a catch-all for all the songs that users can legally access.
In a letter addressed to users on its webpage, Grooveshark urged its users to sign up for legal and licensed music services.
"We started out nearly ten years ago with the goal of helping fans share and discover music," the letter states. "But despite best of intentions, we made very serious mistakes. We failed to secure licenses from rights holders for the vast amount of music on the service."