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Grokster teams with P2P radio

Mercora's new interactive Webcasting service finds a risky partnership in record labels' foe.

File-swapping company Grokster is teaming up with newcomer Mercora to distribute an advanced streaming radio service to the peer-to-peer crowd.

Beginning immediately, Grokster will offer its users a co-branded version of Mercora which allows people to search for and listen to music by specific artists. The service, called Grokster Radio, does not allow people to download tunes, but it lets users stream and listen to high-quality versions of specific songs--even music that is not available through download software like Apple Computer's iTunes.

Because it is a streaming Web radio service, which pays copyright fees for every song that somebody listens to, Mercora executives say their service abides by the mandates of copyright law, even though it comes much closer to offering on-demand music than do most previous Webcasting services.

"We see Mercora as a new way to do the same thing we've always done, which is allow our consumers to sample music," said Grokster owner Dan Rung.

The new service could be a sign that the file-swapping company, one of several that has topped the record industry's most-wanted list for several years, is hoping to put hard feelings behind it.

Grokster will continue to distribute its own peer-to-peer software, which allows people to search for and download music without permission from, or any payments to, the record companies. The separate Mercora peer-to-peer radio service will let record companies get paid for use of their music, however.

Nevertheless, the timing for the deal could be awkward for Mercora. Executives from SoundExchange, the recording industry-backed group that handles Webcasting licenses and royalty payments, said last week that they are in the process of examining Mercora's business model.

The Grokster deal doesn't change the way the Mercora service works. But Mercora's association with one of the companies still being sued by the record industry could trigger strict scrutiny.

Mercora founder Srivats Sampath said he is confident that the deal--and Mercora's business model--will pass the legal test, however. He has already been paying royalties to SoundExchange for nearly six months on behalf of people using his service, he noted.

"This is a clear step towards providing the Grokster user base with a solution that is legal in both the spirit and letter of the law," Sampath said.

News of the deal was first reported by the San Francisco Chronicle.