Grooveshark — The Free Jukebox That Was Built on Songs It Never Licensed

Grooveshark was a free music-streaming service where users uploaded the songs, and on April 30, 2015 it shut down overnight as the price of a legal settlement — admitting infringement, surrendering everything it owned, to escape damages that could have run past $700 million. Launched in March 2006 by three University of Florida undergraduates, Andrés Barreto, Josh Greenberg, and Sam Tarantino, and run through Escape Media Group, Grooveshark let anyone upload an audio file and stream anything in the library for nothing, supported by ads. It was, for years, one of the easiest ways on the internet to play almost any song instantly.

That ease was its appeal and its original sin. Grooveshark’s catalog — at its height the company claimed over 15 million songs, more than a billion streams a month, and around 20 million users — was assembled largely from files its users uploaded, very few of them licensed. The service leaned on the legal shelter that protects platforms from what their users post. The labels argued, and ultimately proved, that Grooveshark was not a passive host but an active participant: its own employees had been instructed to upload copyrighted recordings as a condition of employment.

The litigation was long and, once that fact emerged, lopsided. Universal Music Group sued in 2010; a nine-label coalition including Sony, Warner, and Arista followed in 2011. In September 2014 a federal judge in New York granted summary judgment, finding Escape liable for direct and secondary infringement over thousands of recordings. With statutory damages of up to $150,000 per work and 4,907 works at issue, the company faced a theoretical $736 million in liability — an extinction-level number for a startup.

So Grooveshark settled to survive being erased rather than be bankrupted by a verdict. On April 30, 2015 it ceased operations immediately, posted a public apology, wiped its catalog, and handed its website, apps, and intellectual property to the record companies. It is the cleanest illustration in this catalog of a simple rule: a service whose product is other people’s copyrighted work, taken without permission, is not a business with a legal problem — it is a lawsuit that happens to stream music.

Rdio — The Streaming Service Critics Adored and Spotify Buried

Rdio was a beautifully made music-streaming service that almost everyone who used it admired, and on December 22, 2015 it was discontinued because admiration does not pay royalties. Launched on August 3, 2010 by the Skype founders Niklas Zennström and Janus Friis, Rdio married a large licensed catalog to an interface widely judged the best in the category — clean, fast, with social features that let listeners follow each other and see what friends were playing. It reviewed brilliantly. Entertainment Weekly called it the best app and online interface in streaming. For five years it was the connoisseur’s choice.

It was also, the whole time, losing the only race that mattered. Spotify launched in Europe a year before Rdio and reached the United States in mid-2011, and from there it simply outspent, out-marketed, and out-grew its more elegant rival on every axis that compounds in a network business. Rdio raised serious money — reported at well over $100 million, against the more than $200 million its backer Janus Friis poured in across its life — and still could not buy the scale that Spotify’s marketing, free tier, and partnerships were assembling. By the end, Rdio reportedly had fewer than 200,000 paying subscribers.

The economics were unforgiving. By 2015 Rdio was reportedly spending around $3.5 to $4 million a month, mostly on payroll, against roughly $1.5 million in monthly revenue — losing some $2 million a month with no path to closing the gap. When it filed for Chapter 11 bankruptcy on November 16, 2015, court documents listed about $188.5 million in secured debt. The company that built the best product in streaming was, by every financial measure, a failure.

The end was a managed transfer rather than a collapse into nothing. Pandora agreed to buy Rdio’s technology and intellectual property for $75 million in cash, hiring roughly a hundred of its employees to accelerate Pandora’s own subscription ambitions; the deal closed on December 23, 2015, and the Rdio service went dark the day before. Rdio is the catalog’s clearest case of a hard truth founders hate to hear: in a market governed by network effects and the deepest war chest, the best product does not always win.