I know, it’s confusing, but bear with me. Here’s what happened so far: GEMA, which represents recording artists as well as publishers, wants YouTube to pay a fee for each and every video viewed on the site that contains music of one of the artists represented by GEMA (which include every major label artist, as well as most indies). YouTube has rejected that approach, and instead wants to pay a percentage of the ad revenue it makes with those videos.

Negotiations between both parties broke down in 2010, and GEMA asked YouTube to block videos containing music of some 600 artists. YouTube responded by blocking a wide range of videos, telling users that these videos are “unfortunately not available in Germany” because they could contain music for which GEMA hadn’t granted the rights to YouTube.

GEMA officials have long complained that this wasn’t true, suggesting instead that YouTube simply didn’t pay for licenses to these rights. Of course, the licenses that YouTube is offering are based on the rates that YouTube is challenging, so it’s pretty much semantics and fingerpointing.

Except, most users are upset about GEMA, and the group apparently doesn’t want to shoulder all the blame anymore. GEMA’s CEO Harald Heker told local paper Wirtschaftswoche that YouTube’s handling of the blocking is “pure demagogy.”

A YouTube spokesperson sent me the following comment about the lawsuit:

“YouTube believes that rights holders and artists should benefit from their work. We have dozens of collection society deals in place across more than 40 countries because we provide an important source of income for musicians and a platform where new artists can be discovered and promoted. We are open for negotiations to find a solution with GEMA compatible with YouTube’s business model so that we can again provide a source of revenue for musicians and a vibrant platform for music lovers in Germany.”

So there you have it. Each side wants to sound completely reasonable as, all the while, the actual licensing dispute drags out further and further. At this point, it’s pretty unlikely that German YouTube users are going to get access to their music videos any time soon.

Image courtesy of Flickr user  nyghtowl.

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Friendly Music was launched with a library of 35,000 pre-cleared soundtracks for YouTube users. Since then, the company has been working to add even more music to choose from. Now the catalog includes more than 750,000 songs altogether. But that means finding the right track is more difficult than ever — which is why Friendly Music has implemented a few new features to enhance soundtrack discovery.

One tool Friendly Music has added is a MoodMap, which lets users search for a soundtrack based on the feeling of the video they’ve created. By clicking within a rainbow-like circle, they can find songs that match a certain mood, which refines things a bit. There’s also a “What’s the Occasion” tab for finding soundtracks relevant to certain holidays and occasions. And finally, Friendly Music has an editorially curated Editor’s Picks, with songs focusing specifically on current events, pop culture or upcoming holidays.

It’s also important for users to be able to test tracks out before they license a song and apply it to their video. As a result, Friendly Music has a new feature that lets users preview any YouTube video with a music track before purchase. They can use the tool to adjust the timing of the video and audio track, or move throughout the video’s timeline with the soundtrack loaded.

If they don’t necessarily want to license the song outright, they can create a “Mash” — which is basically just a combination of any YouTube video and a Friendly Music soundtrack. All Mashes have unique URLs, and users can share or comment on those videos with friends. Other viewers can then remix, or “Remash,” the video with other soundtracks.

For Rumblefish, the hope is that adding more songs and more features will get more YouTube video creators involved, and hopefully boost sales of its soundtracks. It’s pretty vast library should help with that, and the ability to share uncompleted videos through the Mash feature could build awareness of the site and its capabilities.

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According to conventional wisdom, consumer startups should move to San Francisco for access to capital, talent, and ideas. But if you’re launching an online music company, consider London or Berlin. For the past few years, a crop of internet music startups have been plying their trade in Europe, away from the glare of the major labels in the United States. Their playbook has been to achieve critical mass — with their product, users, and business model — before jumping over the pond.

Why Europe? One major reason is that it’s relatively easier to do licensing deals with the major labels there than in the United States. The U.S. is a much larger market, so new licensing models and frameworks undergo greater scrutiny because of the risk involved.

“The minute that I tell the major music labels that I am not interested in signing for rights to the U.S., the negotiations over terms become much, much easier,” said Axel Dauchez, CEO of the French start-up Deezer, in a recent Reuters story. The company plans to launch nearly everywhere but in the United States.

Entrepreneurs should also note that investors in Europe aren’t as jaded when it comes to music startups as their U.S. counterparts. Index Ventures stands out in this regard. Bolstered by their success with Last.fm, they’ve added Songkick, Soundcloud, and RJDJ to their portfolio in recent years. As a VC told me earlier this year, the reason he likes consumer music plays — as opposed to video ones — is that the licensing models are relatively well defined. There is a degree of certainty regarding the rates one has to pay for electronic sell-through, versus on-demand streaming, versus non-interactive radio, which Rolling Stone recently documented. Compare that with licensing premium video content, where the various licensing windows and unclear economics involved leads to uncertainty and risk.

All this has effectively turned Europe into a test bed for innovation in music (with the notable exception of internet radio, where the fragmented licensing regimes resulted in Pandora blocking non-U.S. listening).

Spotify is an excellent example of a digital music company that launched first in Europe and then expanded to the U.S., and their growth has been well documented. Much of their delay in getting licensed for the U.S. was rumored to be around the cash advances desired by the labels based on how “freemium” their model would be.

Before Spotify, there was Last.fm, the grandfather of European music startups. They came onto the scene just as I was winding up as COO at the internet radio network Live365. At the time, Last.fm’s look and feel was fresh, and they were innovating at an unbeatable pace. It boggled the mind that someone would invest in internet radio in 2002 given the industry’s trials and tribulations, but they persevered and CBS bought them five years later for a cool $280 million, making the company one of Europe’s biggest consumer start-up success stories.

Besides Last.fm and Spotify, these are the music start-ups to watch in Europe:

Songkick: Started by a Brit and an American, they are on a roll, having reached 100,000 activations within two weeks of launching their iPhone app. They’ve raised funding from Index, and earlier this year they poached an exec from Google to be their CTO. Songkick is centered around a concert listings service, but with social and commerce features that make it much easier to know when shows are happening near you.

Soundcloud: Billed as “YouTube for audio,” this is one of Berlin’s most prominent startups. Founded by Swedish entrepreneur, Alexander Ljung, the company is growing exponentially. It recently surpassed 8 million contributors, up from 3 million in February.

7Digital: Led by industry veteran, Ben Drury, the company is a pioneer in selling digital music. It continues to grow and be profitable, despite walking among giants like Apple and Amazon. Bolstered by its one million mobile users, 7Digital has expanded into the Asia Pacific region.

Mixcloud: Bootstrapped by computer science students from Cambridge, this startup provides a platform for sharing talk radio and music mixes. The site’s members have already uploaded 100,000 programs, and the founders have become fixtures on the Silicon Roundabout scene.

About the Author: Rags Gupta, based in London, is currently on sabbatical from the online video company Brightcove, where he has been vice president, international. Prior to that, he was an executive at Live365 from 1999 to 2004 and is currently an investor/advisor at 8tracks. He can be found at twitter.com/ragsgupta.

Image courtesy of Flickr user photosteve101.

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Grooveshark’s most recent iteration looked much like a cloud-based version of iTunes with a few social aspects added here and there. The relaunch puts social front and center by emphasizing community features and Facebook-like activity streams. Users can comment on each other’s activity and easily share playlists, songs or even complete albums with each other. Ashenden called it “the first real push from Grooveshark to connect music fans with music fans.”

Ashenden also said that the company wants to bridge the divide between fans first, and then extend the same mechanisms to make connections between artists and fans. Grovveshark’s new version has a very basic artist page that includes an activity stream based on the listening and curation behavior of fans, as well as links to songs, albums and upcoming events of the respective artist. These event listings are currently pulled in from a third-party service, but Ashenden told me that the site wants to eventually give artists the tools to promote their own events and sell merchandise. He went on to say that Grooveshark has a treasure trove of listening data, and that it wants to start exposing some of that data in future releases.

These future initiatives won’t just be about making the site better, but also about adding new revenue streams. Paul Geller freely admitted that the company’s current paychecks to artists haven’t made anyone rich yet. But the same is true for competing services like Spotify: “Artists in this day and age haven’t been making a lot of money with streaming royalties,” he told me, explaining that streaming would only be one part of the pie — but possibly one that could help to shift the emphasis away from one-hit wonders, and towards more creativity. “Artists are being rewarded for a more deeper emotional connection,” he suggested, explaining that short-lived hits would over time make less money than deep catalogs of music people care about for decades.

Speaking of Spotify: Geller and Ashenden didn’t seem to worried about competing with the much-hyped music service. “We are thrilled to have Spotify in the States,” said Geller, adding that Grooveshark has seen its largest growth this year after Spotify launched stateside.

Of course, one big difference between Spotify and Grooveshark is their respective approaches towards licensing. Spotify only offers access to licensed songs. Grooveshark, on the other hand, invites its users to upload any kind of music, and then responds to take-down notices from rights holders to remove unlicensed content. That approach has given the company a much bigger catalog, but also more more trouble with rights holders.

The only major label that has licensed Grooveshark is EMI, and Universal Music is battling the service in court, alleging that it facilitates copyright infringement. Geller said that Grooveshark has been seeing “a tremendous amount of progress” in negotiations with the industry. The company is signing between 10 and 20 record label deals a month now, he added, but admits that not everyone is going to come around quickly. Said Geller: “People in the industry who have been doing business a certain way over the last 20 years are going to be threatened by this.”

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TorrentFreak reported Thursday morning that Sabam wants Belgian ISPs to pay 3.4 percent of their subscribers’ monthly fees.

From the story:

“Sabam base their claim on a provision in the Copyright Act of 1994, which states that authors should be paid for any ‘public broadcast’ of a song. According to Sabam, downloads and streams on the Internet are such public broadcasts, and they are therefore entitled to proper compensation. This 3.4 percent share is the same amount as the copyright fees on cable television.”

The flip side of Sabam’s demands is that this levy is only meant to compensate rights holders for the ISP’s use of the music and not for the actual behavior of its customers. In other words: File traders would still break the law, even if their swapping was covered by a public performance fee like the one proposed by Sabam.

That may sound crazy, but it actually has more to do with the complexities of music licensing than Sabam’s current plans. The group only represents authors, composers and publishers, and it administers rights to the composition of the songs in its catalog. The actual recordings are owned by record companies, which aren’t compensated through this plan.

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There are plenty of music-licensing sites for low-budget producers out there, but here’s Tadcast’s twist: Musicians working with Tadcast will pay YouTubers for using their music, either per click-through or per view. This is a pretty big reversal on traditional music licensing practices, in which producers pay artists for the rights to use their songs, but Tadcast’s belief is that a band hoping to get its songs out there will value the promotional opportunity.

How Tadcast Helps Video Producers! from Tadcast on Vimeo.

While the musician program is currently in alpha, Greg Benson (MediocreFilms on YouTube) has already created a few test videos under the program, including last September’s Chat Roulette Rock Band, which currently has 51,715 views. The video’s description includes a prominent link to the band’s iTunes page.

There are currently 91 paying songs available right now, and when that number increases to around 200, Tadcast will encourage alpha users to begin using it, including many of the top YouTubers that Tadcast has worked with in the past. According to Tadcast VP Jeremy Parker, the program will soon be open to any producer looking for free music to use for a video, no matter what kind of view counts he or she gets.

According to the FAQ for musicians, the benefits of using Tadcast are:

If you believe in your music, you want people to hear it. If people hear it, they’ll probably become your fan, right? Bands need to do more than play shows and hope people will discover them. Tadcast allows your music to be heard by potentially millions of people who otherwise would have never had the pleasure of hearing your music. A potential fan will hear your song in a video, see a pop up that tells them who they’re listening to, and will allow them to click on a link to learn more or purchase your song. What more can you ask for from advertising?

Musicians are able to put restrictions on the kind of videos that use their music, such as asking for their tunes not to be used on videos with strong language or extreme political content. While the more a video is seen, the more musicians may pay producers, there are safeguards in place to make sure the bank isn’t broken; specifically, musicians have the ability to cap the payments they’re willing to make on a video from $0 to $250. The FAQ for musicians strongly discourages them from setting the amount at $0, though, stating that:

We want anybody to sign up even if they don’t have the money for this kind of advertising. However, we should warn you that producers will probably shy away from your music and not choose it since other musicians are willing to compensate them. But if you’re a famous artist or you want to take the chance, I guess you could go ahead and choose to pay $0.00 per view.

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