Grooveshark Has a New Look, But It's Still Streaming Unlicensed Content

grooveshark1Grooveshark, the free streaming music site based out of Gainesville, Fla., is set to introduce a major redesign tonight aimed at taking on much-discussed European upstart Spotify as well as incumbents such as Imeem and MySpace Music. But while the company’s revamped user interface could soon make it a fierce competitor, unresolved questions concerning unlicensed content could also cripple Grooveshark’s ability to stay in the free-streaming game, which has yet to produce a satisfactory, sustainable business model.

As I’ve written before, user interface design may be the most significant factor when it comes to streaming music sites capturing consumer attention. Indeed, much of the hype surrounding Spotify’s desktop application stems from its user interface, familiar to any user of Apple’s iTunes software. That familiarity isn’t lost on Grooveshark, whose staffers freely admit that its new design and drag-and-drop interaction is based on the look and feel of iTunes, only it’s located within the web browser rather than on the desktop. The redesign also includes a horizontal player and song queue across the bottom of the screen, making for quick and easy search-and-play functionality, with playlisting and sharing functions as well.

That may help Grooveshark continue to win fans — it claims more than 1 million registered users, and many more unregistered — but it doesn’t solve the company’s larger problem: getting content owners paid. All of the songs streaming on the site were uploaded by users, and Grooveshark doesn’t police its waters for infringing content itself. Rather, Grooveshark relies on the takedown provisions of the Digital Millennium Copyright Act, meaning that it will stream a song until someone asks for its removal. Only one major label, EMI, has worked out a licensing arrangement with Grooveshark — and that deal followed a lawsuit filed by the label in June — but countless songs from major labels and independents large and small remain on the site, streaming away without content owners making a dime.

A streamlined user interface goes a long way, but a limited library of legally suspect songs is still a handicap. Besides, the competing sites that have worked out licenses with majors haven’t proven that they can make money sustainably, and have generally disappointed content owners or forced them to reduce their expectations. Grooveshark’s people say they expect revenues to come from ad sales, branding campaigns, premium ad-free and mobile revenues, and artist promotions, but the site remains years behind its competitors on most of those fronts. And if it intends to compete on scale, it faces daunting challenges related to royalty costs that Spotify, for one, has only begun to confront.

Grooveshark is certainly making a bold move in advance of Spotify’s arrival in the U.S. (whatever it looks like when it gets here), with mobile apps for the iPhone, BlackBerry and Android phones due within 2-4 weeks. Historically, the infringe-litigate-settle-license model has worked for sites such as YouTube, while others, such as Project Playlist, never recovered from their legal troubles. Grooveshark says it’s in talks with the remaining majors as well as independent distributors, but by forging ahead with unlicensed content, it may be putting itself at a disadvantage compared to its competitors — who haven’t proven that there’s a road to sustainability yet, either.

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