Grooveshark: Still free, but now with strings

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Grooveshark, the popular if controversial digital music service, on Friday said it has launched a video advertising program that it hopes will generate revenue from corporate sponsors.

The service lets people listen to millions of songs for free. It also has a premium service that lets users listen without ads for $6 a month, or access the service music on Android of BlackBerry phones for $9 a month.

To help defray the cost of the free service, Grooveshark is testing ways to get its users to pay either with their credit cards or their time. Frequent Grooveshark users who don’t pay money will be prompted to watch a sponsored video. Each time they watch a video, which can last anywhere from 15 seconds to a minute, they get four hours of free listening.

The Gainesville, Fla., company is trying to make the proposition more palatable to its audience by featuring videos promoting ‘up-and-coming indie’ artists such as the Tenant and Quiet Company that are paid for by corporate sponsors.

Outside the U.S., Grooveshark is also testing a prompt that asks some users to contribute anywhere from $2 to $9 to ‘keep the music going.’ Opting to pay nothing would cue up a video ad.

While Grooveshark is a hit with music listeners (it counts more than 30 million registered users), it is less popular with music-rights holders. The company currently faces lawsuits from three of the four major record labels -- Universal Music Group, Sony Music Entertainment and Warner Music.

Only EMI Music, along with a number of independent labels, has granted Grooveshark licenses to use its music catalogs. Those songs are on the legal up-and-up, so to speak. Many ‘files’ streamed on the Grooveshark service, however, were copyrighted uploaded by its users in violation of Grooveshark’s terms of service.

Grooveshark has maintained that, under the Digital Millennium Copyright Act, it is not responsible for the actions of its users so long as its executives do not know about, sanction or benefit financially from the infringements.

If this legalese is making your eyes cross, imagine what it’s doing to the attorneys’ fees racking up on both sides. No wonder Grooveshark is rattling its tin cup.

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-- Alex Pham