Record Labels Continue 'Negotiating Through Lawsuit'

from the it's-why-they're-so-lovable dept

We’ve noted in the past that the record labels have a pretty well established operating procedure when it comes to “negotiating” with startups that are actually doing the innovative things in the music delivery and promotion space. They open “negotiations” with these startups… and then after a certain point, they file a lawsuit. It’s purely a negotiating tactic (and a way for record label lawyers to keep busy), that makes the “negotiation” a lot more antagonistic, and often ends with the startup agreeing to give up way too much. Warner Music perfected this trick, such as when it sued iMeem only to then invest in the company as part of the settlement. Of course, because iMeem had no choice but to cave in order to deal with the lawsuit, the terms of the deal were so onerous that iMeem nearly went out of business — until Warner Music wrote off the investment and recently renegotiated.

As unbelievable as it may be, the major record labels apparently don’t recognize that “deals” negotiated at the end of the barrel of a gun tend not to work out very well in the long run. They’re certainly not mutually beneficial.

And yet… the process continues. While Warner Music has done a bunch of these sue-to-negotiate deals, EMI seems to be involved in many of the more recent lawsuits of this nature. Its latest target is GrooveShark, one of a bunch of sites that lets you listen to streaming music online. Apparently the two companies had been negotiating terms… and then suddenly EMI sued. Par for the course. In the meantime, if you’re a music startup hoping to do a licensing deal with a major label, make sure you have some litigators on your legal team. You’re going to need them.

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Companies: emi, grooveshark

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Comments on “Record Labels Continue 'Negotiating Through Lawsuit'”

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Ima Fish (profile) says:

They’re certainly not mutually beneficial.

The music industry does not enter into these “deals” for the mutual benefit of the parties. It sues and enters into these deals for two reasons.

First, to destroy any music related business model which could interfere or compete with their business model.

Second, in case the new business model somehow succeeds, the music industry gets a cut for doing nothing.

Either way, the current music industry succeeds, even as they are circling the drain.

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