Grokster Enters Web Radio Market

Grokster may be best-known as a "Napster replacement," a peer-to-peer service that’s synonymous with music downloading. Earlier this month, however, the service entered the world of streaming, teaming with Mercora to offer Grokster Radio, which applies the P2P concept to Internet radio, allowing users to search for and play tracks directly from other peers’ computers.

It’s tempting to say that Grokster’s move into the Internet radio space is an attempt for the company to "go legit," but such an interpretation conveniently avoids the fact that, for the time being at least, the courts have declared that the company’s peer-to-peer service is already legal. An August decision by the Ninth Circuit Court in California ruled that Grokster and other peer-to-peer software doesn’t infringe copyright, a ruling that dealt a severe blow to the music and movie industries’ attempts to shut the service down.

Grokster Radio is really little more than a new branding of the already-existing Mercora P2P Radio, which has been up and running since June 2004. Users download and install Mercora’s P2P client, which allows them to share the music on their machine as well as search for music on other peers’ workstations, according to Mercora marketing and business development VP Atri Chatterjee. Key to the service is that Mercora takes care of all the licensing and royalty payments, and the software makes sure that individual Webcasts satisfy the DMCA rules governing non-interactive Webcasting, including conforming to the sound recording performance complement, which limits to four the number of times songs by a given artist can be played within a three-hour time period.

Mercora and Grokster’s clients both feature functions that allow listeners to connect with each other and find the music they want, including instant messaging and customizable searches. While Grokster Radio doesn’t permit downloading, company founder Dan Rung says it serves much the same function that the traditional Grokster service does. "Despite the litigation that argues otherwise, we’ve found that most of our users use Grokster as a sampling tool," he says. "People use Grokster to find new music, and then they often discard the files or stop listening to them after they’ve found music they like and purchased it."

Since Grokster Radio is free to users, its success will depend on its ability to monetize the service. Mercora CEO and founder Srivats Sampath says that the partners plan to generate revenue are three-fold. First, the companies are in negotiations with labels to sell music through the service. Second, the service will begin including what Sampath calls "contextual advertising" and promotion. "If a user is listening to a song by Van Morrison, she might see ads for Van Morrison concert tickets, box sets, or memorabilia, as well as perhaps ads for similar artists."

Finally, Grokster Radio will eventually include a monthly subscription component for "heavy listening" and with undisclosed "special features," Rung says. "We’ve found that if you give people something they like at a nominal fee, they’ll buy it," he says. Mercora claims that its network already includes more than 10 million user-contributed tracks (though that number includes duplicated titles).

While both Chatterjee and Rung acknowledge similarities between Grokster Radio and Live365—both are essentially Web radio aggregators—they claim their services are "listener-centric" rather than "broadcaster-centric." "The main technological difference is that while Live365 uses a centralized transmission, we’re an orchestrated grid of computers, with transfer of the bits guided by a central orchestration server but going on among the peers themselves," Chatterjee says. "That lets us work within a narrowcasting model instead of a broadcast model."

Rung says Grokster Radio will solicit advertisers using a combination of its own ratings and third-party metrics. Within the narrowcast model, he adds, advertisers can achieve tightly focused message delivery to targeted listeners, rather than the shotgun approach sometimes associated with broadcast. "If you’re a popular broadcaster on Mercora, you might get only 3-4,000 listeners a month," Chatterjee adds. "But we’ve got the real estate on their desktops with the Mercora application, and so advertisers can give those listeners information we know they’ll be interested in."