MP3tunes, a music locker service that has spent years locked in litigation with major record labels, announced last week that it was closing up shop. The startup scored a partial victory in court last year, helping to establish the legality of cloud music services in the process. But founder Michael Robertson says that "four and a half years of legal torment" forced his company to file for bankruptcy on April 27.
The filing is only the latest development in a decade-long grudge match between the recording industry and Robertson. Robertson has a knack for starting businesses that threaten to disrupt the business models of music industry incumbents, and they have responded with waves of tough litigation, using every available tactic to drive him out of business. The closure of MP3tunes is another notch in the labels' belt, but it's unlikely to be the last we hear from Robertson.
Round one: MP3.com
Robertson founded one of the first online music companies, MP3.com, during the first dot-com boom. The firm raised $340 million in a 1999 IPO and then launched My.MP3.com, a locker service that allowed users to stream copies of their existing CD collections from the MP3.com website.
At the time, most Internet users were still using dial-up modems, so actually uploading the contents of a user's CDs would have been a long and tedious process. Instead, the MP3.com software computed a fingerprint of a user's CD and compared it with pre-computed fingerprints for songs already stored on MP3.com servers. If there was a match, MP3.com would provide the user with instant access to the copy of the music MP3.com already had. Since users owned the original album, Robertson believed this was legal.
But the recording industry was unimpressed, and it filed a lawsuit to shut the service down. A New York judge sided with the labels. According to Robertson, the damages were so stiff that MP3.com couldn't afford to post the bond necessary to appeal the decision. So the company settled the case and was eventually forced to sell itself to Vivendi Universal in 2001.
Vivendi installed new management at MP3.com. Then, in an apparent attempt to make life difficult for future startup defendants, it ordered the firm to sue its own attorneys for malpractice, arguing that the attorneys should have known that the My.MP3.com business model was illegal.
Round 2: MP3tunes
Robertson wasn't done fighting. After spending a few years creating and running a Linux distributor called Lindows (renamed "Linspire" after pressure from Microsoft), Robertson founded a new company called MP3tunes in 2005.
MP3tunes was strikingly similar to My.MP3.com. Users could upload their music to the MP3tunes servers and then stream it to a variety of devices. The company also operated sideload.com, a music search engine that allowed one-click "sideloading" of music (some of it illegal) from the Web into the user's MP3tunes locker.
The recording company EMI sued MP3tunes in 2007. The lawsuit also named Robertson as a defendant, though the judge quickly ruled that Robertson couldn't be held personally responsible for his firm's actions. After a four-year legal battle, the judge ruled that music lockers are eligible for the DMCA safe harbor, but that MP3tunes had not adequately responded to all takedown requests, leaving it liable for some users' sideloads of infringing music. The judge also found that Robertson could be held liable for sideloading music into his personal locker.
"Defending the lawsuits cost MP3tunes dearly but wouldn't have been terminal if MP3tunes were free to partner with others and grow the business," Robertson said in a Friday e-mail. "But EMI intimidation and outright interference thwarted these efforts."
For example, Robertson said, MP3tunes created a system called Express Listening that allowed users to purchase music from online retailers and deposit it directly into their lockers. But "EMI sent legal demands to existing partners, and potential partners were told they could not work with MP3tunes or risk losing their license to sell EMI music." (An EMI spokesperson wasn't able to comment on these allegations.)
Robertson claims that EMI spent more than $10 million on its legal battle against MP3tunes. He compared his plight to that of Veoh, an online video site that prevailed in a copyright lawsuit against Universal Music but was forced out of business anyway. Veoh's founder cited the lawsuit as a major factor in his firm's failure.
Unsurprisingly, an EMI spokesperson had no sympathy for Robertson's plight. "After four and a half years of Robertson’s bluster and rhetoric, it is apparent to EMI that Robertson has finally realized that his case has no merit," the label told us by e-mail. "While Robertson may believe that MP3tunes will be able to escape liability in the upcoming trial through this bankruptcy, Robertson himself is still a named defendant in the case and the Court has already determined that both he and MP3tunes have infringed EMI’s copyrights."
"EMI will continue to pursue its case against Robertson, to ensure that its songwriters and artists are properly compensated for their creative work," EMI said.
Round 3? DAR.fm
Robertson is a compulsive serial entrepreneur. He is already hard at work on his next project, a site called DAR.fm. And it's unlikely to be any more popular with the recording industry than MP3.com and MP3tunes were.
DAR.fm is a Web-based TiVo-style site for radio broadcasts. You tell it what programs you want to record—Rush Limbaugh, This American Life, or every song on the local oldies station—and it automatically does so. It can access virtually any radio station in the country—and it makes the recordings available for listening from a variety of devices.
As far as we know, DAR.fm hasn't yet faced any lawsuits from content providers. But if the service catches on, legal controversy seems almost inevitable. Five years ago, the recording industry lobbied for regulation restricting recording of music played by satellite radio stations. And companies that do for television what DAR.fm does for radio have all faced lawsuits. A television streaming firm called ivi lost in court last year, and another free-TV streaming startup, Aereo, was sued by broadcasters earlier this year.
Being sued by content companies is almost a rite of passage for online media startups. And many of them don't survive the initiation.
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