EMI Kills Off More Innovation: MP3Tunes Declares Bankruptcy Due To 'Withering' Legal Costs

from the innovation-must-die dept

Fri, May 11th 2012 1:00pm — Mike Masnick

We've noted how frequently the entertainment industry -- especially the big record labels with the help of the RIAA -- seem to sue innovative upstarts. They usually do this as part of a two-part plan: they either want to kill off the innovation, or they use the lawsuit as the opening gambit in trying to get a big chunk of the equity of the startup (which they then stifle and kill). News broke recently that online music storage locker MP3Tunes, one of the first of its kind, filed for bankruptcy in large part due to the years-long legal attacks from EMI. The thing is, MP3Tunes basically won its case, showing that the basic service was completely legal. In fact, what MP3Tunes provides is basically the same service that Amazon and Google now offer with their music lockers. MP3Tunes was one of the pioneers in the space... and for its troubles, it gets sued into bankruptcy, despite being legal.

We keep hearing people insist that the record labels are adapting. And it's true that they've been pulled, kicking and screaming, into parts of the 21st century. But the second that anyone comes along doing anything remotely interesting and which provides real value, they freak out and sue. And it goes beyond that. As Robertson describes in his blog post about this, EMI apparently went to great lengths to destroy MP3Tunes, even if it was legitimate:

At every opportunity EMI dragged out the legal process making it costly and burdensome. One example is the interrogation of company employees in all-day inquisitions called depositions where attorneys try to trick people into making admissions. In our case, they deposed not just management but nearly everyone in the company all the way down to clerical help and customer support personnel. They even paid $25,000 to get an ex-employee to agree to a deposition. For management they deposed everyone - some multiple times with me getting deposed 3 separate times.

The legal pressure was not just confined within MP3tunes. 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. More than one digital company told us they wanted to work with us, but were prohibited from doing so by EMI. They used their government-granted copyright monopoly to get MP3tunes blackballed in the industry.

EMI spent an estimated $10 million dollars with multiple law firms to arm their attack against MP3tunes in an attempt to thwart unlicensed personal lockers. They know it's difficult if not impossible for startups to fight long costly legal battles. Their hope is that the startup cannot fund a protracted legal battle and they win by default. This happened with the music search engine Seeqpod, Muxtape, Favtape and many others that have quietly faded away. They know that even if the digital upstart prevails in court, they will be terminally weakened. Veoh won multiple rounds of their copyright battle outright only to be forced into bankruptcy after spending $7 million on legal bills.

As Robertson notes, fighting the legal battle was one thing, but blocking the company from partnering and building out its business was the really deadly part. Robertson, of course, has been outspoken in his criticism of the RIAA over the years, and has been through previous legal battles with them as well. In part, some of EMI's infatuation with this case appeared to be personally vindictive (they sued Robertson directly as well as the company). Whether or not MP3Tunes could have succeeded may be an open question. But it seems clear that the company had no chance at all given the barriers that EMI put in its place. Of course, during this same period we've witnessed the collapse and sale of EMI (in pieces) as well. Perhaps, instead of suing the innovations that would help move it into a modern digital era, it should have been looking for ways to embrace them.

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Filed Under: bankruptcy, competition, innovation
Companies: emi, mp3tunes, riaa

36 Comments

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Robert (profile), 11 May 2012 @ 1:06pm

Profits in the millions, none to the artists
Where are the yahoo's who normally say that file sharing sites and technology companies keep the profits for themselves and not share with the artists?

** hears only crickets **

Here's another example as proof the labels won't let any sharing site make profits, let alone provide artists with a non-old-industry revenue stream.
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Lowestofthekeys (profile), 11 May 2012 @ 1:08pm

Hrm, I guess legality is made of silly putty.
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Zakida Paul (profile), 11 May 2012 @ 1:09pm

It's the Salem witch trials of the 21st Century. Anything new that makes things easier for people is evil and must be burned at the stake.
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iambinarymind (profile), 11 May 2012 @ 1:17pm

Force...
State force & violence will only destroy prosperity, wealth, and living standards in the long run.

"Copyright" is censorship. The initiation of force is immoral.

Try Voluntaryism instead.
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Anonymous Coward, 11 May 2012 @ 1:26pm

Abolish IP laws!!!
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Anonymous Coward, 11 May 2012 @ 1:26pm

Anyone else ever notice that the ONLY way the Oligarchy ever wins is by buying their "laws" and buying their legal victories?

Rhetorical question: Where do they get the money?

Boycott.
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jakerome (profile), 11 May 2012 @ 1:30pm

See also ReplayTV
They kept winning every lawsuit. But eventually the legal bills bankrupted them and they folded up shop. TiVo survived only because they cozied up to the networks and avoided lawsuits. That's why features like 30 second skip are hidden behind undocumented codes, so as to avoid legal hassle. None of it founded, but all of it costly.
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GMacGuffin (profile), 11 May 2012 @ 1:31pm

Absolutely no legitimate reason to take all those depositions. Pure, unmitigated move to bury MP3Tunes in costs. Despicable.
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Canadian Observer, 11 May 2012 @ 1:33pm

Costs?
Can someone please explain why there were not awarded legal costs upon their victories? Is that not fairly common? Being awarded costs would go a long way to mitigate the financial burden but (obviously) not the other burdens these types of frivolous lawsuits bring.
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Anonymous Coward, 11 May 2012 @ 1:34pm

Re:
Its more of a modern luddite situation imo. The old guard is afraid the new technologies will destroy their abillity to keep their respective industries exclusive from the "unskilled" masses, and instead of breaking new technologies with axes and hammers, they are using the blunt edge of the law to destroy the technologies they most fear.
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Mason Wheeler, 11 May 2012 @ 1:37pm

Legal costs?
Wait. If they won their case, why are they buried under legal costs? If you can show malicious prosecution--which this obviously is--can't you get the court to make the plaintiff pick up the tab for the legal costs that they caused you to have to waste for no good reason?
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Zakida Paul (profile), 11 May 2012 @ 1:41pm

I notice that Bob guy is no where to be seen.
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HuwOS (profile), 11 May 2012 @ 1:48pm

Re: Profits in the millions, none to the artists
"Where are the yahoo's"

Suing facebook!
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Lowestofthekeys (profile), 11 May 2012 @ 1:55pm

Re:
Take note, friend...where ever there is illogical utterances, ad hominem attacks, strawman fallacies or otherwise inane balderdash, you will find Bob.

He is the embodiment of such non-virtues.
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Keroberos (profile), 11 May 2012 @ 2:04pm

Re: Legal costs?
I doubt it would even matter. EMI has the resources to appeal any judgment against them for what might as well be forever. How long do you think MP3Tunes can?
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Ruud (profile), 11 May 2012 @ 2:12pm

There may be two sides to this story. One of them can be found on http://www.freespire.com/
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Anonymous Coward, 11 May 2012 @ 2:43pm

Re:
Interesting link. While some of that maybe true, the fact that someone (or some organization) would go to such great lengths to essentially smear the guy makes me wonder ... and it's also rather creepy. I think more digging on much of this is necessary.

In fact, after reading some of the quotes and clicking through some of the links, they don't seem to tell me anything about who is making any of those quotes. For all I know, these quotes could be made up by the site owner itself. The writing styles of the various quotes seem ... rather similar (very similar) as if they were all written by the same person.

The site says

"NOTE: If Robertson tries to fool you by telling you that the below quotes are made up, email us us for the contact information to verify each quote for yourself."

Which makes me wonder ... what kinda contact information will I be provided with? E-Mail addresses? Anything with verifiable employees?

I'm not sure how accurate this site is, but something doesn't seem right about it.
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Anonymous Coward, 11 May 2012 @ 2:47pm

Re: Re:
and, think about it, it's very hard to get 40 employees in an organization to so blatantly smear their previous bosses like this.

Ok, so the company may have had various lawsuits against it by shareholders and others, name me a company that hasn't. Companies deal with lawsuits all the time.
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Anonymous Coward, 11 May 2012 @ 2:49pm

Re: Re: Re:
Here is another suspicious quote.

"Robertson likes to pretend that he wants to help musicians, but all I ever saw him do was take advantage of them. In a meeting he told me, 'Selling music is like selling gravel.' That shows you how much respect he really had for artists and musicians." Former Executive - MP3Tunes

Really. The same tone and attitude and writing style is pretty much shared by all the quotes. They were ... pretty much, all written by the same person.
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Anonymous Coward, 11 May 2012 @ 3:08pm

An attempt to smear Robertson? Take into context of shuttering TPB after PromoBay vaulted a single into the top singles charts and SWAT team going after Mega (conspiracy) after they ticked off UMG and RIAA with advertising and a plan to go legit, add that to removing a successfull operation like HULU and ... well, none of those served Robertson but they do show a disctint pattern by large hollywood trade organizations.

So what does it take to get anti-trust law suits going against members of RIAA/MPAA because I think it's time.
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Anonymous Coward, 11 May 2012 @ 3:10pm

Re:
Actually I think readers could add to the list of media companies sued out of busines, right or wrongly; Veoh is another one.
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Robert (profile), 11 May 2012 @ 3:17pm

Re: Re:
You mean like RealDVD, who's creator (RealNetworks) attempted to defy gravity with their efforts to appease Hollywood (they DRM'd RealDVD up the wazoo) only to shelf the product.

For more details:
http://en.wikipedia.org/wiki/Trade_group_efforts_against_file_sharing
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AzureSky (profile), 11 May 2012 @ 3:42pm

Re: Re: Re: Re:
a note on the bitter quotes and such, its mostly due to linspire/lindows and the MS lawsuit, many of the people who hate the man hated lindows/linspire because it wasnt "Free" (had pay software in it)

there are also those who hate him because he didnt keep fighting and liquidated or sold off the company flat out, because, the point of it was gone, and alot of money was wasted in court...

Having delt with the militant factions of the linux movement, I can tell you, they are self centered egotists who will attack anybody who dosnt do what they think is right/proper, and they will atack eachother for not agreeing....

this is part of why linux is the mess it is over all, nobody can get them to agree to a set of ISO's to cover things like drivers and installer packages, so your stuck with each distro picking what it wants....no 2 identical.....

makes me sad. but its how they are....they will trash anything from anybody whos not one of them.

i mean look at the site, its clearly not a professional job, looks like somebody with to much time on their hands and to little skill slapped it up so they could trash him....
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Robert (profile), 11 May 2012 @ 3:50pm

Re: Re: Re: Re: Re:
I actually wanted Lindows back in the day because it seemed way cheaper and better than Windows.

Alas, they went bye-bye.
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Anonymous Coward, 11 May 2012 @ 4:00pm

politicians and the courts can be blamed for this. yet again, copyright law that has been ramped up year after year by stupid politicians introducing new or updating old laws have meant courts ruling on the side of the labels with ridiculous award amounts. those labels bottomless pit of money means they will always win the court case, even when in the wrong. as here, lack of funds has lost yet another service and yet another company dies. i wonder if anyone in Congress has ever bothered to see how many real jobs have definitely been lost, how many real companies have definitely ceased to trade, not the fictitious numbers the entertainment industries put out, in order to keep the major labels alive? if they did, i bet they would be in for a surprise. actually, that's probably why no one has checked. the truth hurts. what they dont admit to, wont hurt them!
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Anonymous Coward, 11 May 2012 @ 4:02pm

I wonder, is it possible to bring a lawsuit to these companies, backed up by sites like kickstarter......if the cause is justified and the target results worth it, then that is something i would gladly support indefinatly until

A) we get the a rights a consumer or member of the public should have

or

B) we run their assess to the ground, would'nt THAT, be ironic
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TtfnJohn (profile), 11 May 2012 @ 8:04pm

Re: Costs?
It appears to be less common in the States for costs to be awarded in cases of what we'd consider an egregious abuse of process in civil proceedings like this one. Canadian judges have far less tolerance for this kind of legal bully boy activity that it appears American judges do.

It may be why, despite many threats to sue in Canada, the *AA's and their Canadian branch plant haven't done it to anywhere near the degree that they have in the States. Even in Quebec and it's French inherited civil code.

Make no mistake about it. This has been an attempt to legally bully by EMI. If we can't beat them in court we'll happily bankrupt them keeping them here just because we're bigger than they are and we can. It seems to have been successful.
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Anonymous Coward, 12 May 2012 @ 1:18am

Re: Profits in the millions, none to the artists
Snore.

And btw, mp3tunes doesn't make *anything*. They produce absolutely *nothing*.

If that's your idea of "innovation" in this realm, then you're a moron.
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The eejit (profile), 12 May 2012 @ 1:39am

Re: Re: Profits in the millions, none to the artists
No, YOU are the moron for not getting with the times and actually listeneing to what your customers want.

They may have produced nothing but they had a decent value.
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MrWilson, 12 May 2012 @ 9:43am

Re: Re: Profits in the millions, none to the artists
They provide a service. Products aren't the only things that companies can provide to customers.

Or are you saying that since UPS doesn't make *anything* it therefore has no value?
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The Moondoggie, 13 May 2012 @ 8:42pm

I will bet $100 to everyone that IP Maximalist will win in the end.... unless we start burning IP Maximalist homes, families and supporters.

The more we keep up just bleating and whining around techdirt, protesting and NOT ACTUALLY HURTING SOMEONE(preferabbly an RIAA or MIAA higher-up employee) the faster it will happen.

I'll give you guys, we killed SOPA, ACTA and probably the whole TPP bull in a peaceful way. But I doesn't stop them from making SOPA v2 or rush voting CISPA.

Or doing this to MP3Tunes.

So yeah, let's all just cry and whine here...
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Mike Masnick (profile), 13 May 2012 @ 10:55pm

Re: Re: Profits in the millions, none to the artists
And btw, mp3tunes doesn't make *anything*. They produce absolutely *nothing*.

Actually, they created a very nice and easy to use music locker service. It had some features that I thought were better than Google and Amazon which came long after MP3Tunes.

What do you me an it didn't make anything? They were also one of the first to really create a good cloud player.

I'm wondering if you actually know anything about them at all.
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Ninja (profile), 14 May 2012 @ 7:23am

Re: Re: Profits in the millions, none to the artists
+10 internets for you my good sir.
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Ninja (profile), 14 May 2012 @ 7:31am

Re: Re: Re: Profits in the millions, none to the artists
Actually, I know what he means. We all know. It doesn't fit his definition of creative work much like he believes Google gets its money from content produced elsewhere. He completely ignores the value offered by Google (the example in this case) services such as Youtube or even plain search. In his trollish ignorant mind it takes zero effort, zero brains and zero creativity to come up with these services. So much for new mathematical algorithms.

We should forgive him, his brain is too small to handle the complexity of the issue.
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Hector Salamanca (profile), 14 May 2012 @ 6:06pm

Re: Costs?
They would have been in Canada. Alas, the law is not the same in the US.
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