The safe harbor of the DMCA states that Web services are not liable for copyright infringement if the content is stored “at the direction of a user.” UMG tried to argue that Veoh should not be covered by the safe harbor because it did a bunch of things with the music and video content after it was stored on its servers, including converting it into Flash, breaking it up into chunks for peer-to-peer distribution, and allowing other users to stream it or download it.

The judge, A Howartd Matz, didn’t buy the argument. He found Veoh’s position to be “more persuasive,” noting that user’s must agree to Veoh’s Terms of Service before uploading a video, and that the terms of service clearly prohibit uploading copyrighted material. In other words, the initial act of uploading is considered to be user-directed storage under the DMCA, and whatever Veoh does to process the video after that cannot be used to get around the letter of the law.

This ruling is a godsend to those startups on the edge of legality, and as long as you comply with the DMCA, you are legal. That is, until another court ruling comes along, but since we’re ruled by a series of prior court cases, this should be more ammunition for those sites looking to deliver new, innovative content for users.

I’ve stacked Grooveshark up against two of our (many) competitors, Lala and we7. Both of these have a good amount of funding, an experienced management team, a celebrity spokesperson, yet both of these sites are trailing us in traffic. While the graph used below are entirely representative of world-traffic, and I have no numbers to share with you on advertising and sales revenues for the companies, the experiment still holds merit and proves a point.

grooveshark (red) lala (blue) we7 (green)

Startup Analysis: Lala, Grooveshark & we7

Lala
Their CEO is a veteran startup entrepreneur and Lala is his 7th startup. Lala has raised ~$9 million in disclosed funding from Bain Capital & Ignition Partners. Bain Capital is behind the recent ClearChannel $18 billion acquisition and carries a tremendous amount of weight behind them.

we7
Their founding team includes Peter Gabriel, which bestows a huge amount of music industry cred on the startup. They have raised $6 million from Eden Ventures and Spark Capital (the folks behind Veoh, Twitter, Tumblr, etc.).

Grooveshark
The founders just turned 21, we have raised ~$1 million, we have private friends, family, and and fools for investors. Our team has 0 experience running a startup and the majority of our developers are still in school. I happen to be on the team, so that may be the reason for the huge traffic difference (kidding).

Let us know in the comments why it is that Grooveshark seems to be besting these other two companies in terms of traffic.

Engadget has a great hands-on with the Nokia e66, hit the jump for more:

Nokia e66 “iPod Killer” Reviewed

For the full review, hit up Engadget

You’d like to see more evidence of against-the-grain thinking? OK: See Cory’s blog today, where he announces his move (made two weeks ago, actually)—along with the news that since 2000, he’s purchased 5 albums. Ah, but surely he’s a music hound who spends tons of time cruising iTunes, or some of the other legal music source, right? Nope. “I neither buy nor hear much new music.”

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Napster Learns How to do Subscriptions

Why don’t the Napster folks focus on building their business around other already popular subscription-based offerings. The cable industry manages to bilk you for $100 a month, even though you only watch 20% or less of your total channels. Sirius gets you to pay for radio that you get for free in your car –

If Napster worked on developing better hardware relationships they could really build a killer product. Imagine if Napster created a head-unit for cars, you could listen to any of the music from their catalog on-demand, right from your car. Then, when you want to load up your mp3 player, you simply “star” each song you hear on the radio, and it automatically downloads to your napster player. That’s a pretty cool value I wouldn’t mind paying for, but right now what they are doing is trying to get you to pay for something that you can already get for free, in a better format, higher quality, and from a larger selection — it’s amazing they have any subscribers at all..

You simply type in the artist or song you’re looking for and you’re given a convenient Tinysong url which points you to listen to the song immediately.

Tinysong re-directs to Grooveshark Lite, which if you haven’t seen it yet has been described as “Pandora on crack.” Here’s one of my favorite tracks, and please be sure to share with friends as well: http://tinysong.com/i2.

I have no qualms claiming that Grooveshark Lite is the best product in its class if you want to listen to music for free.

For those of you who haven’t checked it out yet, jump over to listen.grooveshark.com and start playing!

More from Grooveshark.com at Myxer

It reasons that Apple makes more money on the iPhone than it does on the iTunes store, so perhaps they would slightly cannibalize their iTunes sales to drive more iPhone purchases.

But say Apple decides that it wants complete control over the iPhone Apps, then will it start to develop its own apps that take the place of last.fm scrobbler, iLike recommendations, Grooveshark recomp? ..Very interesting times ahead — do you think Apple will be closed or open for the SDK?

Here’s a sample of his suggestions from p2pnet:

Lesson learned: even benign DRM is a bad idea. All forms of friction must be eliminated for authorized file sharing to work.

In Grooveshark, all files are DRM-free in the highest bit-rate available, the way it should be.

If free plays are supported by advertising, and player vendors build easy payment mechanisms into their players, music can be freely shared, musicians can be paid, and fans would never be prohibited from hearing the music they want when they want. Fans will be willing to step up and pay for music they like because it would make the ads go away (to be replaced by artist photos, lyrics, whatever …), it would express gratitude to the artist, and it could potentially lead to benefits from P2P sharing or organized reselling.

Grooveshark uses plays as a promotional piece that allows fans an opportunity to listen to songs on their terms. Fans can just as easily download songs for free from Limewire to listen to them, so how can you force them into 30 second streams if you want them to PAY to download the track.

For more, see their article @ p2pnet