I have a fondness for Grooveshark – they had a model super similar to ours at RVibe for p2p legal desktop sharing. Except that where we did file validation and restricted downloads to explicitly licensed tracks (but not non-interactive streams), they allowed them. And, I asked our lawyer over and over – does their model of “putting the paid money into an escrow account” work? His answer over and over again – it’s still infringement with out a licensing agreement.
So, while I admine their desire to move the industry forward, from a business intelligence and risk mitigation standpoint, they kind of blew it. At up-to $125k an infringement, and will “millions of tracks”, they are in for a very rough ride.
And where other companies (eg: Imeem and their Warner (re)investment) were able to covert the legal morass into a licensing agreement, knowing how the major labels think, Grooveshark has too many technical/model hurdles (not to mention financial ones) to overcome to secure a deal.