> Whether they are obligated to "report streaming data" is up to their contract, not ethics.
There is no contract.
Users upload the music the service is streaming to everyone. Most of that music is copyrighted and the company has no license (or any other contract) allowing them to stream it.
They expected to eventually be sued by one or more labels for doing this. They also expected to have enough data by then to use it to negotiate a contract where they actually make money while legally licensing the music.
Common sense, Wikipedia, previous lawsuits against the company, this lawsuit in question. Feel free to Google. It's not all unlicensed, but their catalog is built upon user uploads (and from previous court cases, from their own execs uploading music they have no license to), not just a database of music they licensed like a legal music store/service.
The UMG lawsuit alone alleges Grooveshark employees uploaded over 100,000 files they had no license to. There was no contract then, they just expected to have enough listening data to make a profitable licensing deal on that music... which might've worked if it didn't come out in discovery of a year old lawsuit that it was Grooveshark employees and not users that uploaded so much of the music. No DMCA protection for that.
Well, that's what UMG alleges based on a comment in a blog. If you look at http://blog.grooveshark.com it's evident they have deals with plenty of labels.
They already said Grooveshark intends to fight this battle before the Court, not in the press, so we are threading on thin assumptions here.
EMI is the world's 4th largest record label. Interestingly they are selling it to Universal, so now UMG has both a licensing deal and a lawsuit with GrooveShark...
There is no contract.
Users upload the music the service is streaming to everyone. Most of that music is copyrighted and the company has no license (or any other contract) allowing them to stream it.
They expected to eventually be sued by one or more labels for doing this. They also expected to have enough data by then to use it to negotiate a contract where they actually make money while legally licensing the music.