How LimeWire’s Grapevine tried to compete with Spotify

It’s been a year this week since a federal court in New York shut down the operations of popular file sharing vendor LimeWire. One casualty of that decision was a music subscription service that the company had been working on to turn file sharers into paying customers.

Grapevine, as the service was called, never saw the light of day — which is too bad, because it had some really interesting features to compete with Spotify and possibly even convince hold-outs to try the idea of music subscriptions.

Grapevine's client. Click the picture for a larger view.

Grapevine was in the works for more than a year under the internal code name “spoon,” and a former employee of LimeWire told me that it became the primary and almost sole focus of the company by summer of 2010.

Part of the reason for that was obviously that LimeWire was handed a summary judgement in May, when the same New York court found that the company was responsible for widespread copyright infringement through it’s P2P file sharing client.

However, LimeWire had been working on licensed music offerings for much longer. The company launched an MP3 download store with content from numerous indie labels in early 2008, and I’ve been told that the internal goal behind Grapevine was early on to build “the best damn music service ever.”

So what was Grapevine going to offer? LimeWire tried bridge the gap between music ownership and an unlimited subscription in an attempt to gradually transition people towards a world where any song is available from the cloud and ownership doesn’t matter anymore. The Grapevine client automatically imported a user’s iTunes collection, and users could seamlessly combine locally stored music and songs streamed from Grapevine’s servers to playlists.

Some of the basic design principles behind Grapevine.

Spotify offers similar functionality, but Grapevine wanted to take the idea of combining ownership and subscriptions one step further: The service was designed to come with bundles of MP3 downloads, which would have allowed paying users to get DRM-free copies of a few dozen of their favorite songs per month on top of unlimited streaming. Users would have been able to transfer these MP3s to any of their devices and access them offline as well. As a result, Grapevine would have been priced higher than today’s subscription services. One price floated as a possibility was $19.99 per month.

LimeWire was actively pitching the service to the music biz, and I’ve been told that many indie labels were ready to sign up for the service immediately. However, LimeWire had learned with its MP3 store that an indie-only offering just didn’t make sense, and tried hard to get the majors on board as well. Someone familiar with Grapevine told me that “all the majors had seen it multiple times,” with meetings including the label’s top executives. Music execs seemed to like what they saw, but the majors only wanted to sign licensing deals after a settlement over LimeWire’s file sharing service was in place. LimeWire’s staff was already long laid-off, and the company wound down when that settlement was finally reached in May of 2011.

Grapevine also put a big emphasis on music discovery. The service allowed users to instantly build custom radio stations based on single tracks in their library.

With Grapevine never having a chance to prove its model, we’ll have to wait and see whether one of the other subscription services will eventually try to combine ownership and unlimited access. One of the people familiar with Grapevine told me that the thinking at LimeWire at the time was that “MP3s are the transitional product users need to get them to streaming.”

He likened it to the way Netflix (s nflx) used its DVD business to launch its online video subscription service. That may not be the best sales pitch for such a model right now, given the troubles Netflix has been facing lately, but still: If you want to grow music subscriptions from a business with a few hundred thousand paying customers to one that could eventually bring growth back to the music industry, then you may need to think about combining access with ownership.