This one isn’t a total shock, as EMI and Grooveshark had supposedly been close to a deal prior to the lawsuit. And it wouldn’t be the first time that a label sued a Web company: See Warner Music Group (WMG) and Imeem, as well as Universal Music Group and News Corp.’s (NWS) MySpace, among others.

No details on the deal from EMI or Florida-based Grooveshark, which offers free streaming music, a la MySpace Music, Imeem, Spotify and others. Unlike those services, though, Grooveshark doesn’t appear to have licensing deals with three of the big four labels and plays their music anyway. But with the exception of the EMI suit, it has remained unmolested. Interesting.

For the record, here’s the release (Inside baseball note to Grooveshark guys: Please don’t attach press releases as PDF files. Really cumbersome. Thanks.):

Music streaming service Grooveshark signs deal with EMI Music and EMI Music Publishing
Gainesville, FL–Today, digital music service Grooveshark.com announced it has entered into agreements with major label EMI Music and EMI Music Publishing that will give Grooveshark users access to content from EMI’s roster of current and legendary catalog artists and EMI Music Publishing’s songwriters.

Grooveshark offers music fans the ability to stream songs for no fee from a vast catalog of music. Fans can enjoy Grooveshark’s music without having to download client software or register. The basic service is free to fans and supported by visual advertising. Fans who opt for a $3 per month premium service can enjoy unlimited ad-free streaming music. The site was recently named the best way to listen to music on the web by Rolling Stone, and just surpassed one million registered users.

“EMI Music and EMI Music Publishing have collaborated with us to create a mutually sustainable deal which represents the future of digital music,” says Grooveshark CEO Sam Tarantino. “We will continue to deliver the best music service on the Internet to our users, and we will expand our capacity to strengthen fan-to-artist connections through our technology.”

“We think services like Grooveshark offer great music discovery options for fans,” said Mark Piibe, EMI Music’s Global Head of Digital Business Development. ”In turn, Grooveshark offers a new revenue stream for our artists and will help us learn more about how we can better connect different types of fans with artists.”

In fact, reps from Google and the AP linked up in Manhattan on Wednesday to discuss the deal, which expires at the end of this year, people familiar with the meeting tell me. This timing makes sense since Google (GOOG) had flown in many of its top brass to New York for a series of internal meetings this week.

But that would come as a surprise to anyone who took Curley’s words, delivered after a speech in Hong Kong on Tuesday, at face value.

Here are Curley’s comments, recorded by an attendee at the Hong Kong meeting and transcribed by Zachary Seward at Nieman Journalism Lab:

Someone asked Curley if Microsoft was willing to accept the AP’s demands. “They have said very strongly that they would,” Curley responded. A bit earlier, he said of Microsoft, “They know how to have a conversation.” And what about Google? “I’m not talking about Google,” he said. “We haven’t talked. We haven’t talked. We haven’t talked with them in any serious way.”

AP spokesman Paul Colford says he has nothing to add to Curley’s comments. But I’ll try to make a case on his behalf: Maybe this is one of those “depends on what the meaning of the word ‘is’ is” situations whereby Curley doesn’t consider the talks the two sides have been having to be “talks.” Alternate proposal: Maybe Curley is going for “truthiness” instead of “truth.”

I guess that’s possible. The recurring story I’ve heard from sources on both sides of the negotiations, which have been going on for months, is that they’re not moving very far.

The problem: The AP has a list of demands, which start with more money and move on from there, including assurances that its copy will receive better treatment than secondary outlets. And Google hasn’t expressed much interest in changing the existing agreement. The company is “quite happy” with the deal it has now, Google CEO Eric Schmidt told reporters on Wednesday.

I understand why Curley would want to play up his talks with other portals, as well as the notion that he’s willing to pull his cooperative out of the world’s biggest traffic generator. Per above, I don’t think those are particularly effective tactics, but I understand them. But that’s different from creating an alternative reality altogether.

Last December, talks between Warner and YouTube to renew a licensing deal broke down, and Warner’s videos disappeared from the world’s largest video site. Now, as Advertising Age has reported, an agreement is in the works that will bring Green Day, Madonna and their label-mates back to the site.

What hasn’t been reported, so far: The deal terms themselves. Neither company is talking, but sources familiar with the negotiations tell me the new pact will be similar to the one Google’s (GOOG) video unit struck earlier this year with Universal Music Group.

That deal created Vevo, a sort of “Hulu for music videos,” owned by Universal and Sony (SNE). So think of Warner’s deal as a “son of Vevo.”

The big idea is the same: Try to create more value for videos by limiting their distribution and creating a more ad-friendly atmosphere around them, and share ad revenue between YouTube and the videos’ owner. The big points:

• Unlike Vevo, Warner and YouTube won’t be creating a separate site for Warner videos, and Warner won’t be creating a separate company dedicated to its videos. Instead, YouTube will help Warner create a “premium advertising platform” for its videos within YouTube.
• Warner will take primary responsibility for selling its videos, and YouTube will receive a cut of the revenue.
• Warner will no longer receive a licensing fee each time one of its videos is played.

I gather that a lot of this is still being hashed out, and some of this will evolve even after the deal is inked. For instance, Warner needs to figure out how it’s going to sell advertising for its clips, since it doesn’t have its own sales force. Timing is also up in the air: Even after the two sides formally announce the pact, users shouldn’t expect to see Warner videos instantly reappearing on YouTube; it may be that they only get rolled out as the new ad platform is built.

Then there’s the ad platform itself: I haven’t been able to get a concrete definition of what this is supposed to look like, but for now, I’m imagining something like the “channels” YouTube has made for partners like ESPN, except they’d be made on an artist-by-artist basis.

All in all, this sounds like a fair deal. Warner loses a guaranteed revenue stream, but if its contention about the value of its videos is correct, it will make even more than it did under the old arrangement. Meanwhile, YouTube gets to hang onto “premium” inventory without being locked into the kind of  pay-per-play arrangement that helped drive the site’s expenses sky-high.

The potential downside for YouTube: If this works–or if the Vevo deal works–it will have to create similar packages/portals/platforms to retain or attract other “premium” content suppliers, like, say Hollywood studios. But given that the site has had limited success getting those guys on board so far, that’s not the worst fate in the world.

In the meantime, even though Green Day is Warner act, you can still find plenty of its clips on YouTube–it’s just that most of them are odds and ends like this grainy concert video:

Google has reached a settlement with a British licensing group in a dispute over royalty payments, which means that YouTube’s U.K. outpost will begin showing licensed music videos again. The clips disappeared five months ago when YouTube and PRS for Music, the U.K. body that collects money on behalf of songwriters, couldn’t come to terms.

Google (GOOG) executives wouldn’t disclose how much they’re paying songwriters for the rights to play videos that feature their songs, but said they would be cutting PRS for Music a single check that covers the length of the deal. The new pact will extend through June 2012 and will retroactively stretch back to the beginning of this year.

The deal may provide a blueprint for resolving a similar dispute between the video site and a German rights society. But I’m not sure it will do much for the one Google is still (still!) stuck in with Warner Music Group (WMG).

Meanwhile, this video doesn’t feature a British composer or performer and wasn’t shot in Britain. No connection at all, really. But if you like Lou Reed, louche ’70s fashion and/or awesome ’70s facial hair, you’re gonna like it.

Warner, which told investors last month that it had written off the $16 million it had invested in the Web music start-up, plus another $4 million in debt, has made a new deal with the company and will get another slug of equity. The big difference: This time, Warner isn’t cutting Imeem a check.

Instead, Warner will get more equity in Imeem in exchange for a renegotiated licensing deal that is supposed to 1) give Imeem a better chance of being able to pay Warner for use of its music and 2) reduce the amount of cash Imeem does pay out to Warner every quarter.

Both companies declined to comment. But multiple sources familiar with the transaction say it was tied to a funding round that Imeem just closed, a follow-up to the emergency money it took on earlier this spring. In total, I’m told, Imeem will have raised an additional $6.5 million this spring. No word on which investors ponied up cash.

But I do know that it wasn’t Warner Music Group (WMG), which already had to tell investors that the $20 million it put into the company previously was worthless. Warner still holds the shares it has written off, but it wasn’t going to pony up any more cash in the recapitalization.

So why make another deal with Imeem at all? The positive spin is that Warner’s earlier write-down was simply an accounting requirement, and that Warner really does like the streaming music company. I’m not sure how much enthusiasm Warner really has for Imeem, but at this point, taking a flier on the company is a no-risk bet: Instead of throwing good money after bad, Warner only has to give it access to its digital music catalog, which doesn’t cost the company a cent, and won’t show up on its books.

Best case scenario: Imeem survives and Warner’s stake is worth something again some day.

And if you want to be optimistic, the really good news here could be for the battered online music business in general, which has struggled to figure a model that works. Up to now, no one except Apple (AAPL) and Amazon (AMZN) has been able to figure out how to make a business out of providing music over the Web–in large part because of the music labels’ insistence on unworkable payment structures.

You could argue that this isn’t the labels’ problem, it’s the start-ups’ problem, and they shouldn’t have gotten into the business in the first place. But now that they’re in it, the labels can try to keep them alive or pull the plug entirely. Looks like they think they’re better off keeping them around.

No way, says reader Joy Sherman, who insists that they’re “all over” YouTube, and pointed me to a clip from WMG’s new Green Day album.

And sure enough, there’s the video for “Know Your Enemy,” the new single from one of the label’s biggest acts.

But I’m not sure about the “all over” part. I can find one live version that’s pretty good. But the other clips I’ve found with the same label are either bait and switches or appear to be disabled in some way.

So. You can find some Warner’s stuff on YouTube, some of the time. But aren’t all of  Warner’s videos–and songs–supposed to be off of YouTube altogether, the result of a licensing dispute that flared up in December?

No official comment from either the label or the video site. But the unofficial story seems to be this: YouTube has variety of methods to take down content that’s not supposed to be on the site, including its ContentID system, which can automate the process for copyright owners that use it–that’s why YouTube wasn’t completely overrun with clips from NBC’s Olympics coverage last summer and why very little footage from ABC’s Oscars coverage made it onto the site earlier this year.

And Warner Music Group (WMG) is a ContentID user. But the system isn’t foolproof, and it’s bound to work much better when YouTube and the content owner are working together instead of fighting over royalties and revenue splits.

So here’s the Green Day video that’s not supposed to be on YouTube, and may not be for much longer once I post it. So enjoy while you can:

And, per MTV VP’s John Loscalzo’s request, I’ll note that Viacom’s video site has a perfectly legally version of the song that won’t get taken down. You can see it here.

Who actually made the move to drop the label’s content from the world’s biggest video site is a matter of dispute, though. Both sides are taking credit for the decision.

Here’s Warner Music (WMG)’s statement:

We are working actively to find a resolution with YouTube that would enable the return of our artists’ content to the site. Until then, we simply cannot accept terms that fail to appropriately and fairly compensate recording artists, songwriters, labels and publishers for the value they provide.”

But a person familiar with the situation tells me that the two companies were close to an agreement until recently, when Warner changed its terms. In response, Google (GOOG) made the move to yank the label’s content.

Google’s blog post about the matter is more oblique. But note that it doesn’t say it is taking the music down at Warner’s request:

Sometimes, if we can’t reach acceptable business terms, we must part ways with successful partners. For example, you may notice videos that contain music owned by Warner Music Group being blocked from the site.”

As I explained yesterday, music videos are some of the most popular content on YouTube. But the videos are also money losers for the video site because it has to pay the labels each time someone views a clip, regardless of whether it’s generating any revenue. YouTube’s contracts with all of the the big labels–in addition to Warner, it has pacts with Sony (SNE), Universal Music Group and EMI–are set to expire in the near future, so there are multiple games of chicken to watch here.

Meanwhile, taking down an entire music company’s catalog can take quite a while, which means that if you head to YouTube right now, you can still find plenty of Warner stuff  there–like the Madonna channel, which has golden oldies like this one: