By Allan Maurer

GAINESVILLE, FL – The Escape Media Group, which does business online as the steaming music service Grooveshark, has raised nearly $3.5 million in a debt, warrants and options financing, according to a regulatory filing.

Founded in 2006 by Sam Tarantino and Josh Greenberg, the 32 employee company is similar to other online streaming music services such as Pandora.com, but includes numerous unique features. It launched Grooveshark Lite in early 2008.

Tarantino came up with the idea for Grooveshark while studying electronics at the University of Florida. A musician, he was distraught with the then current situation in the music industry and co-founded the company with Greenberg, who was pursuing a business administration degree at the University of Florida at the same time.

Greenberg had development experience and had founded his first Web development company while still in high school.

We have been using Pandora and enjoying it daily for some time, but Grooveshark’s service offers a number of features Pandora lacks.

Unique features

In addition to letting users select the music they want to listen to by artist, album or style, the site also lets them create playlists to return to later and provides instant access to favorite songs. Not only that, it makes it easy to share any song or playlist on social networks such as Twitter, Facebook, StumbleUpon, export it as a widget to post on blogs or other sites, or email a link to friends.

The ability to save playlists and songs rather than “stations” as on Pandora, is particularly useful. And, we use social networks Twitter and Facebook daily, so the ability to easily share songs there is another plus. It does have competition, though, from not just Pandora, but also Autolizer, AOL Music, Live 365 and other similar services.

Industry consolidation likely

We certainly prefer Grooveshark and Pandora to the radio station services ourselves.

But we have to think the industry will consolidate behind a few winners in this space eventually.

Grooveshark is supported by advertising and a premium version of the service and expects that pending mobile apps will further monetize it.

Grooveshark also includes song downloads from MP3 store affiliates, and ringtones from Thumbplay.

It also includes some free PC desktop wallpapers (see illustration with this article for instance).

The company disclosed the financing in a filing with the U.S. Securities and Exchange Commission that says it included 28 investors.

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Tags: Escape Media Group, financing, Florida, Grooveshark, Internet/New Media