Youtube may have been slightly more tolerable to rightsholders because it generally hosted content that was materially inferior to the content consumers were buying from them; nobody used it as a substitute channel for commercial TV.

Sure they did. I have many friends who would play music through Youtube or watch music videos on there. A lot of them discovered new music on Youtube, then bought it off iTunes. Mind you, that's not an argument for piracy, it's an argument for the free, easy distribution of music.

I don't know what your comment has to do with my comment. My point is that Grooveshark is a closer substitute for the sanctioned product it overlaps with than Youtube was with the product it overlapped --- especially in the early days, when copyright was an issue for Youtube.

And I agree. I was just saying that people did, in fact, use youtube as a substitute for licensed distribution channels.

I'd have to agree with this also. It's called YOUtube for a reason, it was created for YOU to upload videos of YOUR content. If Grooveshark was called YOUshark or something in the beginning, and stated: Upload YOUR bands recordings and get exposure! This would be a different thing. Back when Grooveshark was starting out they could assume that James Taylor and U2 were not uploading their content to get exposure and could have deleted that manually at the beginning to try and enforce their point that it is unsigned content only. But that's not what they are going for.