Let me know if you have any questions for me- hope the blog doesn't crash!
It doesn't really matter if it is strictly legal (under DMCA and other relevant legislation) or not, they can and will use lawyers to intimidate and/or sue you. It doesn't matter if you're linking to third party hosting or what the technicalities are, if your app can play back music or video that is "owned" by the big players (RIAA/MPAA/MAFIAA) you are under threat.
You made the right choice (thinking practically, not necessarily morally) in not trying your luck in court, you have very little chances of winning and could possibly ruin your future by having a nasty lawsuit on your records.
I don't think it is fair or approve of it but that's the way it works, unfortunately. Google and YouTube can get away with it, not because of DMCA and other laws but because they have (secret?) treaties with the copyright holding parties.
There was no need for any more words. Where would the music industry be today without any of the apps that currently have a licensing agreement? No music in Youtube videos. No Pandoras or Spotify or iTunes even. What would that internet even look like?
I just find it really odd that an entire industry seems to live to bite the hands that feed it. I may be entirely wrong in my assessment, so I'll take whatever licks may come.
As a developer first and a hopeful musician second, one who deeply wishes those roles were reversed, I have to always stop myself when I think of a clever idea revolving around music. It has to have such a rigid constraint that it is almost worthless to continue any endeavor.
But awesome website and good luck!
You have a screenshot of your app with a big-time RIAA artist, big time fail. Even helping people on your forum streaming a link like http://innocent.org/madonna.mp3 can bring down all your efforts. Lawyers will eat you for it. See the landmark work on the new inducement doctrine: http://en.m.wikipedia.org/wiki/MGM_Studios,_Inc._v._Grokster....
For my courtroom CV, google: "borderline incompetent" :-)
Do you know if this is being used by http://gfycat.com/?