Summary:

After raising over $70 million to develop and sell its G2 portable music device, music startup Slacker is giving up on it — choosing instea…

Slacker G2 radio player

After raising over $70 million to develop and sell its G2 portable music device, music startup Slacker is giving up on it — choosing instead, to focus on building a mobile app-based streaming business. President Jim Cady, who’s been running the company since founder and CEO Dennis Mudd stepped down in August, told VentureWire that selling the G2 “no longer fit” with the company’s long-term strategy.

Backed by Centennial Ventures, Rho Ventures, Austin Ventures, Mission Ventures and Sevin Rosen Funds, Slacker just got a fresh influx of roughly $3 million in funding this month, per an SEC filing. Cady told VentureWire that the new money came from “inside investors,” serving as a testament to their faith in the company’s mobile-centric future plans.

Slacker currently has ad-supported Blackberry and iPhone streaming radio apps; it also offers a desktop-based ad-free service for $3.99 per month. The company will continue to sell the G2 through the first half of 2010; it is not clear how long new and existing buyers will be able to get technical support for their devices after that.

Getting people to pay for streaming radio seems to be hard enough, but Slacker faced the bigger hurdle of going head-to-head with Apple’s iPod, an obstacle that even *Microsoft* — with what seems like an infinite budget for marketing, promotion and distribution — has found to be insurmountable. Slacker’s 2-gig and 4-gig G2s retail for $199 and $249, respectively — and that’s a tough sell when compared to the 8-gig iPod Nano, which retails for $149, or the 8-gig iTouch, for $199.

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