I spoke with CEO Richard Nailling this afternoon, and while he acknowledged that the free ad-supported music arena “is a bloody space,” he believes FreeAllMusic is easier for consumers — and provides more guarantees for advertisers — than SpiralFrog, its closest antecedent. For now, the company is allowing consumers to choose a visual ad from among up to a dozen advertisers, but brands may be able to associate themselves with artists and songs eventually. Once an ad is chosen, FreeAllMusic broadcasts more banner ads elsewhere around the web that include the downloader’s screen name and the sponsoring brand; Coca-Cola, Warner Bros. Television and Zappos.com are among the early advertisers.

I’m naturally skeptical of a new company so similar to one that perished so recently, but Europe’s We7 has persisted with another related model with some success, and FreeAllMusic doesn’t have any of the DRM-related entanglements that dogged SpiralFrog. Still, people are generally loath to jump through hoops to acquire music, especially when it’s still so easy to acquire it for free without sitting through ads. And I don’t think anyone will be too enthusiastic about his screen name appearing in banner ads all over the web.

The company hasn’t disclosed which two major labels it’s signed up, although Nailling said each is providing its full digital catalog, as is one independent label. He added that FreeAllMusic completed a seed round this fall and is currently raising a Series A round, with emphasis on strategic investors rather than VCs. And while Nailling said the company will take steps to avoid growing too fast at first, such as capping downloads at five per week, its private beta is set to open up sometime early in 2010.

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Imeem, a San Francisco-based music discovery startup, said it has signed a content agreement with Sony BMG Music Entertainment that gives users access to the Sony(SNE)-Bertelsmann joint venture’s digital catalog of music and video for ad-supported, “free” streaming of these files.

The company, which competes with Project Playlist, makes a customizable music playlist that can be embedded into MySpace and Facebook profiles. This is its second deal with a major label; it inked a similar partnership with Warner Music Group (WMG) earlier this summer.

SpiralFrog, which has a partnership with Vivendi’s (V) Universal Music Group, also offers free music downloads, but of course there’s a catch (actually there’s about 20 catches).

Launched earlier this month after lengthy delays, SpiralFrog makes money through site ads, and then splits these profits with the music publisher.

The good: Users have access to over 800,000 MP3s from popular and lesser-known artists available for free download.

The bad: To keep these files playable, the user needs to sign in to the site once every 30 days. Downloading takes about 90 seconds per song, and SpiralFrog forces users to download songs one at a time so the user stays on the site awhile and has time to view all of those lovely ads.

The really bad: While SpiralFrog supports portable players, it doesn’t support iTunes (or Macs at all, for that matter) at this time.

Meanwhile, LTDnetwork’s legal peer-to-peer (P2P) service QTrax, which has yet to launch, has already signed deals with Universal, Sony/ATV, Warner Music Group, The Orchard, EMI Music Publishing and EMI Music, TVT Records, Go Digital, ASCAP and BMI. They plan to make money through advertising in a P2P client that helps users find legal content.

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