Late last night, SpiralFrog, the ad-supported free-music service launched in 2006, pulled the plug after a long battle with creditors over the company’s inability to manage its debt. Visitors to the domain won’t find any teary goodbye message, but rather a blank page saying the service is unavailable. CNET reported that operations had completely ceased and the company’s assets were being seized by creditors, mostly hedge funds that loaned the company $9 million early last year.
SprialFrog’s nearly three-year tenure was frought with problems. After launching in 2006 and signing a licensing deal with Universal Music Group, it took the company almost two years to sign its next major label — EMI in June 2008 — which left a gaping hole in its catalog. In addition, the company was constrained by copyright protections that limited where and how its music could be listened to at the same time that the majors finally began allowing music to be sold in MP3 form, which can be listened to anywhere on any device.
The ad-supported free-music proposition is a difficult one, at least in its current form. Labels still want to get paid $0.70 per song, which is what they are paid for selling the song through iTunes. As a result, the service has to sell a large amount of advertising at expensive rates to make enough money to pay the content owners and turn a profit. Add $9 million in debt to your books and one of the worst recessions in recent history and it shouldn’t be too surprising that Spiralfrog did not survive. It should be interesting to see how its biggest competitor Q-Trax fares