SpiralFrog, a venture backed company offering free music supported by ads, is shutting down.
SpiralFrog, the pioneering ad-supported music service, quietly closed down on Thursday.SpiralFrog’s site went dark at about 4 p.m. PDT.
A source close to the company told CNET News that SpiralFrog has ceased operations and assets have been surrendered to creditors. To keep operations going last year, the company issued secured notes in order to borrow at least $9 million from several hedge funds and others.
New York-based SpiralFrog made a splash in August 2006 by attempting to offer music free of charge to the public while supporting the site through ad sales. Media outlets such as The New York Times, Reuters, and USA Today questioned whether the site might one day challenge Apple’s iTunes.
In addition, SpiralFrog’s music library was always much more limited than iTunes, Imeem, or other competitors. After signing a licensing deal with Universal Music Group, the largest of the four major record companies, in the summer of 2006, nearly two more years would pass before the start-up signed a second top label: EMI.
Ad supported music model so far has not worked though some companies like imeem are having a go at it. This is just another data point to prove that the model has problems. SpiralFrog could not make it work despite having VC funding and licensing deals with some of major labels.