March 20, 2009

By By Antony Bruno, Denver

Ad-supported music service Spiralfrog has shuttered-a move many critics felt was inevitable from the very beginning.

The company paid millions in upfront licensing fees to the major record labels which it hoped to pay off with advertising revenue over the long term, while taking high-interest loans to keep the company running in the interim. Laden with debt and having run out of money to remain operational, the company finally shut down this week.

Spiralfrog was one of the first digital music services to attempt the still experimental ad-supported business model. The service operated much like a subscription music site only that instead of paying a monthly fee, users needed to visit the site at least once a month.

While many will certainly use this opportunity to question the ad-supported music model, the more likely cause of Spiralfrog's demise was its use of digital rights management to compel users to visit the site to update their files. In addition to being rather cumbersome model, the DRM also meant songs couldn't be played on an iPod.

Spiralfrog also suffered from newer ad-supported services that emerged with a more flexible model, namely on-demand streaming services like imeem. To be sure, these services have their own struggles, but they pay less in licensing fees for an on-demand stream than for a download.

Rumors that Spiralfrog was close to shuttering first surfaced last Friday. On Thursday, the Spiralfrog site went completely dark. Various company executives and boardmembers did not respond to calls requesting comment.

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