Spiralfrog is an ad-supported music download service providing users with a free, legal
alternative to P2P filesharing. It officially launched after a substantial amount of publicity in September 2007 with 800,000 tracks in its collection.According to CNET and Digital Music News, Spiralfrog had over $9 million in debt due, largely in senior secured notes. Secured loans mean less risk to the creditor because the borrower pledges a particular asset to the lender for the loan. If the borrower neglects to pay, the asset is automatically taken by the creditor; payback is required. Traditional venture capital startups, on the other hand, don't require payback and more risk is borne by the VC firm.
Spiralfrog had a rocky start, as shown by a moderate amount of turnover in the firm's leadership. But just one year ago it had established itself as the third most popular 'Net download service with 850,000 registered members. When the website shut down at 4pm, March 19, 2008, it had a purported 3 million songs and 5,000 music videos available for download from labels including EMI, BMI, Universal, and Sony.
What went wrong? I've been a Spiralfrog user since the beginning, so the points I'll give are not only those of popular opinion but those of a conscientious user.
As a semi-pro website developer, from the very beginning Spiralfrog's site was just not up to par. The search function was literal at best and based on a simple stemming algorithm that wasn't very forgiving if you couldn't remember the exact search term. The coding for the website was pretty rough, too, and the problem of downloads being dropped continued to occur through the site's short span of maturity.
Also, of course, the files were only downloadable as DRM-protected 128kbit .wma's that were a bit of a hassle to deal with, especially for anyone who didn't own a PlaysForSure-compatible portable audio player such as the iPod. If you were an XP user with Windows Media Player 10, there was a way around that with a nifty little app called FairUse4WM but it was of questionable legality and at the very least an unnecessary hassle. For me, the format itself was an issue too - 128 is barely sufficient for any audiophile and if you were converting music to MP3 for compatibility you'd lose even more quality.*
In my view, even in these rough economic times (which always come and go) Spiralfrog should have succeeded. The failure rested in the execution - which was evident in the noticeable amount of turnover among the company's leadership during its operation. There was no reason that Spiralfrog could not have secured more traditional capital funding, rather than operating on a debt basis, unless those in charge could not sell the company well enough to potential creditors.
Oh, well. There's always the chance that our favorite virtual amphibian could be brought back with a new owner, but the aforementioned interface and DRM issues need to be addressed before the company will attract the number of users and thus revenue needed to keep it solvent. As the saying goes, the free market abhors a vaccum and I can't wait to see who will try and fill it next.
*Not to mention that for someone who hears high frequencies like myself (and a prime member of the downloading demographic), WMA is just worse than MP3. Proven again. And again.
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