Snocap CEO on layoffs: 'pioneers take arrows'

Snocap CEO Rusty Rueff

(Credit: Snocap)

On the morning after laying off 54 percent of his staff, Snocap CEO Rusty Rueff, greeted me in his San Francisco office.

Guarded at first, Rueff slowly began offering details on Friday about why the music-licensing company, cofounded in 2002 by Shawn Fanning of Napster fame, cut its workforce from 57 to 26 employees and put itself up for sale.

Snocap offers to handle copyright and music licensing for musicians and also powers embeddable download stores that artists can place on any site. From these digital-music vending machines, the artists can sell their own music. According to Rueff, there are signs that the idea is starting to take hold.

"Just not as fast as we expected," Rueff said. "You have to understand that it took a lot of work and a lot of capital to bring this capability to market. But it's that time when we are asking ourselves what's next. And we think it's probably best for us to be part of larger entity."

Snocap is one of the scores of companies trying to come up with a new way to sell music. Almost everyone agrees that the old one, which was built around big music labels, is dead. Sure, technology is helping to usher out the traditional music model more than anything else, but technology hasn't provided a replacement either.

Look around. None of the music services other than iTunes have managed to make much of an impact; not Yahoo Music, Lala.com, Rhapsody, Pandora, Social.FM (formerly Mercora), and some of them have been around for years. The reason is that selling music online is expensive and complicated.

Spiralfrog, the ad-supported music site that launched recently spent years trying to negotiate licensing deals with the four top music labels but for all of its effort has only managed to sign one, Universal Music Group. Figuring out the technology can be tough as well.

Last summer, Lala.com tried to offer a streaming service that enabled users to listen to entire albums free of charge. But it was abruptly taken offline only a month later after it was unable to handle the demand, according to the company.

"When you're trying to be a pioneer, you have to remember that pioneers take arrows," said Rueff, who spent seven years as an executive at Electronic Arts before taking the job at Snocap.

Rueff said that the layoffs were designed to help make the company more attractive to a buyer. A Snocap spokeswoman has said that executives have received offers but declined to give details.

The company's deal to provide music stores for MySpace customers remains intact.