News Blog

Updated 6:20 AM PDT to reflect the official announcement from SpiralFrog.

On its face, the signing of a deal with Warner/Chappell Music, the publishing arm of music label Warner Music Group, would appear to be a breakthrough for SpiralFrog.

Warner Music is one of the top four record companies. And SpiralFrog, which last week claimed the position of third-largest music download site on the Web, has toiled for five years to convince the major labels about the soundness of its ad-supported business model. But so far, SpiralFrog has signed a deal for full rights to offer music with just one of them: Universal Music Group.

What's sad about the Warner/Chappell licensing deal, which SpiralFrog announced Monday, is that the troubled music service may be years away from actually featuring music from James Blunt, Green Day, Linkin Park, or any other Warner Music artist. That's because in addition to gaining the music's publishing rights, SpiralFrog must also acquire the recording rights in order to offer the music.

SpiralFrog cut a deal with EMI's publishing unit 18 months ago, for example, but you still won't find any of EMI's songs on the site. No recording rights.

If you're actually looking for substance from SpiralFrog, you're missing the point. What makes this company so fascinating to watch is how it continues to deliver more pretense than substance. The latest example came Friday when Joe Mohen, SpiralFrog's founder and chairman, came to San Francisco and met with me. I was led to believe that we were meeting to discuss the company's upcoming earnings report.

"Shouldn't the only two metrics that matter from SpiralFrog be the number of downloaded free songs, and the amount they have paid the labels? How is the number of free signups a meaningful measure of any success?"

--David Pakman, eMusic CEO

SpiralFrog, which had previously reported earnings, was supposed to report them this week for the quarter that ended December 31. Music fans, journalists, and insiders were finally going to get a peek at how the service, which launched in September, was faring during its first full quarter in business. In 2006, SpiralFrog drew wide press coverage after announcing that it planned to compete with illegal file sharing by giving away ad-supported downloads. The business model was experimental and, at the time, the record labels appeared desperate to find a legal alternative to piracy.

During my meeting with Mohen, no sooner had we sat down then SpiralFrog's public relations people sheepishly told me that the company was filing a Form 15 with the Securities and Exchange Commission later that day. SpiralFrog would no longer be reporting them publicly.

It's important to note that SpiralFrog is not a public company. Its shares do not trade on any exchange. An unusual arrangement with some early investors required the New York-based company to publicly report. Turns out new investors aren't as fussy about public disclosure, and the board decided to do away with the practice. According to Mohen, some of the company's partners also didn't like SpiralFrog revealing details of its business model to the public.

What this means is that Mohen no longer has to reveal his company's progress--or lack thereof--since reporting a dismal third quarter. For the quarter that ended September 30, SpiralFrog posted a loss of $3.4 million on revenue of just $20,400.

SpiralFrog's "silly" claim
So the public doesn't get any insight into SpiralFrog's business model. What the company offered instead were highly questionable claims. Last week, SpiralFrog announced that it had topped 850,000 registered users, making it the third-largest music download site on the Web behind iTunes and RealNetworks' Rhapsody music service.

"What about Amazon and eMusic?" I asked Mohen.

"We have more registered users than eMusic," he responded. He added that Amazon doesn't count because it's a store. SpiralFrog is an ad-supported service where consumers don't buy anything. I didn't bother pointing out that iTunes is also a store. It was obvious SpiralFrog's carefully tailored triumph could come apart all too easily.

"This claim is silly," David Pakman, eMusic's CEO, said in an e-mail to CNET News.com. "(SpiralFrog is) a free ad-supported service, right? It costs nothing to sign up, right? You simply put in a username and password, no credit card required, right? And they only have 850,000 signups? We have well more than 400,000 paying subscribers. Those are people who have enrolled in a pay service with a valid credit card and are being billed. Those people have paid for and downloaded almost 200 million songs."

Pakman continued: "Shouldn't the only two metrics that matter from SpiralFrog be the number of downloaded free songs, and the amount they have paid the labels? How is the number of free sign-ups a meaningful measure of any success?"

A check of Alexa.com, which measures Web traffic, shows eMusic far outpacing SpiralFrog in rank, reach, and pageviews.

As for Pakman's question about what the important metrics are for judging SpiralFrog's success, it doesn't matter. The company isn't talking about them...anymore.

Online music retailer eMusic launched their 'eMusic Remote' application today, which is currently downloadable for PC, Mac, and Linux. While Remote doesn't exactly revolutionize the eMusic customer experience, it does consolidate the eMusic online store and and eMusic download manager application into one space and increases support for syncing eMusic content to jukebox applications like iTunes, Windows Media Player, or Winamp.

We still wish there was a way to preview tracks without getting kicked over to another application, but this is definitely a step in the right direction for eMusic. It's a much better strategy than trying to offer up a competing jukebox app like Rhapsody, Urge (RIP), or Winamp.

I've written about CD Baby before. It's a great way for independent musicians to sell their recordings.

For a one-time fee of $35 per album, it will set up both mail-order distribution (for which it takes $4 per CD) and digital distribution through all the major music stores, including iTunes (for which it takes 9 percent of what the store gives its artists, which is usually about 60 percent of the list price).

A couple days ago, CD Baby began offering direct downloads from its site. According to an e-mail I got from a representative, CD Baby takes only 9 percent of the list price--its standard cut for all digital downloads. But there's no other party involved, which means that the artist gets to keep 91 percent of the revenue from sales through the site.

As with physical CD sales, the artist gets to set the price. Downloads are unprotected MP3s, lacking digital rights management (DRM) technology, which means that they'll play on any computer or portable device. iTunes still offers better exposure--direct integration into the software used by more than 100 million iPods--but this puts CD Baby into the same space as eMusic, which recently surpassed 100 million downloads.

eMusic works with independent labels, so its artists are probably more prominent than those on CD Baby--musicians on indie labels might get some radio play on college radio and perhaps national press coverage, while unsigned bands almost never do.

Nonetheless, if you're interested in a broad array of music and like to support artists (particularly favorite local acts) well before anybody else has discovered them, CD Baby is a great place to start.

Alltel Wireless has partnered with Frog Design and eMusic to offer Jump Music, a free application for transferring music from your PC to your cell phone.

Similar to the iTunes Music Store model, consumers can navigate to eMusic directly from the Jump Music interface and purchase songs from eMusic's vast catalog of DRM-free MP3s. New Jump Music users can take advantage of a special introductory offer of 35 free eMusic songs. All this, and you can transfer your existing music collection to your cell phone as well. It's initially compatible with only five Alltel phones: the LG AX8600, the Motorola Krzr K1m, the Motorola Razr V3m, the Samsung u520, and the Samsung Wafer.

Alltel hopes to add more phones to the list. You can purchase a Jump Music accessory kit--featuring a 256 MB memory card, a USB cable, and a stereo headset--for $49.99 from the Alltel store.