Wise Startup Blog

Well, it looks like SpiralFrog has payroll coming up, as they’ve raised an additional $2 Million in a round in which they planned to raise $10 million.

For those of you who don’t know, SpiralFrog is an attempt to cash in on the illegal downloading market by monetizing the traffic. Their solution is to offer DRM music songs to users, and force them to come back to the site every 30 days to “refresh” these songs. It’s a nice concept, however, when the files don’t work on iPods, and their selection includes less than 1 million songs, I don’t see many people opting for the legal route when PirateBay and Limewire are still alive and strong.

Per their original $10 million filing, they had their obligatory disclosures as to why they may not succeed, and one of these is very humorous:

The songs we provide do not play on Apple iPods, which could result in fewer users of our services.

As the first and largest legal music download site, Apple has managed to maintain their market share by limiting the playability of music and video content purchased through iTunes, a closed proprietary interface that does not support any digital rights management other than the Apple AAC format. Apple is the category leader for portable digital music players with approximately 76% of the U.S. market share and 26% share of the worldwide market. Since launch five years ago, more than 60 million iPods have been sold globally. Over a five year period many have been replaced or upgraded and the actual figure of working iPods is estimated to be nearer 40 million. Since our music and videos cannot be downloaded to an iPod, users will need to purchase a portable digital music player that is compatible with our services if they want to make their music portable. As a result, users may be unable or unwilling to spend the additional money and may not use our site.

Considering that all of the services that are struggling (Rhapsody, Napster, etc.) do not play well
with iPods, you might think that SpiralFrog would suffer the same fate.

So good luck to those of you who plunked down $2 million in a worthless company. If you’re listening, why not take a look at Grooveshark, a company that has an idea of what illegal filesharers want:

• To get paid $.25 for every $.99 track they share
• P2P library with all drm-free tracks
• Recommendations, discovery, and social networking
• A team of college students building a community of change