SpiralFrog
The business, the turning points, and the decisions behind them.
01 / WHAT IT BUILT
What the company did
SpiralFrog was a New York-based music download service that offered free and legal music downloads entirely supported by advertising. Launched in September 2007, it held licensing deals with most major music owners in the US, Canada, and Britain, including Universal Music Group and EMI, and grew to more than 3 million tracks, 5,000 music videos, 6 million monthly visitors, and 2.6 million registered users at its peak. The catch was heavy DRM: downloaded songs could not be burned to CD, worked on at most two portable devices, never worked on Mac, iPod, iPhone, or Zune, and required a license renewal at least every 60 days. Banner ads funded everything; users paid nothing.
02 / SpiralFrog FAILURE REASONS
Failure reasons
SpiralFrog's ad-supported model broke when the money ran out. The 2008-2009 economic downturn crushed digital advertising spending, and after borrowing at least $9 million in secured notes from hedge funds to stay afloat, lenders recalled the loans and the company terminated operations in March 2009. The product was also squeezed on all sides: free streaming competitors like MySpace Music, Last.fm, and YouTube made downloads feel obsolete, Amazon and then Apple began selling DRM-free tracks, and the service's own DRM restrictions - no iPod, no Mac - alienated the users it needed. Five years of operations ended with lenders pulling the plug.
03 / EVENT HISTORY
Events in the structured record
- Universal Music deal announced
Universal Music Group signed on in August 2006 to make its entire catalog available for free ad-supported download through SpiralFrog, joined by EMI a month later - a splash that made the startup a would-be 'iTunes killer'.
- Service launched
SpiralFrog launched in the US and Canada in September 2007 with about 800,000 songs, growing to more than 3 million tracks and 5,000 music videos at its peak.
- Shutdown after loan recalls
On March 19, 2009, SpiralFrog terminated operations after lenders recalled loans; the company had issued secured notes to borrow at least $9 million from hedge funds the previous year to stay in business.
04 / CONTEMPORARY REBUILD ASSESSMENT
Difficulty of rebuilding this project today
Material for this section is being gathered and checked. It will appear here once ready.
Overall assessment: Not completed
05 / CAUSAL CHAIN
How the factors connect
- 01
SpiralFrog terminated operations on March 19, 2009, after lenders recalled loans; the company had borrowed at least $9 million in secured notes from hedge funds the prior year to stay afloat.
- 02
The company had raised as much as $12 million in venture capital and debt funding over its five-year existence.
- 03
No public disclosure of realized creditor or investor losses was found; the $12 million raised is a funding figure, not a documented loss.