We've been intrigued by We7's plan to offer free music with temporary audio ads attached to them since last September, when the site had 75K registered members. Now 100K users strong, the site has announced $6 million in Series A funding from Peter Gabriel, Spark Ventures, Eden Ventures, and original investors John Taysom and Steve Purdham (of SurfControl). The infusion of cash should allow We7 to drop a few quick million in order to secure licensing from at least one or two major labels.
SpiralFrog, a competing ad-supported music service that requires users to watch a video ad complete a survey every once in a while in order to keep their free music files alive, allegedly burned through $12 million in about 2.5 years and said it would need another $18 million to survive 2008.
Licensing these catalogs is expensive – the major labels apparently tend to want two-thirds of revenue and lots of money up front.
