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Shawn Fanning's Snocap lays off 60 percent of workforce

The music-licensing company says the cutbacks are part of a plan to "refocus resources."

Snocap's leadership, from left to right: Ali Aydar, chief operating officer; co-founders Jordan Mendelson and Shawn Fanning.

UPDATE (12:15 p.m. PDT Friday): CNET News.com interviewed Snocap CEO Rusty Rueff after this story was published. He says the company's music stores just weren't catching on fast enough and its time to sell the company. You can read what he has to say in this story.

Snocap, the music-licensing company best known for being the follow-up act of Napster founder Shawn Fanning, has cut its staff by 60 percent, a spokeswoman for the company said Thursday evening.

Founded in 2002 by Fanning, Jordan Mendelson, and Ron Conway, Snocap started out trying to provide digital-music licensing, but has moved into new areas, such as setting up online stores for musicians.

Thanks in large part to Fanning's Napster fame, the San Francisco-based company attracted a lot of attention when it launched, but has seen its profile steadily diminish in recent years.

The blog Valleywag, which first reported the story, also said the company is for sale.

"Snocap has received interest from several companies and is pursuing that," said Susan Celia Swan, a company representative.

The idea behind Snocap was to help sell music legally online. The company handled the licensing and copyright issues and anybody wishing to sell music from a Web site need only have Snocap set them up with a digital music store that can be embedded into any site.

The service allows artists to sell music directly to consumers and even set their own prices.

But many industry insiders were skeptical about Snocap's chances from the start. Fanning, who founded pioneering file-sharing service Napster, was public enemy No.1 in the sector for years. Skeptics questioned whether music executives would do business with him.

This time Fanning was holding a white flag, however. He declared that Snocap was all about empowering artists and the legal sale of music.

In September 2006, Snocap announced a deal to sell music on MySpace.com. The service allowed bands of any size to sell music for whatever price they wanted. Snocap and MySpace would share the small fee that they charged. It was MySpace's first official e-commerce venture.

Snocap said that its MyStores have attracted more than 175,000 registered consumers, and over 80,000 artists have created their own storefronts.

The number of registered consumers seems shockingly low when one considers that MySpace is supposed to have over 100 million registered users. I know that there are far less active monthly users on MySpace but even if there are 10 million, one would think that Snocap should have a larger profile.

In September, MyStores received nearly 20 million unique visitors and more than 140 million monthly impressions. What's important here is that this is an e-commerce play but the company doesn't reveal anything about sales.