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Digital music startup Jamendo runs out of steam, mulls sale

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[Luxembourg] Jamendo, a community of free, legal music published with Creative Commons licenses, is actively looking to sell to or merge with another company, TechCrunch Europe has learned. Jamendo CEO Laurent Kratz has confirmed rumors that had made their way to Twitter earlier this week.

The reason is fairly simple: Jamendo is running out of money after failing to raise a follow-up round of venture capital. The startup was looking to raise 1.5 million euros (roughly $2.15 million) after securing a ‘significant amount’ in Series A funding back in June 2007. The company failed to come to an agreement with Mangrove Capital Partners, its original backer, and a potential new investor.

Kratz tells us Jamendo for the past 18 months has been frantically setting up a unique infrastructure for the promotion and the monetization of Creative Commons Music, building a vast catalog of music (200.000 tracks, give or take) along with the needed technical infrastructure and legal environment for such a venture to make waves.

In March 2009, the startup debuted an online shop where music licenses for multimedia projects (think film, tv shows, documentary, DVD, promotional video, websites, etc.) and background music for shops, restaurants, hotels and so on could be purchased. Kratz dubs Jamendo a ‘Fotolia for music’ based on that positioning.

For context: artists use the service to voluntarily allow anyone to share, download or stream their music for free or in exchange for 50% of royalties, and Jamendo doesn’t impose any usage limits upon users (for which it is loved). This goes beyond what stock music and sound effects providers like for instance AudioMicro and indie music distributors like Magnatune currently offer.

Jamendo says it has attracted around 2300 paying customers since the launch of the online store, bringing it to a turnover of over 300,000 euros in 2009 with a gross margin of 50%.

Kratz informed me that the startup, along with majority stakeholder Mangrove Capital Partners, has already engaged in talks over a potential sale or merger, although he didn’t want to name names. There are lots of suitors I can think of, but that is no guarantee a sale will follow.

We’ll keep you posted on where Jamendo ultimately ends up: under the wings of another company or in the deadpool.

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