Project Playlist Gets Tangled In MySpace Music CEO Search

Project Playlist is one of the many online music services that have popped up over the last few years. It’s both a search engine and a playlist generator – users search for music that’s located on third party websites and then create playlists which can be embedded elsewhere.

The legality of music search engines is far from clear, as we’ve written about earlier. The company says they pay royalties for songs that are streamed, but that wasn’t enough to stop the RIAA from suing them for copyright infringement in April 2008.

The reason for the lawsuit, which is aggressive even for the RIAA, is that Project Playlist has grown into one of the larger sites on the Internet. Worldwide Comscore stats say the site had 822 million page views from 9.3 million users in September, up from 446 million and 5 million, respectively, a year ago. The number of users is probably somewhere around 20 million.

The company has raised around $3 million from venture capitalists as well as angel investors. They have been unable to raise a new round of financing, sources say, until the RIAA mess is cleaned up. And of course investors are unlikely to pour money into the company since those dollars will just run out the back door to the RIAA in a settlement.

Own Van Natta (Facebook’s former Chief Revenue Officer), is one of the investors in the company. He was until recently being recruited by MySpace to run the new MySpace Music property.

Knowing that the company was in a bad spot, Van Natta may have spearheaded efforts to sell Project Playlist to MySpace while simultaneously interviewing for the CEO spot at MySpace Music. The dual effort put some MySpace execs off of the candidate, our sources say, because they felt that they may have had to acquire the company to get him on board.

Van Natta won’t return emails to discuss the issue, and MySpace isn’t commenting. But it’s clear that MySpace isn’t buying the company, and that Van Natta is no longer in the running to take the CEO role at MySpace Music.