Self-styled "P2P radio" network Social.fm has gone out of business. A visit to it's Web page merely states "The Company is unfortunately no longer in business and therefore cannot continue its service to you." It closed July 31.

It's unclear why parent company Mercora went out of business, and representatives could not be reached for comment. Mercora recently raised $5 million in funding from Norwest Venture Partners. It also earlier this year scored a distribution deal with Microsoft that added the service to Windows Mobile-enabled smartphones.

The Social.fm service skirted the legal line very closely, using a mix of user-provided content with DMCA rules. Rather than licensing music from labels directly, it used P2P technology to read the music libraries of any member signed into the service at any moment. Rather than letting other users play the songs on-demand, it would randomly stream this music based on the DMCA rules regarding Internet radio.

It's quite possible Social.fm fell victim to the new Copyright Royalty Board ruling dictating how Internet radio sites paid for streaming music under these same rules. Additionally, the startup faced increasing competition from free on-demand services like Last.fm and Imeem, which offered more advanced features as a result of having direct label licensing deals.

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