Snocap, the online digital music registry that first promised to revolutionize P2P networks and then transform social networking sites into music stores, is facing some major changes.

A company spokeswoman has confirmed reports that the company is laying off 60% of its workforce and is considering selling the company to a third party after receiving interest from "several" companies.

The development is just the latest for a company that has seen significant ups and downs in its relatively short history. Founded by former Napster creator Shawn Fanning and others, Snocap's business model made sense on paper and raised a lot of eyebrows but has yet to strike a lasting chord in today's chaotic digital music space.

The company originally tried to monetize P2P networks by implementing an identification and filtering system. Labels who allowed songs to be traded would receive compensation by the service operator, while those that didn't could simply block the download.

The first such "authorized" P2P service to support the system, Mashboxx, practically built its entire business model around the capability but never launched a live service. Other similar services used competing technologies.
Snocap then switched gears and developed its MyStores service, which allows artists and labels to sell digital tracks directly to fans through customized widgets. They could set their own pricing and DRM restrictions, and place the widgets anywhere they liked.

Snocap scored a huge coup by partnering with social networking giant MySpace, which offered the MyStores service to the millions of bands registered on its site.

According to a company statement, only 175,000 users have registered for a MyStore account, needed to purchase tracks through the system, and only 80,000 bands have created MyStore widgets. MySpace alone has 100 million members and millions of bands and artists signed up.

Snocap says this year was primarily a building effort, as the MyStores program launched back in December. Although the company says the number of MyStores are growing at an acceptable rate, the company has yet to reveal any sales figures. This spring, it lowered its per-track cut of each sale to 39 cents from 45 cents in a effort to goose participation.

Snocap in June signed up another social networking site-Imeem. Record labels that license their music to Imeem allow users to stream full versions of their songs from the site at no cost. Snocap's technology identifies which songs are allowed to play in full and which must be clipped to 30-second samples. Participating labels then receive a share of ad revenue. To date, Warner Music Group and Sony BMG are the only two major labels participating in the Imeem service.

Snocap also has deals with digital music sites Reverbnation, Electronic Arts and Pump Audio, which recently was acquire by Getty Images. Snocap also had a sales deal with indie outlet CD Baby, which it dissolved last week, asking artists to sign up for a MyStores account directly rather than working through CD Baby.

The company spokeswoman says the staff cuts will not affect any of these ongoing programs.