Shawn Fanning's baby killed by CD Baby

What led to yesterday's layoffs at Snocap, the digital-music startup founded by Napster creator Shawn Fanning? The breakdown of a deal last week with online retailer CD Baby, if not the proximate cause, was surely a signal of the startup's incipient meltdown. CD Baby is a music store that allows independent artists to sell their music at their own price, and Snocap's most significant partner besides MySpace. But, judging by the comments of CD Baby artists whose songs were being sold through Snocap's MySpace stores, that partnership has had little value.

When the relationship broke down, Snocap began sending emails to CD Baby customers, trying to sign them up directly and cut CD Baby out. Other musicians began reporting Snocap stores appearing in their MySpace profiles without approval. Others yet were complaining that Snocap wasn't providing its artists with any payout after five months. Things only got stranger with official statements from the companies.

When the deal fell apart, Snocap acted as if it was at its behest. Said Snocap CEO Rusty Rueff:

These experiences have shown us that Snocap works best when used directly by artists without the extra support of CD Baby. To use or continue using the Snocap MyStore to sell your music on MySpace, you must create a direct account with Snocap.
But a few days later CD Baby founder Derek Sivers rebutted that claim:
I'll give a public and detailed account soon. For now, just know that the ending of the relationship between CD Baby and Snocap was our idea, and done for your benefit (as well as our sanity).
Benefit of our sanity? We can't wait for the detailed account, but is it any surprise, really, that Snocap is laying off the majority of its staff?