Music social network Imeem has acquired Snocap, the struggling digital rights company founded by Napster creator Shawn Fanning.

Terms of the deal were not disclosed, though its believed to be less than $5 million. That's a ridiculous discount to the $25 million that investors (including Morgenthaler Ventures, WaldenVC, and Court Square Ventures) sunk into Snocap.

Imeem, which uses Snocap technology, is gaining the firm's content identification technology and a digital registry, as well as its COO. Snocap's CEO Rusty Rueff is moving on.

Snocap's technology matches digital music to its database of 7 million songs, which then lets Imeem figure out how to allocate portions of its advertising revenues to the music companies who own the copyrights to the songs.

Snocap has been on the chopping block for some time, so it's not necessarily indicative of a massive downward trend. But it's another example of how the business model for digital music - even those that are fairly useful - still has yet to be worked out. And why some of these artificially bloated VC-funded companies haven't quite figured out that whole "sustainable" piece yet.

I'm not saying that Internet Radio isn't a threat to the big-bad broadcast infrastructure. Of course it is, and a looming one at that. But many of these companies haven't quite discovered the business model yet.

And there's still plenty of opportunity to get in on the action.

[TechCrunch, paidContent]