Digital music startup Beyond Oblivion—which raised $87 million from investors, including Rupert Murdoch’s News Corp—filed for Chapter 11 bankruptcy protection Tuesday.

The New York City-based company owed creditors more than $100 million. It has estimated assets of less than $10 million, according to documents filed with the U.S. Bankruptcy Court, Southern District of New York.

Its two largest unsecured creditors: Sony Music Entertainment and Warner Music Group, each of whom are owed $50 million in “trade debt.”

The company’s other investors include the U.K.-based charitable organization Wellcome Trust, investment firm Allen & Co. and Silicon Valley-based Intertrust Technologies Corp.

Beyond Oblivion—founded by British entrepreneur and music producer Adam Kidron (pictured)—is aiming to sell its intellectual property through an auction process to be overseen by the bankruptcy court, the company’s lawyer told the Dow Jones  Daily Bankruptcy Review .

“There seems to be great interest in the assets,” Beyond Oblivion’s attorney, Gerard Catalanello, said. “There are a number of parties who have already begun their due diligence.”

The company’s aim was to launch a service that would “innovate how digital music is delivered and paid for,” Catalanello said. Users wouldn’t be charged for each download; instead the company would license music to the manufacturers of computers, phones and tablets. With their electronics, customers would then buy a license to download music for the life of the gadget, receiving unlimited downloads of everything available on Beyond Oblivion’s cloud server. Record labels would receive royalties, expected to be some 70 to 90 percent of the company’s revenue, each time their songs were played.

“We feel we’re building essentially a world-class user interface and product that users are going to be incredibly happy with,” the company’s chief financial officer, Jim Heindlmeyer, told Dow Jones’ VentureWire last March. “The basis of the model is about licensing devices. The goal is to increase revenues to the music industry.”

News Corp originally paid $9.2 million for a 23 percent stake in the company in April 2010, according to Reuters. The company poured in an additional $2 million, to own about 20 percent of the company.

Kidron—a producer for a bunch of minor early ’80s New Wave musicians including Scritti Politti—formerly was co-founder and CEO of the hip-hop website Urban Box Office Networks, which  went bankrupt in 2000 after hiring 300 employees. After a year and a half in operation, the company had revenues of $150,000—against nearly $50 million in spending.

Kidron also was the “managing partner/imagineer” at 4food, which  he describes as “a well capitalized startup restaurant company.”

Kidron’s sister Beeban is the director of films such as  Bridget Jones: The Edge of Reason . His father was the Marxist economist Michael Kidron.