The service, which had raised $87m (£55.8m) from investors, pledged to provide a major competitor to the likes of Apple iTunes and Spotify.
However, its closure was confirmed by Adam Kidron, the British record producer who was Beyond Oblivion's chief executive, in a statement before the New Year.
Kidron had intended to offer an online music service, to be called Boinc, which would have been free of subscription fees, but also advertising. Instead, it would be a cloud-based offering allowing users to store and share music on multiple devices.
Under the plans, Beyond Oblivion would pay a royalty to the record labels each time their music was played, while revenue would be generated by charging a flat fee to consumers for use of the digital music locker on their hardware.
However, various reports indicate that Beyond Oblivion fell down in negotiations with the hardware manufacturers over charging shoppers for the service when they purchased the product at point-of-sale.
Investors, including News Corp and the Wellcome Foundation, are understood to have poured around $87m into the venture.
Kidron blamed the failure of Beyond Oblivion on the difficulty of "co-ordinating the diversity of the ecosystem", which includes complex royalty agreements between the artists, labels and manufacturers.
"Beyond was always a tremendously grand ambition as the advances required by the record labels and music publishers were substantial, reflecting the breadth of the rights required to create a true digital music one-stop," he added.
Various companies are currently vying for the potentially lucrative yet also extremely tough digital music market, yet only really Apple's iTunes has made it work.
Pandora, the long-running music service, recently went public with a valuation of $4bn, but the loss-making service has since seen its share price fall sharply.
The Beyond Oblivion case also raises questions over News Corp's digital strategy. Murdoch's media giant bought MySpace for $580m, but sold the social networking pioneer for just $35m last summer. Its iPad-only newspaper The Daily has also struggled since its launch.
Speculation mounted that Murdoch was about to invest in Twitter this year after the billionaire joined the microblogging site at Christmas. However, it appears that he is purely involved as a user.
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