I need your advice! Startup Failing. Should I simply release the product?

Get the product into as many people's hands as quickly as possible, as massively as possible. If there's a chance that some hacker is willing to do some of the work to make it work with other media formats, then for heaven's sake open source the product (or part of it like pg said). What do you have to lose? You're product is more than just a list of features. Believe it or not, many people will not do a point-by-point comparison of your product with other products- there's the coolness factor, loyalty to you and your company, the subtle touches of your product, the way you support it and it's users, the vision you have of how it can be used to enrich someone's life, how frequently you respond and update it, etc. etc.

None of that will matter if no one is using it. Start a following. It may fail either way- that's got to be part of the reason you still have a day job, but it has absolutely no chance of success if no one is using it and spreading the word about it.

jwercker has some great advice - you need to get this out there. The other products are pulling ahead because they're actively building a community. You aren't!

Adding to that, you may want to take some time to invest in a communications "strategy". After reading your post and checking out the website, I don't think I have much of a clue as to what your product does, other than maybe allowing me to organize media in some way... how will that benefit me? How is it better than the products your competitors have released?

You need to build the community, but in order to do that, you need to communicate how your product is going to improve that community's lives in some way - and you need to do this on the front page of your site.

A little later, I was at another startup whose product IMHO sucks *more*. They, however, are profitable. They manage to get customers to fork over several hundred thousands dollars to use the product.

There's almost *always* a buyer if you look hard enough. Entrepreneurs are usually the most critical of their own product; they ought to be, that's what makes them improve. But chances are, somebody somewhere really wants what you're making, and your job is to find them.

You sunk a lot into this and giving it away would yield you 0 return. I understand that. But don't let regret and hindsight turn into future mistakes. Get it out there and get yourself a user base.

ASSUMPTION?: I'm assuming your product is a shrink wrapped binary to be released to one operating system for single users (from what I've read on your product).

COMMUNICATION: I cannot really view your software, but it looks like its a binary application. Unlike its web counterparts, your audience cannot simply use your software. This is by far the biggest hurdle. If your audience cannot use or see your software they will judge (rightly or wrongly) by what information you offer. Do you show on your website, blog or other forms of communication the following?

* product summary?: simple sentence explaining problem solved

* why better/product comparison: how is your product than competitor(s)?

* features: list of things the software does

* scenario: small stories of how certain problems are solved

* images: screenshots of major forms

* blog: meta behind the scene view of product (my favourite as you can really guage the product process) & how real users solve their problems (hopefully with your software)?

* forums: what problems people are having

* price: what is the price of your software? No price, even if its alpha still give a hint

DELIVERY: Are you going to have your software on your website? Or are you going to look for the best couple of sites that offer downloads for new & categorised binary software like Tucows or Cnet.com? The ranking and categorising of products make it easier for users to find new & interesting software and also makes it easier for developers to find their markets. From here you can work out important things like pricing, feature matching etc.

'... Your first set of problems revolve more around business & distribution than software and engineering. ...'

CONCLUSION: Notice I've not added any development problems here (release planning, defect processes, etc ...) Your first set of problems revolve more around business & distribution than software and engineering. Since you have invested time & money and you want to protect your investment consider the following. Go back to marketing 101.

Invest the time (not money) to see how you can improve the communication of your product on your site. Then concentrate on placing your product with Cnet. At the same time maintain your job (and income) & improve the existing code but not new features.

There are other alternatives, explore those. I do not suggest you open source the product. If you have created a site that communicates the benefits of the product. Found a way to deliver the product to consumers. Then you can work on selling. This is going to take longer than you probably think.