Playlist builder Streamzy, which enabled users to build playlists based on songs from YouTube and Seeqpod, just shut its doors and is selling everything, including lock, stock and source code – on eBay, Wired reports.

The service closed on the morning of March 30 and the auction is scheduled to run through April 1. Bidding started at $1,000.

Streamzy fingers copyright problems as a major factor in shuttering the service. The company sent out an e-mail stating it couldn’t “take the heat.” When pressed for more information, Wired cites an e-mail from a company spokesman confirming the “heat” came from the music industry.

“They waste too much time worrying about other people when they should focus more on core development of their own,” the spokesman wrote.

Streamzy didn’t actually host any material. Instead, it provided an environment where users could create playlists from content hosted by YouTube and Seeqpod.

The site’s code is based on Seeqpod technology. Warner Music Group sued Seeqpod in January 2008, claiming the site’s music search engine violated performance copyrights by streaming music to its users without compensating rights holders. Like Streamzy, the site didn’t actually host copyrighted material.

One year after WMG sued Seeqpod, EMI launched its own lawsuit against the company and upped the ante by naming FavTape operator Ryan Sit.

According to The Washington Post’s TechCrunch blog, Sit developed FavTape to act as sort of a front end to Seeqpod. By naming Sit in its lawsuit against Seeqpod, EMI indicated it was also pursuing sites using the company’s licensed technology.

Streamzy is one of those companies.

However, Streamzy has yet to be sued, and the auction to sell the company may only be a way for it to exit gracefully from the music streaming arena. The site’s eBay listing states it only had about 7,000 unique users last month and currently counts only 2,400 registered users.

But you gotta admit, blaming potential lawsuits by record labels is sexier than admitting to low user numbers. Add that to selling the service on eBay and you have an exit strategy that’s getting more attention than the actual business ever accrued. Too bad the auction, which ends tomorrow, is for real and isn’t just an April Fool’s gag.

Read Wired’s account here.

Read TechCrunch’s account here.

Visit the Streamzy auction on eBay by clicking here.