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@ MidemNet: Qtrax Launches Free Music In A Blaze Of Questions

MidemNet 08Qtrax, a new P2P service offering free ad-funded music, spent big marketing bucks to set up big expectations here in France – but, despite being due for download at midnight EST, the software still appears unavailable and questions have surfaced about its bold claims.

Five years in the making after having shut down in the wake of Napster (NSDQ: NAPS) Qtrax is a marriage of Mozilla’s open-source Songbird music player with Rebel Digital, an ad sales house set up by SpiralFrog alumni that will tout inventory in the service and in which Qtrax has invested. The idea is to legitimize P2P by passing ad dollars back as royalties (from clients said to include McDonalds, Microsoft (NSDQ: MSFT), Ford and Samsung). The outfit reckons illegal P2P downloads outnumber iTunes sales at least 20-1. “We want to put an end to it,” CEO Allan Klepfisz said in the press conference, aiming to tempt users with not just tunes but reviews, biographies, concerts and any other content that can be delivered through Songbird’s built-in Firefox web browser.

“The biggest hurdle has been licensing,” Klepfisz conceded – though Qtrax now cites contributions from all four majors and some indies and claims to carry over 25 million licensed tracks. This from the LA Times, however, is an embarrassment: “Executives at Universal, Warner and EMI say they haven’t signed deals with Qtrax, though a Universal spokesman says the label is “really close” to coming to terms. Officials with Sony (NYSE: SNE) haven’t returned phone calls.” (More in this AP story on the the not-yet-signed deals)

The IFPI industry body last week said only six million tracks were licensed for online internationally. Where do the extra 19 million come from? Qtrax’s secret – “we don’t acquire them, they exist on P2P – we’ll start with the Gnutella network”, Klepfisz said. So Qtrax piggybacks the existing P2P net, filters out dodgy content and includes everything else. It differentiates between what it calls “white”, already-licensed music, “black” music rightsholders are withholding from download and so-called “gray” tracks (think concert bootlegs, mashups) shared by Gnutella users that could potentially be licensed. It’s these “gray” tracks Qtrax says it has agreed to license from labels, vastly increasing the available repertoire. But for an industry notorious for making even legal licensing difficult, this sounds like an utter minefield.

Klepfisz: “The Limewires, the Kazaas, the Morpheuses did not a cent of advertising; the great social networking successes of recent years, likewise, didn’t do any advertising. If we’re able to be modestly successful and claw back some of that 99 cents that’s stolen (Klepfisz said artists were only getting one cent in the dollar), it’s going to make a massive difference. In a decade’s time, it may be that paying for music online may be something of the past but that there is enough income that the industry earns its payday.”

Going against Qtrax: Songs can’t be burned to CD or transferred to any portable devices (though portability is due on February 29 and an “iPod solution” on April 15). Klepfisz couldn’t answer questions on what file format or audio quality his service uses (“Once again, that’s a bit technical for me – unfortunately, I’m not qualified to tell you what those minimums are” (it’s a proprietory “MP3-quality”, ‘MPQ’ format that includes a Windows DRM layer to count track plays for royalties purposes, though other DRM standards are due to be added)… Klepfisz’s bio says he’s previously worked in the restaurant, textile and chemical industries. Users must revisit the service every 30 days to retain their music. And many people set their music player in the background after pressing “play”.

Qtrax’s marketing spend here in Cannes has been enormous. A giant street banner warns delegates 617 million songs will have been downloaded illegally during Midem, posters with slogans like “It pays to be free” are absolutely everywhere, Qtrax has a whopping 32 staff and at least five marketing consultancies in on the books here, while dozens of PR bunnies wear t-shirts bluntly proclaiming “We won’t get sued again.” They’re even set to sponsor a Nascar team, had both James Blunt and the Sugar Hill Mob perform for them and have an even bigger American rocker lined up to play tomorrow.

If this all sounds familiar, with big claims on ad-supported music services, then it is: SpiralFrog had similar big claims two years ago, but fizzled out last year with management trouble and lack of funding. It is trying with a renewed push this year.

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