Qtrax - Jumping the Gun
01.29.08 - 10:54am
Qtrax is or was, a new advertising based free music download service that on Sunday announced that they had contracts with all the major music labels and 30 million songs available for free download. They also said they had a way to make the songs compatible with the iPod even without a FairPlay license. “We’ve had a technical breakthrough which enables us to put songs on an iPod without any interference from FairPlay,” said Allan Klepfisz, Qtrax’s president and chief executive. He further said “Apple has nothing to do with it,” something that was sure to rile up Steve Jobs to take action to prevent the downloads.
Today, however brings different news and it would seem Qtrax has much more to worry about than Apple fighting their “technical breakthrough”. Today they are fighting the record companies denying their songs and denying deals as well as a possible SEC fraud violation.
Both Warner Music and Sony BMG say they did not sign contracts with Qtrax to license their music to them.”Sony BMG can confirm it has not signed a deal with Qtrax for the ad-supported service,” said a spokesman for Sony BMG. According to Sony and Warner they did have contracts previously with Quatrax to test the service but those contracts expired last year. EMI also denied a contract saying that while their song publishing unit has a contract with the service their recorded music arm, EMI music, does not.
Over 61,000 users went to the site every hour after the company announced the news of the free service, but they went there in vain. Nothing worked, since none of the music was actually licensed for use. The premature launch may have doomed Qtrax forever. “When you launch a service billed as the first legal peer-to-peer, it sets up expectations,” said former EMI Group digital executive Ted Cohen, who moderated a panel discussion in Cannes with Qtrax Chief Executive Allan Klepfisz. “It’s going to be tough for them to recover from this.”
Klepfisz, in a phone interview from a full fledged party at the annual Midem music business conference in Cannes, France announcing the launch said, “We got nods to go ahead with the service Friday night. There’s been a misunderstanding.” He said the deals were close enough to proceed. Obviously the record companies didn’t think “close enough” was enough. Both LL Cool J and James Blunt were hired to perform at the inaugural party.
Although the record label executives say they are still willing to try for a deal with the company, it could be weeks away before any negotiations are filed. In the meantime there may be an SEC lawsuit against the company, since the stock jumped up and then crashed $25 million on the news, enough for possible fraud allegations.
Steve Jobs it would seem doesn’t have to worry about them trying to hack the FairPlay code with their “technical breakthrough” so the tunes can play on the iPod, something that would most assuredly have resulted in a lawsuit as well. Rather he gets to sit back and watch them be their own demise.
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