Now Qtrax is back from the dead and — according to its founders — back on track. But what makes them think they can succeed this time?
“What we’re doing is, without question, overly ambitious,” says Allan Klepfisz, an Australian entrepreneur who, along with Lance Ford, a former British rock musician, is restarting Qtrax to much skepticism. Critics point to false starts and missteps in the company’s history and say its plan to make a profit solely through advertising is untenable.
Qtrax’s ambitions may seem quixotic, but it does offer something distinct in the current market: free and legal music downloads.
Mr. Klepfisz says he isn’t trying to compete directly with Internet radio stations like Pandora, Slacker, turntable.fm, iHeartRadio and Radical FM, or with Apple’s iTunes store for paying customers. Instead, he is aiming at the millions of people who now go to pirating sites and other outlets to download songs illegally.
About 95 percent of music downloads in 2010 were unlicensed and illegal, with no money flowing back to artists, songwriters or record producers, according to Alex Jacob, a spokesman for the International Federation of the Phonographic Industry. So riches could await a company that persuades some of these Internet scofflaws to change their ways.
Illegal downloading does have drawbacks that go beyond the threat of prosecution, which is relatively rare among average listeners. For one, the sound quality can be poor. For another, the songs on illegal sites can harbor viruses.
Qtrax says it offers free, high-quality and safe downloads, now on laptops and coming soon to mobile phones. Unlike streaming services, which need a strong Internet connection and often require subscription fees, Qtrax listeners can tune into their music where there is no Internet — on subways, say, or in that log cabin deep in the wilderness.
But there’s a catch. The Qtrax music can be played only on a Qtrax software player, which is free but must be downloaded — ads included — from the company’s Web site.
Mr. Klepfisz and Mr. Ford first introduced their baby in January 2008 in Cannes, France, with a multimillion-dollar splash at Midem, one of the music industry’s most prestigious trade shows. They rented suites at the Intercontinental Carlton hotel, in anticipation of a flood of press requests. They also sponsored lunches at the conference hall and hired LL Cool J, Don Henley and James Blunt to rock out at a private party, and the buzz was on.
They boasted of big-name advertisers, including Ford Motor and Burger King, and said they had the blessing of the major record labels, along with some 25 million tracks available for download.
But within days, one of the major labels announced that no licensing deal had been signed. Trade show attendees soon learned that formal licensing agreements had not been signed with any of the four major labels, that the depth of advertising support was exaggerated, and that the number of available tracks was highly questionable.
The backlash broadsided Mr. Klepfisz. “We took a massive reputation hit,” he says.
Mr. Klepfisz says he and Mr. Ford were simply naïve and did not intentionally mislead anyone. On the wall of their 28th-floor office in Midtown Manhattan is a sign that reads “naïve” in big block letters, given to Mr. Klepfisz by his former wife, Jennifer, as a commentary on Qtrax, he says. (She had to suffer through its first start, he notes.)
He says that talks had been under way with the four labels, and that he was led to believe that they supported the venture even though formal agreements had not been hammered out.
Mr. Klepfisz says he now has official, short-term licensing agreements with three of the four major labels — Sony, EMI and Universal. For confidentiality reasons, he declined to give details about the cost or the length of the licensing pacts. As for the claim about offering 25 million tracks, he acknowledges that he jumped the gun, saying that it was the number he estimated the company could eventually offer as the licensing agreements were rolled out.
Sony and EMI confirmed that short-term agreements with Qtrax were now in place, but declined to comment further. Universal did not return calls, and negotiations are still under way to get a licensing deal with Warner, the fourth major label. Mr. Klepfisz says all of the licensing deals will need to be renewed this year, but adds that he’s confident they will be.
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