At the Midem conference in Cannes, France, Qtrax and its parent company Brilliant Technologies Corp. announced deals on Sunday with all four major labels that would make it the first free and legal ad-supported P2P service with major label music.

This article has been reproduced in a new format and may be missing content or contain faulty links. Contact wiredlabs@wired.com to report an issue.

By allowing users to share DRM-protected files with label approval, Qtrax CEO Allan Klepfisz said he expected the service to offer over 25 million songs, dwarfing the catalogs of iTunes and other online music stores. The service launched today, after what Klepfisz called four and a half years of negotiations with the labels.

But the resulting deals are nowhere near as firm as Klepfisz indicated they were during conversations with the press last week. For example, here’s an audio sample of Klepfisz telling me that his company would announce deals with all of the major labels:

Although the company is said to be negotiating with all four labels, and has at least one confirmed current major label deal (with EMI’s publishing division), Qtrax apparently lacks current deals with the major labels to offer song downloads.

"EMI Music had an initial agreement with Qtrax, essentiallyalicense designed to help them experiment with this ad-supported modelhad licensed songs to Qtrax," said an EMI spokeswoman. "Qtrax didn’tlaunch the service duringthe period of the agreement — I think we initially did this two yearsago. We’re now in talks with the company about a possible new deal,

but as of today, they don’t have a license with EMI Music." Qtrax doeshave a deal with EMI Publishing, she said, but its license for offeringEMI sound recording downloads has expired.

An agreement with Universal Music Group has also apparently expired, while a Warner Music Group spokeswoman flatly denied any deal with Qtrax:

"Warner Music Group has not authorized the use of our content onQtrax’s recently announced service." However, sheconfirmed that negotiations between Warner and Qtrax are ongoing.

A spokesman for Sony/BMG said the label had licensed Qtrax to offer tracks from its catalog on a limited play basis in April of 2007, so long as Qtrax included an option to purchase the track once the play limit had been reached. However, Qtrax’s new service offers unlimited playback, and so it is not covered by that agreement. The spokesman confirmed that Sony/BMG is also in talks with the company to forge a new deal.

Apparently, Qtrax, eager to make its announcement during the Midemconference, misrepresented ongoing negotiations and expired deals as official major label sign-off. Thecompany certainly didn’t earn points with the media over this strategy– at least one major publication had to "stop the presses" over theweekend, according to one source.

The flub could hurt negotiations too. Now thatQtrax has promised major label catalogs to consumers, its bargainingposition with the labels may have been weakened, although aspokesman said company executives "still feel they have the backing of the industry."

Assuming that QTrax can untangle its licensing situation, it will offer a socially-driven music source for the 94 percent of internet users Klepfisz says do not and will not pay for music online.

"You can’t change the attitudes and habits of what is now probablyamounting to two generations who believe that music ought to be free onthe internet," said Klepfisz. "Those people are notgoing to be discouraged by Supreme Court decisions, they’re not goingto be discouraged by technological interference. Ultimately, what willdiscourage them is a demonstratively better service."

Songs will be wrapped in Microsoft’s Windows Media subscription DRM.

This means that unlike the free, ad-supported services offered by imeem

and Last.fm, Qtrax’s songs can be downloaded onto compatible players. The application is based on the Songbird engine, so sharing and downloading occurs within a customized Firefox browser — no separate application required.

As of now, the tracks are not compatible with the Apple iPod, butKlepfisz said that the service would be compatible with iPods beforetoo long — an indication that Qtrax could apply the subscriptiontechnology Apple developed for iTunes movie rentals to the music market.

To get the industry on board with P2P, Qtrax will sign over "the lion’sshare of revenue" to labels and publishers, paying out on per-downloadand per-play bases. The site also categorized the music of the worldinto three lists. One list includes artists who do not permittheir music to be made available online in any capacity. "The blacklist isfast disappearing — my prediction is that in a year, the blacklistwon’t be in existence," said Klepfisz. The white list consists of thestandard digital catalogs from major and indie labels — the same 5-million-plus songs that are on iTunes.

The gray list constitutes the difference between what’s available oniTunes and what’s available on BitTorrent. "Then you have the graylist, which is that vast body of stuff that’s out there on P2P, wherethere are rights holders, but the rights holders themselves may not evenknow that a song is being downloaded frequently…. To the best of ourability, we identify the rights holder and pay them a percentage of theadvertising revenue. In the minority of cases where we can’t identify arights holder, we will actually put up the song for claiming, and willreserve the portion of the ad pie until that song is appropriatelyclaimed." As with other free, ad-supported services, revenue comes fromadvertisers who want to target ads to specific types of listeners.

In negotiating with Qtrax, with whom some of them have signed deals in the past, the labels are demonstrating an openness toward revenue streams that deviate from the record-store model.

"This is a tacit acknowledgment that ‘bulletproof’ wasn’t working,"

said IDC consumer audio analyst Susan Kevorkian. "And it hasn’t beenworking. But it was an experiment the music industry needed toundertake in order to figure out how to address digital distribution.

It was a very long learning process, but fortunately there’s still thepossibility of finding the pot of gold at the end of the rainbow."

See also: