News.blog: Qtrax loses track of labels

For weeks, Qtrax, an ad-supported file-sharing site, had promised to offer free and legal music downloads from all four of the major record labels when it opened for business. Turns out the start-up might be forced to go back on its word.

Despite earlier reports, Qtrax's Web site will not feature legal downloads from all the majors when it debuts today. On the eve of the site's launch, Warner Music Group and Universal Music Group said that Qtrax was not authorised to offer their music.

Both companies said they continue to negotiate with Qtrax, but emphasised that they don't have a done deal (The site was supposed to go live at midnight (EST) on Monday. An hour after that deadline and I was still unable to download music).

The Los Angeles Times reported on Sunday that New York-based Qtrax is also without a final agreement with EMI. The blog, Silicon Alley Insider, was first to report on Qtrax's troubles.

Qtrax CEO Allan Klepfisz acknowledged in an interview with CNET.co.uk's sister site News.com late Sunday evening that his company may not possess agreements "written in stone", but that it doesn't mean Qtrax is without the labels' consent to feature their music.

"This is a tempest in a tea cup," Klepfisz said from the Midem music conference in Cannes, France. "It's true, some of the deals may not be locked in ink, but it's also true that we had understandings. In some cases, we had endorsements."

Klepfisz said it was likely the Qtrax Web site would debut featuring music from all four labels despite the public comments by UMG and Warner. Is he worried about a lawsuit?

"The answer is nobody has threatened us with a thing," Klepfisz said. "We plan to release music the way we said we were."

Qtrax's business model is based on offering people an attractive and legal file-sharing site.

The company's music offering sits on top of the Gnutella file-sharing network. Once a user downloads Qtrax's software client, they can look for songs with the help of the company's finger-printing technology.

Qtrax guarantees to protect customers from spyware or viruses that plague illegal sites. The way Qtrax makes money is by placing ads on its Web pages. The company then splits the ad revenue with the labels.

Recently, the labels have embraced ad-supported models. What they don't seem keen on are ad-supported sites that offer downloads.

For example, services such as Imeem and Last.fm, which stream music to listeners but don't allow them to download it to a computer or portable device, offer songs from all four top labels.

SpiralFrog, one of the best known services and one that enables people to download to a PC and some portable devices, has been toiling in the sector for nearly two years and has only managed to land one of the biggie labels: Universal Music Group.