A Shakeout in the Nascent World of Ad-Supported Song Downloads

Ad-supported song downloads sure seem like a good idea. After all, most everything else online is ad-supported, and the record labels are getting so desperate they appear willing to consider anything, even doing away with DRM altogether. But giving people music in exchange for watching ads hasn’t worked out too well so far – partly because the labels always attach some strings. Back in August, SpiralFrog was the first company to make a splash with a deal to distribute music from EMI, but it never signed any more major labels and many executives and sales staffers left in December. Also, the DRM on the songs was out of hand. A couple other similar companies appeared but generated little buzz.

Now a few former SpiralFrog execs have founded a new online rep firm called Rebel Digital to work with labels and publishers focused on music, including music download services. Its first big customer is Qtrax, an ad-supported peer-to-peer music distribution platform that has already won the catalogs of three major labels plus a slew of minors.

“What we liked about QTRAX is… it’s fishing where the fish are,” said Rebel Founder Robin Kent, referring to its new client’s P2P focus. Kent expects to offer a range of ad formats, including sponsorships, video and display units. Much of the ad revenue may come in the form of on-demand content, including videos and ringtones, from other recording artists.

Qtrax places some major restrictions on music it offers free with ad support, allowing only five or so plays for songs from the major labels.

“We believe that as the advertising starts flowing, that number will be relaxed, and the ultimate goal is… completely free music,” Allan Klepfisz, CEO of Qtrax parent Brilliant Technologies, told me yesterday. Many indie labels offer unlimited plays on their songs.

Qtrax will also sell songs directly to consumers with no strings attached.

Klepfisz acknowledges the songs-for-ads tradeoff has yet to be tested on a large scale, but he’s optimistic the songs-for-sale model will be replaced entirely be an ad-based system.

“We will be selling music. However we don’t really see that as the future of music,” said Klepfisz. “We’re pretty convinced there is enough advertising [money] out there… Up until now, in some ways, the music industry has not adequately embraced this possibility, but it is now happening.”

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