The Daily Swarm

UPDATE: LAT: Qtrax jumped gun on online deal:

Label executives, some of whom had agreed to support an earlier, less radical, version of the system for ad-supported downloads, said they were either still negotiating with Qtrax or were willing to do so.

But they marveled at the company’s willingness to officially proclaim something that wasn’t there. Qtrax even released supportive quotes from record-label executives that had been agreed upon more than a year before and that referred to different incarnations of the service.

Brilliant Technologies shares set a 52-week high of 9.2 cents Friday in heavy over-the-counter trading before any official announcement. But trading volume tripled Monday and the share price plunged to 5 cents, cutting the stock’s market value to about $35 million.

That market value drop of more than $25 million should be enough to trigger a shareholder class-action lawsuit alleging fraud, Columbia University securities law expert John Coffee said.

“There will predictably be some litigation,” Coffee said. “There’s a good chance the SEC may take action too.”

A spokesman for the Securities and Exchange Commission said the agency couldn’t comment on specific companies. He noted that such “pink sheet” stocks as Brilliant Technologies’ face much less scrutiny than companies trading on major exchanges.

Qtrax spokesman Justin Kazmark declined to comment on the applicability of securities laws forbidding false material statements.

UPDATE: Qtrax First Look: Nice Interface, but Where Are the Tunes?:

So was Qtrax’s announcement some sort of sick joke? Why did the company claim that the deals were in place?

One answer lies in the massive amount of media attention garnered by the announcement. (Regrettably, I was an unwitting participant: In the future, when a company claims to have deals with all four major labels, I’ll make at least four phone calls before writing a single word.)

But there are shreds of truth to Qtrax’s claims, despite its confounding launch strategy. The company has signed deals with major labels in the past. In one case (EMI), the deal expired before the launch announcement, and in another (Sony/BMG), the deal only covered limited-play downloads, not the unlimited-listening downloads Qtrax claimed it would offer. And in some cases, Qtrax has deals with publishers allowing it to make and distribute copies of songs, but lacks deals with labels that would allow users to hear them. Isn’t copyright law great?

Qtrax maintains that the labels will sign their contracts soon, and that users can expect to receive activation keys shortly that will allow downloading to begin. We shall see. Until then, Qtrax is just another music playback program, albeit one developed by a company with a questionable grip on reality.

UPDATE: Qtrax CEO: ‘We Are Not Idiots’

“We are not idiots,” he said.“We wouldn’t have launched the service in front of the whole music industry unless we had secured its backing. We feel we have been unfairly crucified because a competitor tried to damage us. Everyone is very upset.”

Mr Klepfisz’s company put posters in Cannes claiming that the launch of the service would be the “second coming,” and hired stars including James Blunt, LL Cool J and Don Henley of the Eagles for the event.

“We do have industry agreements including the major labels. Even today we are working on more deals,” Mr Klepfisz said. He added that although “ink hadn’t dried” on some of the deals, Qtrax still planned to deliver on its promises “within months.”

UPDATE: Sony-BMG: We Don’t Have A QTrax Deal, Either:

Not a huge surprise at this point, but Sony-BMG doesn’t have a deal with free music service QTrax, says a person familiar with the situation, who says the two companies are in discussions.

For the record, that means that QTrax doesn’t have a deal with any of the four major music labels for the ad-supported, peer-to-peer download service it is debuting this morning.

Paid Content: Qtrax Launches Free Music In A Blaze Of Questions:

Qtrax, a new P2P service offering free ad-funded music, spent big marketing bucks to set up big expectations here in France – but, despite being due for download at midnight EST, the software still appears unavailable and questions have surfaced about its bold claims.

Five years in the making after having shut down in the wake of Napster (NSDQ: NAPS) Qtrax is a marriage of Mozilla’s open-source Songbird music player with Rebel Digital, an ad sales house set up by SpiralFrog alumni that will tout inventory in the service and in which Qtrax has invested. The idea is to legitimize P2P by passing ad dollars back as royalties (from clients said to include McDonalds, Microsoft (NSDQ: MSFT), Ford and Samsung). The outfit reckons illegal P2P downloads outnumber iTunes sales at least 20–1. “We want to put an end to it,” CEO Allan Klepfisz said in the press conference, aiming to tempt users with not just tunes but reviews, biographies, concerts and any other content that can be delivered through Songbird’s built-in Firefox web browser.

L.A. Times: Major record companies weigh deal with online service:

Major record companies may be considering deals with Qtrax to allow music lovers to listen to any tune, anytime, free of charge.

Qtrax says that the four big labels—Universal Music Group, owned by Vivendi; Sony-BMG Music Entertainment; Warner Music Group; and EMI Group—have agreed to license their digital catalogs to the service, which aims to exploit online music bandits for commercial purposes.

Executives at Universal, Warner and EMI say they haven’t signed deals with Qtrax, though a Universal spokesman says the label is “really close” to coming to terms. Officals with Sony haven’t returned phone calls.

Silicon Alley Insider:

QTrax officials said they had deals with WMG, Universal Music Group, EMI and Sony-BMG, which would give them access to a catalog at least as big as the 5 million tracks that Apple sells through its iTunes service. But we’re told that the service’s previous deal with Warner, signed in 2006, expired last year.

Over the weekend, QTrax officials were still trying to convince Warner and UMG to sign on. On Saturday Robin Kent, who handles marketing for the company, allowed that its paperwork with labels might not be up to date. QTrax had “the blessing” of all four majors, he told SAI, but “two of the four are more happy about it than the other two.”

Times UK: From today, feel free to download another 25 million songs – legally:

After a decade fighting to stop illegal file-sharing, the music industry will give fans today what they have always wanted: an unlimited supply of free and legal songs.

With CD sales in free fall and legal downloads yet to fill the gap, the music industry has reluctantly embraced the file-sharing technology that threatened to destroy it. Qtrax, a digital service announced today, promises a catalogue of more than 25 million songs that users can download to keep, free and with no limit on the number of tracks.

AP: Qtrax Aims to Offer IPod-Friendly Tracks:

The service, which boasts a selection of up to 30 million tracks, also promises that its music downloads will be playable on Apple Inc.‘s iPods and Macintosh computers as early as March.

That’s unusual, as iPods only playback unrestricted MP3s files or tracks with Apple’s proprietary version of DRM, dubbed FairPlay.

“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.

Klepfisz declined to give specifics on how Qtrax will make its audio files compatible with Apple devices, but noted that “Apple has nothing to do with it.”