Crave

Executives from MySpace officially announced the creation of MySpace Music, a service that will be jointly operated by News Corp.'s MySpace and, at least initially, three out of the four top record labels.

The Thursday morning teleconference MySpace held with the press was anticlimactic since details about the service have been leaking for weeks.

The service will roll out gradually over the next three to four months and offer free streaming music, unprotected MP3 downloads, ringtones, and e-commerce offerings such as merchandise and ticket sales, said MySpace CEO Chris DeWolfe. Among the top four music companies, EMI was the lone holdout. A source with knowledge of the negotiations said that MySpace and EMI continue to seek a deal.

For more on this breaking story, see News.com's coverage.

The music industry is preoccupied with giveaways these days.

The latest example will come on Sunday, when New York Daily News subscribers will find an access code in their paper that they can use to retrieve three free songs from EMI Music.

Subscribers punch the code into the newspaper's Web site, Nydailynews.com and the music is theirs. They have over 120,000 tracks to choose from.

Among the songs available is an unreleased track, "It's Love" by Ringo Starr. The promotion will also run on the following Sunday, the day of the Grammy awards.

Combining music with newspapers (two industries being pummeled by the Internet) was a powerful mixture for rocker Prince last year. The rocker made news last July by giving away copies of one of his CDs to readers of a London tabloid.

Lenny Kravitz is launching a similar giveaway in Great Britain on Feb 3.

Radiohead redefined music giveaways with its "pay-what-you-want" offer in October.

There's plenty of people in the music industry that fret that giveaways devalue music.

While it must be noted that the Daily News is compensating EMI for the songs, it's still important to point out that to the public, these days the word "music" trails the word "free" like a caboose.

At first blush, Qtrax seemed like a good idea.

Executives there wooed reporters by promising to corral illegal file sharing. They built an interface on top of the Gnutella network where millions of songs are pirated. They pledged to offer users a legal way to download and share music.

Qtrax managers said they had convinced the big record labels that it could turn file sharing into a cash cow for them. They said all four of the most powerful labels were on board.

But on Monday, Qtrax was more than 12 hours late launching its music service. A day earlier, the big record companies made news by contradicting Qtrax. They said the company was not authorized to sell their music.

What was once an eagerly awaited debut is turning into a fiasco for the New York-based start-up, which has tried for more than a year to get off the ground.

The issues with Qtrax illustrate two things. First, the labels have clearly signaled that they are willing to give ad-supported music a try--just not with downloads. Secondly, Qtrax executives should know better than to announce deals when they don't have ink. Qtrax CEO Allan Klepfisz told CNET News.com on Sunday that the company had agreements, but acknowledged that they just weren't signed.

But everybody knows that without signed contracts, there is no deal.

Perhaps actress Kelly Preston said it best in the movie Jerry McGuire: "It's not 'Trust my handshake.' It's make the sale. Get it signed. There shouldn't be confusion about that."

As Qtrax struggles with licensing deals, the big record companies are partnering with a growing number of ad-supported sites that stream songs to listeners but don't allow the music to be downloaded to computers or digital music players.

Services, such as Imeem and Last.fm, which only stream songs, offer music from all four major labels, Universal Music Group, Warner Music Group, The EMI Group, and Sony BMG Music Entertainment.

Meanwhile, SpiralFrog, one of the best-known services and one that enables people to download to a PC and a handful of portable devices (but not the iPod), has been toiling in the sector for nearly two years and has managed to land a music deal with only one top label: Universal.

But how did Qtrax get mired in this mix up? Is the company a victim of a misunderstanding? Were executives overly confident when boasting to reporters that they had signed the top labels?

After interviews with managers at Qtrax and the record labels, it appears that a bit of both occurred.

Previously, Qtrax had succeeded in striking agreements with at least two of the record companies as the start-up was preparing to ramp up. But sources with knowledge of the deals said those deals have expired.

Qtrax is close to getting signatures from Universal and EMI, said the source but, "Qtrax spoke too soon."

How this public relations nightmare affects Qtrax's prospects for the future is unclear. But don't believe the old adage that all publicity is good publicity. As it stands, the debacle undermines Qtrax's competence, if not its integrity.

UPDATE: 7:12 A.M. (1-28-08): Qtrax continues to delay the launch of its much awaited legal file-sharing site as more record labels confirm that the startup doesn't have permission to sell their music.

For weeks, Qtrax, an ad-supported P2P site, had promised to offer free and legal music downloads from all four of the major record labels when it opened for business.

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

Both companies said they continue to negotiate with Qtrax, but emphasized that they don't have a done deal. A spokesman from Sony BMG echoed the other two companies by confirming on Monday morning that the label has not signed on to Qtrax either.

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

Meanwhile, Qtrax has missed it's launch time of midnight Monday morning ET. More than eight hours later, visitors were still not allowed to download music. Robin Kent, a Qtrax marketing executive said that it might be another 24 hours before the company can enable downloads.

Qtrax CEO Allan Klepfisz acknowledged in an interview with CNET 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.

Rapper Saul Williams

(Credit: Atticus Ross)

Could John Hammond have discovered Billie Holiday, Bob Dylan, or Bruce Springsteen by scrolling through MySpace pages?

The Babe Ruth of talent scouts, Hammond made Artists & Repertoire guys famous. These music-label reps have a storied history of haunting backwater honkey tonks, nightclubs, and dive bars in a quest for hot new acts. In the future, some may be asked to forget the clubs and restrict their searches to the Web.

Private-equity firm Terra Firma, the company that acquired record company EMI in May, is now trying to attract investors by floating a plan that includes drastic cost cuts at the struggling label, according to a story in The New York Post. The paper said that according to a "confidential investor presentation," Terra Firma is considering slashing EMI's fixed costs by $223 million.

Under the proposal, EMI would slice $58 million from its A&R and marketing budget. The savings would come from requiring talent scouts to rely more heavily on sites such as MySpace to find talent, the Post reported. The company would also use social-networking sites to promote acts. The plan is only under consideration and final decisions have not been made, one of the label's spokesmen told CNET News.com.

Nonetheless, this shows just how much influence MySpace has acquired in music circles.

The site is already teaming with hopeful musicians who may find it beneficial to build jaw-dropping Web pages and MySpace profiles to help them stand out.

Rapper Saul Williams, who is distributing an online-only digital album called, The Inevitable Rise and Liberation of NiggyTardust, said MySpace is helping to boost ticketsales.

"MySpace has made people more interested in seeing live performances," Williams told CNET News.com during an interview two weeks ago. "Its extremely exciting for me to see how the Internet is bringing more people to live shows than ever before That's one thing you can't duplicate on the Internet. You can't get that exhilaration that comes from a live performance from a computer screen."

If that's true, can is MySpace really an effective tool for A&R guys?

"It's true, you can find some interesting music on MySpace," said one music record executive, who asked to remain anonymous because he has dealings with EMI. "Yet, I look for bands with strong live followings and a strong live presence and there's no substituting getting out there and seeing whether someone can actually play. I don't think you're going to find the next Bob Dylan on MySpace."

Rob Sheridan, a designer who's worked in the music industry, has posted a 6,000-word diatribe bemoaning the shutdown of file-trading network Oink and predicting (and encouraging) the death of the major-label system. It's an entertaining read, and should be required for Guy Hands and anybody else in the executive offices of the major labels. And he's not the only one who's predicting the death of the label system.

I'm currently reading a fascinating book, The World Without Us, which imagines what the world would be like if humans suddenly disappeared. So here's my thought experiment: what if we woke up tomorrow to headlines that all four majors had decided to get out of the music business and had freed the artists from their contracts? What would the business of music look like? ... Read more

Guy Hands is the head of equity firm Terra Firma, which took over music label EMI earlier this year. A few days ago, Hands sent a memo to all EMI employees outlining his basic vision for the company, and Hits Daily Double got ahold of the memo and published it.

Guy Hands, head of Terra Firma, which owns EMI

(Credit: Terra Firma)

As with most corporate memos, it's short on specifics--these communications always get leaked, so executives are naturally careful with them. But it's surprising to me how little mention he makes of digital technology. After a cursory note that technology should be "seen as an enabler, rather than a threat," the subject never comes up again.

Ironically, EMI has taken some tech-savvy steps this year. Notably, it was the first of the big four to offer its songs for download without digital rights management protection, allowing users to transfer them among multiple devices without restriction. According to an analysis by music-industry blog Coolfer, this gamble appears to be paying off: EMI's share of the digital market has gone up, even as its share of CD sales has gone down. In other words, EMI hasn't had as many high-profile releases as its competitors--hence, the decline in CD share--but despite this, its digital sales have gone up. You could reasonably credit the lack of DRM as a reason, although it might also be due to high-profile artists (such as the individual Beatles' solo albums) coming online after years of not being available.

Again, corporate memos are notoriously bland, but I'd expect at least a few specific areas of concentration. Should EMI push to release its entire back catalog digitally? What about subscriptions as a sales model? How can a music label cooperate with Web sites to earn money from crazes like social networking and online video? Will EMI try to reduce Apple's power over digital downloads, and what steps might they take to do that? Should labels change how they compensate artists to make up for the lower production and distribution costs of downloads? These are some of the questions EMI and the other labels are wrestling with, and it would have been interesting to see them addressed, or at least acknowledged.

Yesterday, the New York Times ran an article about Imeem, pegged to the news that this fledgling site has signed a third major label, EMI, leaving only Universal in the "not yet" column. The service is getting credit for trying to pioneer a new business model for digital music distribution: users can select songs and stream them for free, as long as they're willing to sit through the occasional advertisement.

I registered and fired the service up, and while I'm not ready to call ad-supported music DOA, Imeem isn't about to unseat the current digital music leaders. The main problem: I don't know what I'm supposed to be doing on the site.

(Credit: Apple Inc.)

According to CNET's own experiments, the iTunes Plus feature that launched Wednesday and allows you to upgrade previously purchased EMI song files to the DRM-free versions appears to have a neat side effect.

The upgrade, which costs 30 cents per song or $3.00 per album, seems to be based on iTunes account purchase history, not whether the song file resides in your iTunes library.

Figure out the perk, yet?

It means that those of us who have lost a previously purchased iTunes song file due to a corrupted or lost laptop, now have a chance to get it back for only 30 cents more. While Apple has been known to restore lost DRM files in some extenuating circumstances, many people have had to repurchase them or go without.

Apple did not immediately reply to our request for comment on this found feature.