False Start: Qtrax! Music Site Jumps the Gun

An upstart, supposedly legal music file-sharing service that opened for business to great fanfare yesterday has been forced to backtrack after the four major record labels denied the company's claim that it had secured licensing deals with them.

Qtrax, a New York-based startup, said yesterday that it had secured the approval of Warner, Universal, EMI, and Sony BMG to stream the labels' content over the web. The company's business model relies on web advertising.

There was just one problem. Today, the labels said they had agreed to no such thing.

"Warner Music Group has not authorized the use of our content on Qtrax's recently announced service," WMG spokesman Will Tanous quoted an EMI representative saying that company had not struck a deal other.

Sony BMG is out too, Reuters reported.

"Sony BMG can confirm it has not signed a deal with Qtrax for the ad-supported service," a Sony BMG spokesman told the news service.

The Qtrax backtrack was the talk of the Midem music conference in Cannes, France, where C.E.O. Allan Klepfisz scrambled to try to explain the disconnect between the company's announcement and the labels' statements.

In comments to The Times of London from Cannes, Klepfisz said his company "had secured" the industry's approval. He blamed the incident on a competitor trying to "damage" Qtrax.

"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."

"This is a tempest in a tea cup," Klepfisz told CNET's Cave blog. "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."

Qtrax also said that its service would be immediately compatible with iPods, a claim that also appears to be untrue.

by Sam Gustin