Media Wonk

Will Qtrax find Harmony with Apple? - January 28, 2008

The long-awaited relaunch of Qtrax as a free, licensed P2P service got off to a rocky start at MIDEM over the weekend as Warner Music Group, Universal Music Group and EMI issued statements following the Qtrax unveiling denying that final licensing deals with the service are in place. According to this report by Silicon Alley Insider, Qtrax "repurposed" an old quote from WMG exec George White to give the impression of a fresh endorsement, apparently without his sign-off, a monumentally stupid thing to do from both a PR and partnership perspective. Qtrax plans to offer unlimited free music downloads on its ad-supported platform, splitting the ad revenue with artists, publishers and labels.

There was another intriguing element to Qtrax's announcement though that could also spark controversy. Although Qtrax downloads will not initially be compatible with Apple iPods, the company plans to introduce an iPod-friendly version later this year. Qtrax plans to wrap its downloads in Windows Media DRM, preventing them from being burned to a CD but allowing transfer to a portable device. Normally that would make them permanently incompatible with iPods, which support only Apple's proprietary FairPlay DRM or DRM-free MP3 files.

Qtrax says it has found a way around that problem. "We've had a technical breakthrough which enables us to put songs on an iPod without any interference from FairPlay," Qtrax CEO Allan Klepfisz told AP. Klepfisz provided no further details, but stressed "Apple has nothing to do with it."

That's pretty much the same thing RealNetworks said in 2004 when it introduced its Harmony plug-in for Rhapsody, which made Rhapsody tracks playable on iPods. At the time, however, Apple was not amused, accusing Real of "hacker tactics" and threatening legal action.

No lawsuit was ever filed. Apple eventually disabled Harmony through a series of iPod firmware updates and Real eventually moved on to other strategies. But the issue was never formally resolved.

Is that what awaits Qtrax? Much has changed since 2004, for Apple and the rest of the industry. For one thing, Apple is officially no longer quite so committed to the idea of DRM. Plenty of other online services have by now also made themselves compatible with the iPod by going DRM-free, including major players such as Amazon. Although the iPod remains the dominant portable music player, even Apple seems to have accepted that iTunes is losing its monopoly on music sales to iPod owners.

That doesn't mean it's going to be thrilled about someone hacking around in its proprietary software, however, especially if anything Qtrax has done implicates Apple's iPod patents. Should Apple resist Qtrax, we could be in for a very interesting showdown.

As a practical matter, you're not really in the portable music business if you can't get your tracks onto iPods. Although Apple seems to have conceded that DRM-free music is here to stay, and will be a significant source of tunes for iPod owners, limiting other vendors to a DRM-free format limits the type of business models they can follow.

Qtrax, for instance, plans to use Windows DRM to count the number of times a track is played and the number of times an ad is served against it so that the revenue can be appropriately allocated to rights owners. If the only avenue to the iPod for an outside vendor is to go DRM-free, however, Qtrax's free, ad-supported model is basically out the window. And if Qtrax can't get its tracks onto iPods, it's basically out of business.

How will Apple respond? Media Wonk won't pretend to know the mind of Steve Jobs. Much will probably depend on how exactly Qtrax's has managed to get around FairPlay, and whether it impinges on Apple's intellectual property. If it does, however, and Apple takes action against Qtrax, it would pit Apple's right to defend its IP against the possibly anti-competitive effects of foreclosing certain business models for distributing music online.

That would be worth sticking around for.

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