Ad-Supported Music Downloading Finally Becoming a Reality

Spiralfrog Launches, Others Look to Enter Market. But Will Any of the Services Sound Good to Consumers?

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NEW YORK ( -- Launching a free, ad-supported music-downloading service has been not unlike downloading an actual song -- unintended glitches may occur. But despite one early, high-profile stumble and the lack of a proven model, a trio of startups is still bullish on the business opportunity.
Qtrax hopes its song catalog, which is five times bigger than that of iTunes, will set it apart.
Qtrax hopes its song catalog, which is five times bigger than that of iTunes, will set it apart.

Last fall, the much-hyped Spiralfrog announced it would make its debut by year's end as the first free, ad-supported major music service to offer downloadable MP3s of songs from a major-label music catalog (in this case Universal Music) ,with Perry Ellis as its first sponsor.

Spiralfrog held out in vain for other major catalogs and financial setbacks and serious in-fighting caused Spiralfrog to delay its December launch date and reorganize its ranks, resulting in the departure of 11 of its 23 original executives, including its CEO, former Universal McCann chief Robin Kent.

Nine months after its false start, Universal-backed Spiralfrog officially launches today, with an initial offering of about 700,000 songs. But it's got at least one major competitor already on the horizon: Mr. Kent's new ad-supported music venture, Qtrax.

P2P competition
After the Spiralfrog falling out, Mr. Kent and his colleague Lance Ford, founding publisher of the U.S. edition of Maxim, started a company called Rebel Digital and made ad-supported music service Qtrax its biggest project. Targeted toward the 13-to-35 demo, it's designed to compete with the peer-to-peer market rather than iTunes or Rhapsody but has the support of all four major music catalogs -- Universal, BMI, EMI and Sony BMG -- and an aggregation of enough music publishers, exclusive live tracks and obscure remixes to make for a launch catalog of roughly 30 million songs. ITunes, by comparison, sells only about 5 million to 6 million tracks.

"The core difference is the size of the catalogs," Mr. Kent said. "The killer app for us is in the gray area -- [aggregating] the peer-to-peer community as opposed to one website."

Qtrax will officially kick off in the U.S. by year's end, and a major international launch is set for early 2008. Its revenue-sharing model gives labels a significant cut, said Qtrax Chairman-CEO Allan Klepfisz. "If we do well, they do well."
Robin Kent may be competing against his former company, Spiralfrog.
Robin Kent may be competing against his former company, Spiralfrog.

Consumer receptiveness to ads in music services is unproved. Ruckus, an ad-supported music server offered exclusively on college campuses, is the closest any of these attempts has come to success. Although all the big music players have licensed their catalogs, Ruckus lacks at least one killer app 18-to-24-year-olds need: portability. Once songs are downloaded, users can't upload them to their iPod or burn them to a CD.

But Ruckus seems to be just as much about helping marketers target college students as it is about providing free music. CEO Mike Bebel said a major goal is to help advertisers learn more about its users and their demo.

Making a recovery
Spiralfrog, for its part, seems to have made a recovery in the past nine months. Founder and Chairman Joe Mohen said the catalog will be expanded with content from the major publishers in the near future, and he recruited another McCann vet, George Hayes, to head up ad sales. Charter advertisers include Colgate, Chevy and Discover Card, whose ads will be served during the 90-second song downloads. Age targeting allows the service to court spirits marketers as well. But for a site that was ready for launch a year ago, Mr. Mohen's definition of early success for Spiralfrog seems to be more technical than engagement-based.

"The first three months will be all about making sure the system's working, learning from the focus groups that we've made the enhancements they've requested, making sure the reporting's up to speed, the glitches are worked out. Then we'll start looking at the scale of monthly uniques," Mr. Mohen said.
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