Michael Arrington at TechCrunch threw out a big “told you so”, stating that the era of paid music downloads are coming to an end. Arrington thinks that QTrax,a new peer-to-peer music network that has signed all four major labels (EMI, SonyBMG, Universal, and Warner), is the next step to completely free, DRM-free music downloads. But, Mike, I’m responding to your “told you so” with a big “not so fast.”

Arrington says “But the trend is clear - labels have given up on DRM completely and are willing to experiment with ad supported free downloads.” Sorry, but the trend is not clear. QTrax music downloads will have a DRM wrapper. So, what does this mean? This means that the music downloads from QTrax are in fact no free — someone is paying for them. Since details are lacking, I have to speculate a bit. With DRM-wrapped downloads, I can say with a lot of confidence that QTrax knows which users have what songs and when they play them. You see, QTrax music only plays in a proprietary player build on the Songbird platform. In this player, ads are displayed while the music is playing. Here’s the theory: QTrax is paying just as much for the music as every other digital retailer, they’re just deriving their revenue from advertisers rather than direct payments from customers. There is no innovation here. Instead, this is a step back to the days of the first web bubble — let’s give the world away for free; the advertising space will cover the cost. Here’s a hint QTrax: web users are increasing getting used to advertising and how to block and/or ignore it. Good luck finding consistent advertising dollars.

QTrax will be an epic failure. They are utilizing peer-to-peer technology that offers no value to the end user. Customers aren’t trading files. All of the files need to be acquired through QTrax. So, what does QTrax stand to gain from peer-to-peer? Well, beside being able to use “hip” buzzwords like P2P they gain a little bit of bandwidth savings… but those savings will only come if they can grow the user base large enough and keep them online long enough. And advertising isn’t going to generate enough revenue to keep this service in business. People like to listen to their music on the run. QTrax doesn’t support iPods or any other digital music player at the moment. The player also won’t run on Apple computers. And, you cannot burn the music to CD to play in your car.

QTrax doesn’t add any value, in fact it takes the value of digital music away. They are betting on the public being willing to sell the freedom of digital music for $0.99 per song. Personally, I’d rather pay a buck a song to be able to play it on all of my devices and even burn it to CD if I desire. Sorry QTrax, go back to 1999… you’re model will never work here in 2008.

Technorati Tags: qtrax, p2p, digital music, free