The music industry’s latest example of not understanding consumer preference has recently launched. Its called Qtrax and some have called it ‘Digital music’s latest non-threat to iTunes.’ Qtrax is an ad supported peer-to-peer software program similar to Kazaa that allows users to download songs legally but with so many restrictions its hard to imagine seeing this venture take off. The songs will carry DRM software and can only be played using Qtrax’s not so flattering interface meaning they cannot be transferred to ipods, mp3 players or burned onto CD’s – rendering them virtually useless. Does Qtrax really think that most people prefer to listen to music in front of their computer?

After installing the software I was surprised to discover there were no songs available to download. Despite claiming to have deals in place, it turns out that Qtrax has not even closed a deal with one major record label although claiming to have signed up at least 4.

With all of these negative features its hard to believe the venture has recieved $30 M in funding and recieves 1,464,000 unique users per day since its launch 3 days ago. Furthermore, the launch of such an out of date and unappealing program has even raised concerns that there may be a stock scam involved.

This business model is not entirely flawed, however, as the idea of ad supported free music holds great potential if executed properly. The way video game producers are changing their business models provides a great example. Electronic Arts has recently announced it will be releasing its latest game Battlefied Heroes for FREE. The game will be distributed online only and will be supported through advertising and micro sales (players can purchase upgrades for their characters). Although 95% of players dont buy anything, this model has worked for EA in the Asian market and they hope to bring that success to North America.

It seems the music industry still has a lot to learn but with so many great examples around its hard to understand why the pace of change is so slow.