A Note From Allan Klepfisz

The Impossible Takes a Bit Longer

I suppose most of those that will read this first blog of mine, don’t know me. Though that doesn’t prevent a few supporters and indeed detractors from writing with the sort of certainty and detail that implies an intimate knowledge of, not only me, but also my motivations, character etc. In this age of blogging you can enjoy the illusion of having many more friends (and enemies) than you’ve really earned. Hundreds, if not thousands, can now exchange tweets with you. But I recall (from the days when I knew an occasional moment of leisure) that there’s nothing quite like a couple of really good friends. But to be a good friend of mine, these days (and I suppose for the past 8 years), you have to suffer all the considerable indignities I throw in your direction. Including but not limited to having no time to ever go out with you (or even socialize with you in my very occasionally occupied home), making highly unreliable times to talk with you on the phone, etc etc. There are clearly very few that would put up with this sort of mistreatment & so my friends are few. But hugely appreciated because I am the undeserving recipient of their undying loyalty. And they understand my obsession to accomplish the heretofore impossible. On behalf of my shareholders, my hugely deprived but amazingly focused and dedicated and inspired and inspiring colleagues & professionals, my family, my creditors & just in case I sound too damn altruistic, myself. In no particular order.

The entrepreneur- which as I write it sounds like far too pompous a title to attribute to oneself- can sometimes be selfless. Something I (usually feebly) aspire to. But if he is dedicated & “inspired” he is inevitably as selfish as hell. Because nothing stops in the way of “the vision”. And whatever he sacrifices of his own, he also mindlessly sacrifices of others. Most particularly his family. And friends. But perhaps I will try to assuage my towering guilt on another blog.

But back to my original assertion- most likely, you don’t know me. Well if you knew me, you’d know that in the mix of my few virtues & multiple flaws, I have an attribute which is probably both- to the extreme. I have a quite obsessive need to pedantically report it, as it is. Every scintillating and bloody boring detail of the truth. Unabridged, unexpurgated, relentless, accurate detail. The good, the bad & the ugly. And then some. Perhaps as a consequence, silence is a challenge for me. But one that I’ve been forced to master over the past few years- at least in so far as denying myself a voice in the public arena. My main reason for doing so is pretty mundane- no damn time. And the feeling that in the 20 or so hours a day, 365 days a year that you must dedicate yourself to achieving the impossible (and staying alive to do it), you are not doing everything that’s needed. Indeed, for all that you get done there’s so much that you can’t. And the notion of squandering time, explaining rather than doing, is not an attractive one.

But it’s become a necessary one and one that our long-suffering, amazingly supportive shareholders can rightly think is way, way overdue. So from now on, I’ve decided to use those occasional down times, when your output is curtailed by circumstances- like flying over the Pacific as I’m currently doing- to share a few facts, thoughts & lots of ramblings with you. Of course in detail. And most importantly, calling a spade a spade. Or even better, a bloody shovel.

Some of the questions I hope to answer are: Why has Qtrax taken so damn long? Why have we suffered multiple and major delays not to mention false starts? Why do we nonetheless think- more so than ever- that we have a completely unique proposition that is going to give the consumer, the artist and the rightsholders, so much more than they’ve enjoyed to date, in the digital age. And be a badly needed paradigm shift for the music industry. And why do we think- more so than ever- that the other models out there just don’t work. And what’s so damn unique about our model. And aren’t we just another crappy ad-supported model? And why would anybody believe, after all the delays, that finally we are going to be launching throughout the world, progressively? And how does an impoverished little company, that’s fought & is fighting so many battles get on its feet- financially & operationally? And when is everything supposed to be happening, this time? See that’s the trouble with the Pacific Ocean- it’s very big and the flight’s long, so you might be getting more info than you’ve bargained for.

Qtrax has taken so damn long because the impossible really does take longer. We are the only company in the world that has global licenses for free & legal downloads. From majors & indies. And there is only one territory in which they exist in the hands of others- China in which Top100 hits has a limited catalog in partnership with Google. And we have these rights for the world.

Now- am I claiming that in achieving the impossible, we’ve been highly efficient? Absolutely not. We’ve tried hard but the truth is that if total efficiency is the goal, we’ve failed. I’ve failed. You want examples of failure, wretched reader? Well here they are. We have had several iterations of the software. We chucked out the earlier ones and built something that is unparalleled, we believe, in its functionality. And ease & speed of downloading of music tracks (Perhaps 5 seconds). And accessible encyclopedic information. But in building this extraordinary product, our brilliant CTO, Chris Roe, abandoned just about everything from prior efforts. As did our unerringly spot-on content czar, Matt Kramer. So we wasted a lot of time in getting to a great product. And in shifting our team from Australia to NYC. And in stopping & starting as money ebbed & flowed. Boy, have we had a lot of stops & starts.

We’ve also been inefficient in going through two sets of expensive licenses with the music industry. We threw out the first set. They were too restrictive and didn’t allow us to present the ultimate consumer proposition: free, high quality, downloadable music. A massive catalog. Unlimited plays. Etc, etc. But the first step was the unavoidable stepping stone to the second as the industry liberalized it’s thinking.

And of course we had an aborted launch. In Jan, 2008. But enough has been written about that. Our spectacular international humiliation. That had a massive silver lining. We could demonstrate how huge a desire there was for our service. And we increased our resolve to be able to offer an unparalleled service. And globally.

But despite the fact that these “detours” have robbed us and our supporters of time, we have remained undeterred in our mission.

It’s not the done thing, perhaps, to be so direct but in my view it’s the only way to be. It may provide fodder to those that are dedicated to undermining us- whether because we are encroaching on their territory and threatening their business models (including the illegal ones that enrich themselves at the expense of the artists etc) or because they are twisted & jealous (I won’t name them because to do so would be to reduce myself to their level of character assassination). But telling it, like it is, warts & all, is pretty damn important. The twisted bloggers are great at frankness within a very narrow band- the warts of others (none of the good stuff about others ) and never, but never, their own warts. In fact, they are perfect & hence supremely qualified critics. If only the truth was not the reverse.

So, while making those lofty observations about telling it like it is, let me be even more frank. We have most often suffered delays because of lack of money. Did I say that? Do corporations ever say that? Probably not. But let’s aspire a little higher on the frankness scale. Oh, we raised a lot of money- and spent it as judiciously as we could (which we think was pretty damn judiciously), notwithstanding my confessions above to certain inefficiencies. But this is a crazily ambitious project and we’ve always needed more. Indeed, it is delays in promised monies, that have in turn, delayed us once more. Broken promises with money tend to create a vicious chain. Somebody promises somebody else who promises us. And any broken promise, in the chain, leads to delay on our part. Not to mention to our own set of broken promises. Now, don’t get me wrong. I am not attributing the blame to anybody else. The buck (or lack thereof) stops with me. Probably, by now, I should have learnt to not make ANY predictions. Even with all the requisite disclaimers. But people, rightly want some guidelines & timelines. And so we try, not often enough, to provide them. But in a way, it’s too often. Because, particularly, in these unpredictable times, it’s very easy to be wrong. Because even if you add plenty of extra time to account for the unexpected, you can never accommodate a massive delay or a completely broken promise. But none of this is an excuse for being late. Nor is it an attempt to avoid giving what will, we strongly believe, be the final, unalterable, unmovable launch time. And we’ll do that in the next week. And you’ll be able to mark it in your calendar. And we’ll do a corporate update at the same time to give you a few more things to mark in your calendar. The reason we’re waiting until next week is we want to make sure we have the money in the bank. With money comes certainty. Our detractors may rejoice at the delay. We’ll all be rejoicing very soon. With much more joy. I just hope that the disbelievers don’t own any shares. If they ever did.

Our confidence comes from the fact that we have finally found the bucks (that we thought we had before). In almost sufficient & certainly substantial quantity, to do everything we want & need to do. Now, you might justifiably ask- could something go wrong? Could there be a further delay? My answer, and the only responsible answer, is anything is possible. And you can never be certain about funding until it’s in the bank. But this should be it. We have never had more money promised, with more certainty. From sources we trust. Whose word is their bond. And worth more than a 100 page contract. But if there is going to be the slightest variation, we will inform you ahead of time. We are confident. These people have previously delivered. And delivered. A very large amount in aggregate. Microsoft has often had major & repeated delays in releases. And they couldn’t use the money excuse. In our case, I think you know intuitively, that it’s the cold, hard truth. On to the next confronting question…..

So why is Qtrax unique & uniquely powerful? Because of its licensing contracts, certainly. But also, because of its business model. Refined over the 7 years we spent in the wilderness. Working on the licenses and thinking. And thinking. And thinking some more. Let me make a few reflections in this regard although I must ask you to forgive me if we don’t reveal every aspect of our “secret sauce(s)”.

First, if you want to have a viable ad-supported model, it helps to have people that know something about ads. Too many people that come up with a technology, even a winning one, place inadequate emphasis on the importance of getting the ad part right. Which after all, is the revenue, stupid! Or much of it. Now, my partners, Lance & Robin know a damn lot about advertising. They have lived it & breathed it for their entire professional lives. As many of you know (and are thankful for), Lance was (among many achievements) the founding publisher of Maxim magazine. And during the 8 or so years under his leadership, against all odds, the magazine became the number one men’s magazine in the US & sold hundreds of millions of dollars of ads to advertisers for our demographic- 15-35 year olds. And Robin- was of course the global Chairman & CEO of Universal McCann. In fact, made it agency of the year. These two guys happen to be damn smart at what they do. And not too dumb, otherwise.

Secondly, you need to make the site attractive to advertisers. Obvious, you might say. Well, not obvious enough to be a priority to so many sites including most that offer music. They are sinfully unattractive. Especially to advertisers. And user-generated content doesn’t help either. It often makes advertisers nervous. And most of the big sites to date, are based on user generated content. Which gives us a massive opportunity. Because advertisers need to come online to find our demographic. But they want to do it in a predictable environment.

Third, you need to be realistic about your revenues. Most of your income is going to come from network ads. Those low paying ads that populate most sites. You’re not going to earn a high CPM for them. In fact, you are going to early a decidedly lousy CPM. And only a small percentage of your inventory is going to be premium advertising which will necessitate negotiating with an advertiser and getting a more decent rate. But your business has to survive on low CPM’s and if it can’t, you’re up the proverbial creek without a paddle. We have tweaked & tweaked our business model, to make sure it can. And Robin has then modeled our business model- 23 times to date. Not because he loves the task but because we take this shit very seriously. Because guess what- we’ve worked this hard to create a successful business. Not a money, losing proposition. When (ok, if & when) we have tens of millions of users, we want also to be profitable. Call us weird.

Fourth, you need to be mindful of your costs. Something that streaming services are discovering. And they account for all of our free music legal competitors. And you need to find a way to make your licensing costs bearable. Something we’ve worked very hard at.

Fifth, you need to have a sure way of getting massive audience. And we are creating that sure way. By engaging the dominant sites, search engines & media players in each territory. In short, by getting off our asses, leaving the comfort of the US and talking to eager marketing partners. My partner Lance has sacrificed his home life (not to mention his golf) to take to the road with me. Interminably. As has my long suffering partner, Chai. And Robin. And Alex. Perhaps not the common way for people in our industry. But a damn effective way.

Sixth, what about the local music? If you leave the safety of your home country and pound the overseas pavements, you might notice that taxi drivers in Hong Kong listen to Chinese music, in Turkey to Turkish music, in Dubai to Arabic music etc. So it takes effort & we are just beginning but we are intent on hunting down the sources of local music in every country we’re going to be operating in. And having something other than your standard, US, ethnocentric, music service.

I could probably go onto to 20 more unique aspects of what we’re doing. But as Dylan says, “Time is an ocean but it ends at the shore” and they’re serving breakfast on this flight which means the Pacific is soon ending and land is in sight. Apart from which, there has to be something left for another monster blog or 2.

But I haven’t answered all the confronting questions, I posed and I know there’s at least one miserable soul out there who is waiting to fault me on being evasive about something.

Just a word, then, on our battles. We have had every type. Battling against an old model for the music industry. Which served it so well for so long. But which the ability of consumers to bypass the CD, rendered obsolete. If you can get music free, albeit illegally, you will. And that’s why, perhaps 95% of consumption, perhaps much more, is illegal. And if you can buy, legally, just the track or 2 you want from an album, you will. Which is why both illegal activity & legal activity are making the industry cry out for a new model. But our departure from any conventional model was radical. Too radical. And we had to battle hard for it. And we did. And did.

And we battled the complexity of licensing. Our licensing guru, Rick Riccobono went on a mission to London to sort our the insanely complex terrain of European publishing licensing. He’s got it sorted after being there for 2 grueling years.

And we’ve battled to raise money. And to raise it while being honest (if sometimes wrong). Every day for about 7 years. Every day. With the help of a team that I thank hugely. They know who they are. And the money raised has mostly been from genuine investors who have mostly remained very enthusiastic for the entire period. Which has been really more than we could expect or deserve. Much more. But also from toxic PIPES/death spiral funds (Google that!) and inadvertently from some undesirables and we’ve ended up in legal battles with several of them. And a couple of suppliers who may or may not have done the right thing by us. And sometimes, frankly, we haven’t done the right thing by others, either. Like not being able to meet checks on their due dates. And as inexcusable as that has been, one by one we have worked thru situations to ensure that everybody gets paid. Even if it means dipping into our own pockets. No hiding behind the corporate veil for us. Whether it takes personal guarantees (& exposure) or personal funds, we’ve done what is required to keep the company afloat.

And we’ve battled to remain in control of our destiny. This has been a critical and constant battle. Because everybody knows how to do it better. But thankfully our largest funders have been the wisest. They’ve known that to tame us is to destroy us. I believe we have the most talented team ever assembled to get this job done. From our office manager Teo (who has to put up with both you & us), to the IT, content, licensing, advertising & funding execs. They’re nothing short of brilliant. And dedicated, And loyal. We’re also damn unconventional and we’re going to stay that way. You think we need to become more mainstream, more corporate? Screw you.

And we’ve battled to simply exist. To keep the lights on. Not to go the way of so many others. And to survive personally. I am both proud and ashamed that management is the largest creditor of this company. You’d understand why.

And we’ve battled not to dilute the hell out of shareholders while raising funds. And somehow we’ve succeeded in this regard more than could perhaps be expected.

We are nothing if not dogged. And stubborn. And determined. And God willing, our reward & that of our large number of stakeholders, is that we are very soon going to launch a powerfully attractive music service, with leading internet & media companies as marketing partners. That have existing substantial users. And we’ll progressively roll it out throughout the world.

This is the least that you, our long suffering, supporters deserve. And while it’s perhaps more than I deserve because of how long it took me to get here, as long as there’s breath in my body, I will not rest until it’s achieved. Of that you can be certain.

–Allan Klepfisz