Ad-supported music downloading could prop up a music industry that's seeing CD sales drop off at a fast clip, reports The International Herald Tribune.

At least one analyst from Jupiter Research wonders whether there's enough potential in a model such as this to see real revenue numbers. Labels have been extremely hesitant to offer any sort of free music previously, but the inclusion of advertising into the mix has done a bit to overcome some concerns. Large labels, including Warner, Sony and EMI, have already expressed their interest.

Services such as SpiralFrog and Ruckus have or are working on deals with the record labels to make their music available online for free with ads. One such venture is Qtrax, which would deliver contextual ads to users running searches in the network. Advertisers would not be able to target by band or artist but can specify a genre. Music can then be played or purchased for download, essentially creating two revenue streams for labels.

Qtrax, a start-up that opens for business in September, has already developed vendor relationships with Sony BMG, Warner Music and EMI Group. Universal Music and Merlin, an independent label, are waiting in the wings.

Qtrax operates in the same way a file sharing program does, searching the Gnutella network. It will only display files it has permission to play, and users may listen to material a certain number of times before accessing an option to purchase it.

Relevant ads will appear alongside the content. In the same way commercials support TV show production, ad revenue will be used to compensate labels who agree to make music available on Qtrax.

Labels have been hesitant about the notion of providing free music. However, they are also in dire need of a new business model; while revenue from legitimate online stores like iTunes grows, it is not growing fast enough to support plummeting compact disc sales.

One reason why Qtrax has seen success in its search for vendors is because labels are hoping the convenience of the service will attract illegal downloaders or "media pirates."

CEO Terry McBride of Nettwerk Music Group confirms this belief. "My philosophy is, don't try to get people to consume the way you want them to. Figure out how they’re consuming music, market to that and monetize their behavior."

Qtrax was founded four in a half years ago as a rogue file-sharing service in Melbourne, Australia. It was shut down six months later.

"Our challenge is to demonstrate that ad-supported peer-to-peer is lucrative enough that everyone is going to be happy," said Klepfisz. "The real issue for the industry is that right now there are all these people paying nothing for music."