Legitimate-Content Bay?

I was surprised to see in numerous newspaper (here, here, etc.) that a Swedish firm called Global Gaming Factory signed an agreement to buy the Pirate Bay. For those unaware, the Pirate Bay, also based in Sweden, is the world’s largest Bit Torrent tracker, providing easy access to a multiplicity of files using peer-to-peer technology. An estimated 90% of these are copyrighted, and a Swedish court held the company and its founders liable in mass copyright infringement. It’s founders and financial backer have recently been sentenced to one year each in prison and millions of dollars in fines (the case is under appeal and some of the founders are no longer in Sweden).

But now, Global Gaming Factory is agreeing to pay US $7.8 million for the file sharing website, tracker, and community of users.  Global Gaming’s business plan is weird to say the least. It plans to pay royalties to the copyright owners for the files that are transferred using the tracker and make money using a mix of advertizing and the selling of bandwidth on the peer-to-peer network to internet service providers and other entities. The latter means that if a user is downloading or uploading a bit torrent file using Pirate Bay, their spare CPU, memory, and internet connection capacity will be sold to a third party who can use it for anything from SETI to DDoS attacks. The company is also planning a revenue-sharing program to kick back a part of the earnings to its users.

All of this sounds great (or not so great in the case of DDOS attacks, but the company assures us that it is legitimate), there’s just one problem: Global Gaming does not seem to have any plan on making this happen. Case(s) in point: they have not approached any of the copyright holders to attempt to negotiate prices. They have no idea how much they will have to pay to make Pirate Bay go legitimate. Analysts are also saying that ISPs will likely balk at buying bandwidth back from its own users. Users selling bandwith (which they are if there’s a revenue sharing plan) is also against the Terms of Service of most ISPs.

To add to their problems, Global Gaming is now being investigated for insider trading. Authorities noticed an unjustified spike in the price and trading volume of the company’s shares weeks before the announcement to purchase Pirate Bay was made. AktieTorget, the Swedish exchange on which the company was listed is also saying that it will broaden its investigation into the activities of the company once the sale is completed. Any illegal activities (such as distributing copyrighted content without permission) are grounds for removal from the exchange.

I find the move to buy the Pirate Bay to be a little bit weird. Global Gaming seems to be a legitimate company that owns internet cafes and produces software. It is highly unlikely that they would put out $7.8M USD if they did not have a plan. There’s something missing. For now, Pirate Bay’s previous owners are optimistic and there’s some cautious optimism in the Pirate Bay community as well. If Global Gaming manages to pull off what they’re promising, they have found a brilliant new business plan that may legalize all kinds of file sharing. The costs of failiure however, are very high. Global Gaming has a huge uphill battle ahead.

1 Comment on "Legitimate-Content Bay?"

  1. John Magyar | July 6, 2009 at 9:27 pm |

    I agree that the business model is very unusual. Since I know nothing about the costs and logistics of internet bandwidth I can’t comment on the likelihood of this model succeeding. However it should be remembered that radio lost money for years before a method of selling of advertisements was successfully implemented. This kind of unorthodox thinking is exactly what we need today. If everyone gets what they want (i.e. the downloaders get the music & movies, the distributors get sufficient royalties and the ISP’s get cheap bandwidth) then everybody is happy.

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