The Pirate Bay's New Owners: Service Providers Will Pay Us, We'll Pay Users

from the in-theory... dept

Wed, Jul 1st 2009 12:10pm — Mike Masnick

One of the things that got a lot of attention with the announced sale of The Pirate Bay to GGF was the claim that the new owners would launch new business models that would compensate copyright holders. Many took this to mean that it would stop offering tools where people could freely exchange content themselves -- but that's not what GGF said. It just said it would compensate copyright holders. That could involve a variety of different business models, as surely they recognize that trying to charge directly would simply lead to mass abandonment of The Pirate Bay. And, indeed, it appears that GGF isn't planning to charge users at all. Instead, it's actually trying out a business model based on BitTorrent's original purpose: making sharing files more efficient by breaking up the pieces so that a single source doesn't bear the brunt of the bandwidth costs. GGF's argument is that they can use the community at The Pirate Bay to reduce congestion for ISPs and bandwidth costs for other service providers. On top of that, GGF claims that rather than having users' pay, its plan is to pay users for providing a service to those who have files to distribute. In an interview with the BBC, GGF's Hans Pandeya explained the plan:

"More than half of all internet traffic is file sharing and P2P [peer-to-peer] traffic and buying Pirate Bay gives us one of the biggest sources of traffic.

"We can then use this massive network of file-sharers to help [internet service providers] reduce overload.

"Let's say a popular song comes out. Rather than a million downloads from a site - which would cause a considerable strain on that ISP - we can take that song and put it out on P2P.

"The copyright holder still gets paid, the users still get their file, the ISP doesn't have a million people all grabbing a file and - for the users who share that song - a payment for putting that file on the P2P network."

This is the sort of thing that sounds good in theory, but that the entertainment industry will never go for. GGF is right, in some ways. The fact that individuals are sharing the content via BitTorrent actually is helping decrease the distribution costs, but as we've seen, the entertainment industry likes to ignore that, and assume that the entire value is in the content, not in the distribution. I can't see the entertainment industry seeing this as a viable solution, even if it makes some amount of sense (distribution is expensive, GGF can use TPB to reduce distribution costs, that seems like a service worth paying for). I just don't see the industry buying into it.

Separately, I have to take issue with one comment from GGF:

Mr Pandeya said that one of the biggest hurdles in overcoming illegal file-sharing was that there was zero cost to the users, while legitimate sites required users to pay for content. The only way to make something more attractive than free was to pay users to share files.

On this, he's fundamentally wrong. There are many ways to make something more attractive than free without paying users. In fact, there are many cases where paying users actually makes something less attractive than free because they're doing things for non-monetary reasons, and the money actually changes the equation significantly. Yes, paying users is potentially one way to make something more attractive than free, but it's hardly the only way, nor is it always the best way.

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Filed Under: business models, file sharing
Companies: ggf, global gaming factory x, the pirate bay

28 Comments

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C.T., 1 Jul 2009 @ 12:20pm

That article/interview is really confusing. Having read it, I still have no clue what it is GGF plans to do with The Pirate Bay.
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Anonymous Coward, 1 Jul 2009 @ 12:30pm

These guys appear to be making a very serious mistake: The are assuming that traffic is something you keep forever. Slap a price on the TPB, and the traffic will pull a Napster.
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Anonymous Coward, 1 Jul 2009 @ 12:56pm

So, basically, they'll pay me in content (say the newest video game that everyone is raving about) in return for me helping them distribute content (the aforementioned video game)?

How does this pay for content creation?
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Jeff, 1 Jul 2009 @ 12:57pm

It's time...
for a new Pirate Bay. TPB2.

Quickly, someone get started on this.
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Brooks (profile), 1 Jul 2009 @ 1:00pm

Payment does change the equation
In fact, there are many cases where paying users actually makes something less attractive than free because they're doing things for non-monetary reasons, and the money actually changes the equation significantly

Indeed. This brings to mind an probably apocryphal anecdote from a professor I had. It goes like this:

There's a older guy who takes great pride in his lawn. It's a huge and gorgeous piece of grass, and he puts a lot of work into maintaining it, and has done so for years. One weekend, to his dismay, a bunch of high schoolers show up and start playing football on it.

The game is noisy and irritates him, and tears up his lawn. During the week, he repairs the damage, only to have the same thing happen the next weekend. He's really irritated, but he knows enough about kids to realize that he can't yell them off his lawn, and that if he calls the police or something, he'll probably get his windows broken or worse.

So, being a smart guy, one day he goes out to the kids and tells them how happy he is that they're playing football on his lawn, and that he gets great value out of the entertainment they provide, so he wants to pay them. He'll give them a dollar each, every day they show up to play. The kids are thrilled.

This goes on for three or four weeks, the old guy shelling out $20 or so a weekend. Then, one day, he very apologetically tells the kids that he can't afford to pay anymore, but that he hopes they'll still play on his lawn. "No way," the kids say, "if you're not going to pay us, we're going to take our game somewhere else!" And they do.

Note to the literal minded: this probably never happened; it's just told to illustrate the point that money changes perception, and perception changes behavior.
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robin, 1 Jul 2009 @ 1:15pm

show me the money
@ mr. pandeya: where's the money coming from to pay, upfront, the copyright holder?

also his statement: "Let's say a popular song comes out. Rather than a million downloads from a site - which would cause a considerable strain on that ISP..." doesn't make sense to me. where in the real world is this happening? apple's itunes servers are more than capable, as are their external service providers. there aren't any backbone problems anywhere. there aren't any big content players serving up files anywhere. wth does he mean? who's going to pay him to solve this "problem"?

sounds to me like smoke and mirrors to hide the simple fact that he's buying a data transfer technology and infrastructure to help his internet cafe business.
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Anonymous Coward, 1 Jul 2009 @ 1:18pm

I worked for a company who tried this. We actually got contracts from the major labels and some game and audio book content. Margins were so small and credit card fees were the killer. We ran out of money and folded.
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CreativeLinks, 1 Jul 2009 @ 1:24pm

What?
Step 1:
Pay hackers to put up copyrighted content, and have users freely download that content, while paying the legitamate owners of that copyright the fees their legal team requests.

Step 2:
???

Step 3:
Profit.
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Anonymous Coward, 1 Jul 2009 @ 1:36pm

Re: What?
"Step 2:
???
"

Step 2:
Sell the website to a public company and run away with the money, thumbing your nose at all the people who though you were in it for the cause, not for the cash.
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Dark Helmet (profile), 1 Jul 2009 @ 1:38pm

Re: What?
"Step 1:
Pay hackers to put up copyrighted content, and have users freely download that content, while paying the legitamate owners of that copyright the fees their legal team requests."

Haha, hackers. If Zero Cool and Acid Burn are uploading copyright content, they have dropped off in my eyes in terms of stature.

"Step 2:
???"

This is why you aren't a business owner and/or entrepreneur for the internet era. Btw, I'm not either, but that doesn't mean that type of business genius doesn't exist.

"Step 3:
Profit."

Indeed.
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Fushta, 1 Jul 2009 @ 1:53pm

Re: show me the money
I think the only way this mysterious "problem" can be alleviated by TPB: Apple has to pay for the resources for iTunes (infrastructure/people/etc), but if TPB can take the load from their servers, then Apple doesn't have to pay as much to keep the servers up.
It's like paying someone to mow my lawn. Sure, I could do it, but I gotta buy gas, and it's 100 degrees out. Plus, I could sell my lawnmower, and get some cash. I'm offloading my problem onto someone else, and paying them for the service.
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Anna Karlsson, 1 Jul 2009 @ 2:01pm

Exciting & brave but I'm sceptic
I'm a Swede, I've followed TPB trial and am now excited about this turn of events. It's definitely about time that a new business model regarding entertainment content emerge but I am not sure GGF is smart enough to pull this one off.

1) Transaction: Free and easy is better than making a buck on something complicated
2) The industry: TPB trial shows what mindset the entertainment industry have, music is one thing but movie and TV?!?! Hulu is not open for outside US, Spotify has had to fight hard on a very simple model, this is far more complex. Jerry Maguire says "show me the money" so does hollywood...
3) The Brand of TPB: Making TPB ligit is like teenagers' parents comming to rock conserts, it hurts the experience more than it makes daddy cool.

Sooo, all in all - exciting, brave but I'm a sceptic...
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Brooks (profile), 1 Jul 2009 @ 2:06pm

Re: Re: show me the money
That business model exists. It's called CDN.

Bandwidth is cheap; while it may be that a million simultaneous downloads of a song from one server is a problem, any reasonable CDN can handle it, and the costs are fairly low.

I'm skeptical that the cost savings of P2P outweigh the added complexity, security issues, and, heck, the *name* TPB.

But I have to thing the GGX folks aren't total morons, so they must have a model in mind that either removes unauthorized copyrighted material sharing, or monetizes it. My guess is that they figured the purchase price was so low that the PR alone ma be worth it. Heck, if the TPB had announced they were for sale *I* could have wrangled $8M to buy 'em.

Heck, you could probably turn around and sell TPB to the RIAA/MPAA for $15M, at least.
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Matt, 1 Jul 2009 @ 3:05pm

Lets examine The Pirate bays "new" ideas for its "inovative bussiness model.

Superdistribution-Fail unless its a streaming ad supported model(see adware) ...but look at Joost (although that was bad management)

Distributed Caching -Some success but not a great business model just have a look at Bittorent and Cachelogic .

AdwareSpyware -this is where you might make some money
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Anonymous Coward, 1 Jul 2009 @ 3:37pm

Seems to me that they are trying to gather all the seeders and leachers. If they pay it will attract more users, in turn for all we know these new owners could be in conjunction with the entertainment industry. All these corperations seem to become more and more consolidated.
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Anonymous Coward, 1 Jul 2009 @ 3:48pm

Re:
Except if they are paying for the seeders and leechers, then they are in business of procuring infringing material for the most part. There are almost no "pure" trackers out there, there are almost not "clean" systems. So if you are paying people to rip stuff off and put it online, you create possibly the easiest to prove conspiracy case ever.

So far this is reading like a bad remake of Dumb and Dumber. Wanna bet that BrokeP and his friends will be dumping their shares very soon? Take the money and run, laughing at all of you.
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pd, 1 Jul 2009 @ 4:10pm

Sounds similar to a company I know of, http://www.invisiblehand.net/.
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Halo Inverse, 1 Jul 2009 @ 6:24pm

Doesn't seem so unfeasible to me...
My initial comment ended up being longer than the original article, so here's a quick summary, leaving out the core premises and logical structure:

Tag torrents by the original producer of the content, or their representatives. Maintain strict upload/download ratios, but sell blocks of download credit. Credit sales go into a pool, which gets divided among content producers, in proportion to download volume per payment cycle.

Micropayments go away, artists get paid, seeders get compensated for buying high-tier Internet service for their uploads, hosting costs and marketing effort shift to users, "criminals" are re-named "crowdsourced volunteers". Lawyers get to stop suing five-year-olds and the dead for more than their lifetime net worth, and can move on to something more profitable instead of trying to "make examples" of people for no significant return on investment except bad press.

If my logic's correct, everyone can profit - artists, *IAAs, ISPs, even dedicated users-formerly-known-as-criminals - except for producers of poor-quality content, whom no marketing blitz will be able to save.
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Halo Inverse, 1 Jul 2009 @ 8:07pm

Re: Doesn't seem so unfeasible to me...
Ignore my musings, it looks like that's exactly what's being planned. Except that instead of paying seeders in download credit, they'll be paying seeders in...cash?

Okay, that doesn't quite make sense. Yes, dollars are potentially more attractive than megabyte-credits, but it seems to double the number of user-side cash transactions required. Why so much banking overhead? Unless the "cash being paid to seeders" can be kept on file and immediately applied to a download being requested... Marketing jibba-jabba may trump economic efficiency yet.
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Brett Glass, 1 Jul 2009 @ 9:44pm

Bogus
BitTorrent's original purpose was not "making sharing files more efficient by breaking up the pieces so that a single source doesn't bear the brunt of the bandwidth costs." It was twofold: to facilitate piracy and to take server bandwidth from ISPs without paying for it. ISPs bear the entire brunt of BitTorrent's bandwidth costs, which are high because BitTorrent is extremely inefficient. (Just think of the overhead of establishing all of those connections.) Like some other greedy content providers, the buyers of The Pirate Bay plan to make their money on the backs of ISPs and copyright holders. Don't believe otherwise for a picosecond.
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Tor (profile), 1 Jul 2009 @ 11:58pm

ISP traffic reduction savings
I think it's interesting to compare with this Torrentfreak article about an ISP intercepting torrent files and adding an additional tracker of theirs with local seeds in order to reduce the bandwidth costs due to people communicating with peers outside their network.

Convincing content providers to pay would probably be quite difficult, so I think it might be easier to get ISPs to pay for the service of minimizing their traffic with external networks. However it's hard to see how that alone would make the torrent database and bittorrent tracker service any more legitimate from a legal point of view.

Btw. on of the main IP-critical intellectuals has written a blog post about what GGF really bought: The schizo-politics of The Pirate Bay, Inc.
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Mike Masnick (profile), 2 Jul 2009 @ 2:01am

Re: Bogus
BitTorrent's original purpose was not "making sharing files more efficient by breaking up the pieces so that a single source doesn't bear the brunt of the bandwidth costs."

Uh, yes, it was actually.

It was twofold: to facilitate piracy and to take server bandwidth from ISPs without paying for it.

Neither of these are true -- and you should at least admit your own bias: that you own an ISP.

BitTorrent has actually always been a rather bad solution for "piracy" because it's so easy to trace users. In fact, Bram made that point quite clear when he first launched it. It really is a rather inelegant solution for piracy. I'm still surprised it became used so much for it.

As for "taking server bandwidth from ISPs" that's pure bull and you know it. The mistake was THE ISPS for offering unlimited bandwidth and then freaking out that people actually used it. Bittorrent merely recognized that people weren't actually using their bandwidth so it looked to make that bandwidth useful.

To then BLAME them for doing exactly what ISPs SPECIFICALLY ALLOWED is the height of ridiculousness.
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Anonymous Coward, 2 Jul 2009 @ 3:32am

I don't think that this can work.
The film industry will insist that everything will have some kind of DRM on it and who will want to download that?
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Yeebok (profile), 2 Jul 2009 @ 4:50am

oh for unlimited bandwidth
Far as I'm aware the original purpose of bittorrent was to reduce overhead, you can grab bits of files from anywhere, and -reduce- traffic at the server level. In theory, the server may send downloaded file once only, but 500 people end up with a complete copy.

Being able to download a portion of a file from anywhere meant you could also pick a file up at your connection's full speed, theoretically faster than the hosting server could provide it on its own.

It was never intended for piracy, but neither were telephones lines, or the postal service. Things get used to do what they're good at doing. Bit torrent is good at distributing and that's something piracy needs, is a good method of distribution.

As for ISPs offering unlimited bandwidth, well you reap what you sow. If you offer to bend over for customers, expect some of them to get the lubricant out. Where I live, 25Gb's a fairly large limit. The 53Gb I'd get if ADSL2 was available (same $) would be nice but alas I can't at this address for some reason. I'm not in the US.
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luckybleu, 2 Jul 2009 @ 7:30am

licensing
GGf is either lying or crazy and has something else up their sleeve.To pay copyright holders means going through the licensing process,the majors will never ,never never,ever come on board with this who are they kidding at best they can make an imesh out of all this.never ,never never ever,will the pirate bay be legal,maybe they will keep the name thats about it.
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Brett Glass, 2 Jul 2009 @ 12:56pm

BitTorrent rips off both copyright owners and ISPs
To say that I'm "biased" because I'm an ISP misses the point. Everyone should be "biased" against theft. And that's what P2P is. It is ovewhelmingly used for theft of intellectual property, and is also used to take bandwidth from ISPs in violation of those ISPs' terms of service. No ISP promises "unlimited" bandwidth (we certainly never have in our 17 years of business) or unlimited amounts of data. Bandwidth costs money, and no one can afford to give it away for free. Content providers who want to distribute their content should pay their freight for server bandwidth; not surreptitiously steal it from ISPs by setting up servers that violate the ISPs' terms of service.
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Fausty, 2 Jul 2009 @ 5:00pm

Reverse merger
Kind of strange that nobody's calling this transaction what it actually is: reverse merger. Detailed analysis available here, posting link rather than crossposting the whole shebang:

http://www.cultureghost.org/viewtopic.php?f=17&t=2699

Fausty
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Anonymous Coward, 20 Jul 2009 @ 2:57pm

Re: Payment does change the equation
Great anecdote and very appropriate. thank you
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