As those of you who don’t surf the web under a virtual rock are already aware, the “Pirate Bay Four” were found guilty by a Swedish court of “assisting in making copyright content available” back in April. Site operators Peter Sunde, Fredrik Neij, Gottfrid Svartholm, and apparent tech facilitator Carl Lundström have a year in jail to think about what they’ve done, and have a $3.6 million dollar tab for damages to split amongst themselves. Despite the verdict, the site has continued to operate til present, some 20 million regular users strong.
Throughout the trial, the prosecution contended the sites’ co-founders brought in as much as $4 million per year in advertising revenues, while the defense argued no profits were made – hence any illegal activity was actually on the individual users who chose to participate. In an ironic (or is that hypocritical) twist, it looks like the Pirate Bay is about to be sold for a hefty profit. Details are being finalized at this point, with sources reporting Swedish based “Global Gaming Factory X” putting up somewhere between $7.7 and $7.9 million dollars for the acquisition – making that $3.6 million dollar fine look like chump change. [full text press release, PDF]
So what’s a Swedish company to do with an organization recently convicted of illegal activity by Swedish courts? Legitimize it, of course. Stick with me for a moment folks, if this business plan doesn’t make any sense to you, you’ve got the jist.
First, Global Gaming chief exec Hans Pandeya, plans to license content from media companies for legal downloads. That’s right – they’re expecting the likes of the Sony and Viacom and Fox and Warner Brothers of the world embrace the namesake Pirate Bay to legally tout their digital wares. No, it’s not deja vu… how’s that business plan working out for you Napster? Surely, those 20 million users in search of free downloads will stick around when the site’s offerings are slashed to near nothing and will suddenly see the light and start paying for it.
Next comes some premium advertising. Pandeya and co hope to raise up to $50 million per year in ad revenues on the newly legit ‘Bay. As of now, the Pirate Bay (and sites like it) have difficulty finding advertisers that will even touch potential breeding grounds for digital theft. Advertisers on display range from bottom feeders to downright scammers, bidding at some of the lowest CPMs on earth. But hey – once it goes legit, everybody will forget the past! Large companies will surely see that same light the users do, and will ignore history to put their highly protected trademarks and reputations all over it. (You might want to turn down your sarcasm detectors if you haven’t already; I’m not responsible if they blow a gasket.)
But lastly, we have a real gem of a business idea. The Pirate Bay is going to get in the Internet services biz. They’re going to take the concept of peer-to-peer and leverage those millions of users’ Internet connections… Users can opt in to a program where they share their existing bandwidth with a peer to peer “cloud.” Internet service providers can rent capacity on this network when they need short term boosts of bandwidth to handle unusually high loads. This new technology is called “Peerialism” and potential uses might be streaming video during major media events (like the great bandwidth drains earlier this year care of studious employees watching the NCAA Final Four on their work computers.) After all, this distributed model has been used by legitimate researchers to do things like search for aliens and seek out a cure for cancer. Only here, users will be compensated – financially – for participating. Earnings might be paid out directly, or used within the site to purchase music from the afformentioned licensees.
Cool idea on the bizarro Internet, perhaps. In the real world, the whole idea is perposterous. It’s against the terms of service set by pretty much every single Internet Provider out there. Looking at my own provider’s ToS, I can count at least half a dozen ways this violates my contract. Save yourself the legal jargon – here’s the synopsis, assuming a residential connection. You can’t use the service to make a profit or run a commercial endeavor. You can’t re-sell your connectivity. You can’t redistribute audio/visual content. You can’t charge others in any way shape or form for access to any facet of your service. You get the picture. Ignoring the fact this will either be blocked by your provider or cause your connection to go dark without a refund, it still doesn’t make sense if you consider who the intended customer is: Internet pervice providers. Why again will an ISP essentially buy back the bandwidth it just sold you? It’s like buying a dozen ears of corn at the grocery store and telling your grocer “hey, I just noticed you’re short 12 ears of corn, I’ve got a dozen here you might be interested in!” ISPs already have bandwidth sharing strategies to buy bandwidth from one another when their tubes get clogged… but SURELY they’ll want to go around in circles and buy their own bandwidth back care of their own customers in violation of their own terms of services – from the Pirate Bay, of all places. (OK, you can turn those sarcasm detectors back on, I’m done.)
In summary, so long Pirate Bay. It’s been a good run. And while I’m not a certified financial advisor and you should always read your prospectus first… if Global Gaming Factory X or “Pirate Bay 2.0” ever goes public, you might want to devise a short sale strategy.