Legitimate Pirates

According to the BBC, the world’s most notorious peer-to-peer file sharing website, The Pirate Bay, is going legit. In case you have not heard, TPB was sold off for about US$7.8million a couple of days ago. Everyone has been wondering what would happen to our last bastion of legal piracy in this world. It seems that our questions have been answered by the company who is taking over TPB. Their premise is quite interesting – that the only way to beat a “free” service is to pay users to share files.

The only difference would be the legality of the files being shared. At present, there is a lot of copyrighted content being freely shared on TPB. What the new parent company plans to do is to work out a mechanism for compensating the copyright holders and the file sharers financially. In theory, it is a sound proposition. From an abstract view, we can see the file-sharers as a massive content distribution network that works very well. The parent company plans to use this massive network to help content owners distribute their content more quickly and efficiently.

However there are a few questions that pop up.

It makes sense for content providers to pay money to use the distribution network to help them get their content out. The distribution network then becomes a service that is exploitable. However, in order for this network to be worth anything, it has to guarantee some sort of service level, which ultimately depends on the number of file sharers linked to the network. The file-sharers are encouraged to join the distribution network by receiving financial compensation for using their computers and bandwidth. However, all this hinges on the value attributed by the users to the network and the content. If the price is wrong, then the file-sharers will drop off the network faster than you can say bittorrent. I just don’t see them paying the users enough to gain a critical mass of file-sharers that is needed to become a formidable distribution network.

Let us start with the network. This business model introduces the problem of valuating bandwidth. ISPs sell bandwidth based on very fundamental costs that are translated from the physical infrastructure costs, maintenance and service costs. The new TPB can’t possibly pay more than the cost of bandwidth charged by the ISP. By paying less than the value charged by the ISP, they force the file-sharers to evaluate the value of 1kbps. However, the value of 1kbps is different for everyone. Someone who does not use their bandwidth much will value it less than someone who is consuming 90% of their bandwidth already with little to spare.

Another problem is that of content. The value of the Internet comes from the fact that it does not discriminate against content. However, file-sharers are highly discriminatory. Everyone cares about the kind of content that gets stored on their computers and gets shared to others. I can see the porn industry being interested in using this service to distribute their wares. If the network is content agnostic, it should not matter to anyone if they are distributing porn. However, it will definitely affect the file-sharers (either way) and it doesn’t just stop at porn. If the network is content dependent, then there will not be any sort of guaranteed service level for the content providers. This will ultimately reduce the value of the system.

Anyway, much of this is just conjecture. I don’t really know if they will succeed or not. I guess that even the new owners are not quite sure. They are quoted as saying: “this technology is new. For now, we’re outlining our intentions and asking users to have faith.”