GGF Shareholders Approve Pirate Bay Buy... But No One Knows Where The Money Is

from the still-sketchy dept

We're among those who think it's quite questionable as to whether or not the acquisition of The Pirate Bay by GGF will ever really go through. GGF's CEO Hans Pandeya has had a lot of trouble answering basic questions ever since the deal was originally announced. The company has had trading in its shares halted twice now, and many of the "big name" people that Pandeya used to show he was legit have separated themselves from the company -- often questioning Pandeya's ability to do this deal. So, lots of people are interested in the news that GGF shareholders have apparently "approved" the deal. But, that's somewhat meaningless as there still remains little evidence that GGF can actually scrape together the money needed to complete the purchase. This whole thing has been pretty questionable from the start, and there's nothing yet that suggests there's a real deal here at all.

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No Surprise Here: Pirate Bay Acquisition Falling Apart

from the and-there-it-goes... dept

Back at the beginning of July we expressed our doubts about GGF's "acquisition" of The Pirate Bay ever actually happening. The quotes from the CEO made very little sense, and he was clearly hedging his language. Some have suggested that the whole thing was just a pump & dump scam (and, in fact, there were early questions about insider trading). As more details came out, the "plan" behind the acquisition just didn't make much sense, and those on the inside started bailing out.

Greg Sandoval's been on the story, and has a few more updates that make the whole deal seem quite unlikely. First, remember how the same day GGF announced a plan to buy the company Peerialism, which would be the key component to making The Pirate Bay function as a legit service? Yeah, well, apparently GGF hasn't actually followed through on that deal at all, and Peerialism notes that GGF hasn't lived up to its contract terms or delivered any of the promised money at all -- and that no development work has been done. Then, this morning, trading in GGF shares was suspended again, as more doubts are being raised about the whole effort. From all this, plenty of people are now starting to realize there's as good chance that the deal itself is never going to happen.

The real question, though, is whether or not it was ever really expected to happen?

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Pirate Bay Sale Looking Even Less Likely

from the was-it-ever-real? dept

At the beginning of July, we questioned whether or not the announced purchase of The Pirate Bay by GGF was ever really going to happen. From the statements made by GGF CEO Hans Pandeya, it really seemed quite doubtful. Not only did he do a terrible job of explaining the plan, he contradicted himself multiple times and suggested a few times that the deal could fall through. That may in fact be happening. Two weeks ago, we noted that Pandeya had supposedly hired Wayne Rosso (former Grokster boss) to negotiate with record labels concerning a business model that didn't make much sense to us. Rosso has now admitted that he's no longer working with GGF and doesn't believe the company has the money to make the purchase, and has problems with Pandeya's credibility. So, once again, we're left wondering if this deal will ever happen.

Separately, it should come as little surprise that a bunch of entertainment companies are demanding that the Swedish courts shut The Pirate Bay down. It was noteworthy that in the original ruling against the four people associated with The Pirate Bay, the court did not issue any sort of injunction to stop the site from functioning. The folks at The Pirate Bay are claiming this sudden demand for a shut down is because the entertainment industry is trying to mess with the sale to GGF, but it certainly looks like that's falling apart on its own (as if there was ever any real meat there). Still, for all of the complaining by the entertainment companies, it seems quite premature to shut down the site when the original ruling is still under appeal. But, since when has that ever stopped the industry? In the meantime, it might not matter much even if it is shut down. Since the announcement of the GGF plan, lots of others have stepped up to try to take the place of The Pirate Bay as a key source for torrent searches. It makes you wonder who the entertainment industry will single out next? After all, The Pirate Bay was a relatively small player itself before the US entertainment interests first called it out...

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Pirate Bay's Plans Too Clever By Half: Arbitrage Consumer Bandwidth

from the this-looks-like-a-mess dept

There's a bunch of news coming out about the sale of The Pirate Bay to GGF, though it's still not making very much sense, I'm still wondering if the deal will really happen. However, it appears that GGF has started working with Wayne Ross, who ran Grokster and Mashboxx, in an attempt to get him to negotiate with the labels. In an interview, he more or less reveals GGF's plans for The Pirate Bay.

Basically, you'll have to pay to leech, but the more resources you "contribute" to the system, the less you'll have to pay, and if you contribute enough resources/bandwidth, then you might actually make some money. Then, on top of that, they believe that some content providers/ISPs will pay for offloading their bandwidth. That explains some of the earlier statements made by GGF. In theory, the idea is that it makes everyone happy. Those who pay for bandwidth on hosting content can pay a lot less. Users who contribute bandwidth end up getting free content (or potentially even making some money). And, of course, the content owners get paid.

Except... that idyllic picture starts to break down when you start to run through the details. The second the paywall goes up, an awful lot of users will abandon The Pirate Bay for friendlier non-barrier-happy sites. That takes away pretty much the entire advantage of The Pirate Bay to make this work. Even the appeal of potentially making money probably won't attract enough users. Second problem? There's no way the economics works out nicely on this one. We've already seen the sort of ridiculous rates that the RIAA wants to charge for individual streams/downloads of music. Put those numbers into this model and start doing the math... and start laughing. There's no way that much money comes into the system. None.

Finally, it leaves out an important party who clearly will not like this setup at all -- even if all the rest of it works: consumer ISPs. The real "ingenious" part of the plan appears to be that some content hosters/service providers are effectively pushing bandwidth costs away from themselves, and dumping them on retail ISPs, who offer flat-rate connections. So the real "costs" are hidden in the typical flat-rate plans of ISPs.

It's effectively a sneaky arbitrage play, whereby The Pirate Bay tries to aggregate all the unused flat-rate ISP bandwidth, and wholesale it to others, paying copyright holders in cash, and downloaders in free/cheap content. But the ISPs whose bandwidth is getting used don't get paid, meaning they're more likely to push back even more against unlimited connection plans. I just can't see how this works.

Oh, right, in the meantime, it's not clear the recording industry has any interest in playing along. They're already demanding that cash from the sale go to them, rather than the founders. Of course, that's a bit misguided, since the founders no longer own The Pirate Bay, having handed the ownership over to others in 2006. So they won't be getting any of the money from the sale. The recording industry basically says it doesn't believe that to be true, and will use the sale as evidence that the founders should pay up. Thus, it's difficult to see them rushing out to embrace this already questionable arbitrage play.

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Will GGF Really Take Over The Pirate Bay? Could Be Doubtful

from the is-it-all-a-ruse dept

Martin points us to a video interview with Hans Pandeya, the head of GGF, the supposed new owners of The Pirate Bay. To be honest, the interview seems somewhat incoherent, where he doesn't actually answer the questions, and does little to elaborate on the confusing business model he's talked about with others:

But what I found most interesting about the interview is that Pandeya repeatedly notes that his shareholders will vote on the acquisition in August, and if the company cannot show a clear legitimate business model, he doesn't think they'll approve the acquisition. The questions try to dig down on this, and Pandeya doesn't really do much to answer them, but it certainly sounds like the company has a giant out. There are some other contradictions in Pandeya's statements, as well. At one point he implies that they'll have agreements in place with record labels in time for this vote, and if they don't, then people will vote against the deal -- but then says that it will take much longer to get those deals in place, and there's no way they'd be ready in time for the vote. The whole thing remains a bizarre mystery that is more confusing than enlightening... but I'm beginning to wonder if the deal will ever happen, in reality.

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Insider Trading Suspected In The Pirate Bay Sale

from the getting-weirder-every-day dept

The whole story of the supposed sale of The Pirate Bay gets odder and odder as more news comes out. Beyond the questionable business model the new owners are discussing, now comes the news that trading in GGF shares were halted prior to the transaction due to suspected insider trading. There was an unexplained bump in trading the week before the sale was announced, leading to suspicion that people were trading on non-public news. This could create more problems for GGF. On top of that, the stock exchange GGF is listed on is apparently already threatening GGF for owning The Pirate Bay, noting that it "wants to make sure that the companies that are traded on the list are managing legitimate businesses." Given the conviction against the four people associated with The Pirate Bay, their assertion is that it's not a legitimate business. Honestly, the story is somewhat surreal and feels quite like the trial itself: a lot of people not really taking things seriously.

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

from the in-theory... dept

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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