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.

Filed Under: arbitrage, bandwidth, bittorrent, business model, content, file sharing, wayne rosso
Companies: ggf, the pirate bay


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  1. identicon
    Jim, 16 Jul 2009 @ 6:39pm

    Don't forget the DRM requirement!

    Although all major music labels will sell MP3s, they still want DRM for videos (which means they have clearly learned nothing). All major movie studios currently WILL NOT allow someone to legally distribute their movies over the Internet as downloads without DRM. So, unless TBP adopts DRM, there is still no way they are going to distribute even old releases from the majors (Sony Pictures, MGM, Universal, Disney, Fox) or even large independents (Lionsgate), without value-destroying DRM. The only exception to that rule is Flash streaming, which employs a collection of measures (i.e. SWF authentication, encrypted streaming, etc.) that the majors call DRM light.

    You are right, Mike. Most current users will simply abandon TPB. And unless the new site offers consumers something more with their download, such as easy DVD burning, quality guarantee, etc., then all users will abandon TPB. You did, however, forget to mention major studios' DRM requirement for any kind of download, which by itself would make TPB as unusable as every other DRM-based download offering ever created.

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