Sat, Jul 04, 2009 - Page 9 News List

New boss hopes to turn Pirate Bay into a cash cow

By Eric Pfanner  /  NY TIMES NEWS SERVICE , PARIS

Free music and movies, mostly pirated, abound on the Internet, but Hans Pandeya thinks he has an even better offer than free. He wants to pay Web users to share songs or films — with the full approval of copyright owners.

Pandeya, chief executive of a small Swedish software provider called Global Gaming Factory, said on Tuesday that the company had agreed to acquire the Pirate Bay, a file-sharing service whose founders were recently sentenced to prison for assisting in illegal copying.

Global Gaming Factory, a publicly traded company based in Stockholm, said it would pay 60 million Swedish kronor (US$7.75 million) for the site and hoped to turn it into a legal source of free music, movies and other content, using a novel, untested business model.

“Content owners hate file-­sharers, but this is going to change,” Pandeya said.

It would be a radical change.

The Pirate Bay, its Jolly Roger logo serving as the talisman to an estimated 20 million copyright cheats, has been the music and movie industries’ highest-profile target in the battle against illegal file-sharing. A Swedish political group called the Pirate Party, playing on a crescendo of sympathy stemming from the court decision against the founders, won a seat in the European Parliament in elections last month.

To keep content free, but appease content owners, Global Gaming Factory wants to generate revenue from a new, ultra-fast file-sharing system employing peer-to-peer technology, which uses networks of computers to help move large digital files.

Pandeya said the network could be used to ease the strain on Internet service providers, some of which have complained that file-sharing traffic is clogging up their networks. He envisions charging Internet service providers. The Pirate Bay could also generate revenue from advertising, he said.

Some of the proceeds would be returned to copyright owners, he said, while participants in the network, who agreed to allow their computers to be used to help share files, would also be paid.

“There’s tremendous value being created on the Internet, but what do the file-sharers get? Nothing,” Pandeya said. “What do the content owners get? Nothing.”

Global Gaming Factory also said on Tuesday that it had agreed to acquire a company called Peerialism, which has developed software for the new network.

Analysts were skeptical about Global Gaming Factory’s chances of succeeding. Previous efforts to bring unauthorized file-sharing services in from the cold have met with relatively little success. Napster, an early target of the music industry’s legal battles against file-sharing, was later reborn as a legitimate, commercial service, but has struggled to attract paying customers.

“There’s a huge number of unanswered questions,” said Mark Mulligan, an analyst at Forrester Research. “It will be hard to persuade the record labels to create a legal file-sharing site.”

As paid-for digital music services like Apple’s iTunes fall short of the industry’s hopes, recording companies have grown more flexible about the kinds of businesses they are willing to license. The Universal Music Group, for instance, recently announced an agreement with a British Internet service provider, Virgin Media, to make available unlimited downloads of music for a monthly fee, with no protection against copying.

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