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Pirate Bay to be acquired by Global Gaming Factory

The popular site for illegal music and movie downloads is going legit, but consumers and studios might not play along.

July 01, 2009|Ben Fritz

The world's most popular source for illegal music and movie downloading is going legit, but it's far from certain whether consumers or big media companies will embrace it.

Pirate Bay, a Sweden-based website that indexes and links to millions of unauthorized copyrighted files on the Internet, has agreed to be acquired by Global Gaming Factory, a Swedish operator of Internet cafes, for $7.8 million.

Hans Pandeya, chief executive of Global Gaming Factory, said in an interview that he intended to cooperate with studios and record labels to turn Pirate Bay into a copyright-friendly business that would help sell their content over the Internet.

But to do that, Pandeya seeks to stand the traditional seller-buyer relationship on its head. Under his plan, Global Gaming Factory will pay Pirate Bay users to let their computers become linked in a global network whose bandwidth would be sold to Internet service providers such as AT&T and Comcast.

Computer owners could then use the money deposited into a personal account to buy and download songs, TV shows or movies. Such a system, Pandeya said, would be more efficient for the ISPs.

"To compete with free file sharing, you have to beat it," Pandeya said. "What's better than zero? That's paying somebody $1."

The acquisition covers the Pirate Bay name only. Pandeya said his company planned to run the site with technology it's acquiring from Swedish software company Peerialism for $13 million.

Convincing Web surfers to change their behavior can be difficult. Pirate Bay not only trained users to expect free content but celebrated it, with the site's founders frequently ridiculing intellectual-property laws. Four of them were convicted in Sweden in April of facilitating copyright violations and were ordered to pay plaintiffs including Fox, Warner Bros. and EMI $3.6 million.

"It's easier to start from scratch with a legitimate model than to try and convert people, because you set their expectations correctly upfront," said Ashwin Navin, the former president of BitTorrent who is now working on an Internet video start-up. "All the arbitrary rules [of legal downloads] are difficult to introduce when people expect things for free."

Studios typically make movies available online when they are released on DVD, but with restrictions on copying and transferring them to other devices. Pirate Bay users accustomed to getting a movie while it's in theaters -- or, in the case of leaked movies, even sooner -- may be frustrated by the restrictions on legal downloads.

Navin noted that the costs of transmitting files on the Internet have fallen sharply, rendering the advantages of the peer-to-peer technology used by Pirate Bay less attractive.

It's also unclear whether Global Gaming Factory will be able to reach licensing deals with labels and studios. John Kennedy, CEO of the International Federation of the Phonographic Industry, which represents music companies, and a representative for the Motion Picture Assn. of America would say only that they were encouraged by the news.

However, GGF has yet to reach any licensing agreements, meaning that when it takes over Pirate Bay by early August, pending shareholder approval, it probably won't have much to offer.

"In four weeks we don't expect to strike all our deals," Pandeya said. "But we want the industry to understand that now, whatever they want, we're willing to work with them."

This wouldn't be the first attempt to turn a popular file-sharing site into a copyright-friendly venture. The Web is littered with failed or struggling companies whose path Pirate Bay is following, including BitTorrent, Napster and iMesh.

"When the terms change, the audience shifts," said Eric Garland, CEO of online-media tracking firm BigChampagne. "I absolutely expect that in a year or two we'll be talking about some other website that has become the single largest point of distribution for unauthorized media."

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ben.fritz@latimes.com

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