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Published: August 19, 2009
Sometime over the next 16 months, one-quarter of
the Internet will go on sale. But you shouldn’t be suckered into
this deal...
Before we get into the ins and outs of this sale, we need to
clarify what it means to actually buy one-fourth of the
Internet. Of course, you can’t just own something as large and
independent as the Internet. But you can buy a portion of its
traffic.
We’ve been recently writing about international telecoms. If you
bought up enough of these Internet Service Providers you could
potentially own enough Internet traffic to constitute a quarter.
But there will soon be another way you can invest in the traffic
with just a single click.
About 50% of all Internet traffic is from file sharing– people
sharing music, videos, games, and every other type of file you
can think of. Regardless of how you feel about Internet piracy,
50% of all bandwidth on the net is made up of this type of
activity.
Here’s where the story really starts heating up...
The Pirate Bay: 2009 Has Already Been One Hectic Year
Half of all file-sharing traffic is hosted on a single website.
That’s a fourth of all Internet traffic in one place. That site
is called The Pirate Bay.
TPB was launched in 2003, less than one and a half years after
Napster-the pioneer in music file sharing- was forced to shut
down because of court rulings.
TPB operates in Sweden, free from initial U.S. laws. But over
the past several years, the European Union and many individual
member-countries have cracked down on e-piracy.
In 2006, Swedish police raided TPB’s headquarters, temporarily
shutting down its server. April of this year was an even worse
time for the organization. Founders Peter Sunde, Fredrik Neij,
Gottfrid Svartholm and Carl Lundstrom were sent to prison for
one year and slapped with a $3.6 million fine.
TPB’s Next Giant Step Forward
With the founders in jail and facing serious fines, another
Sweden-based company, Global Gaming Factory, announced plans to
purchase TPB for $7.8 million. GGF intends to turn TPB into a
legal, fee-based website. Users would have to pay a monthly fee
to share files. This money would then be used to pay copyright
fees for each file transfer.
This, again, might conjure up images of Napster, which was
bought by Roxio Inc at bankruptcy auction. Roxio rebranded it as
Napster 2.0, which began to offer legal, paid transfers. Best
Buy acquired Napster last year for $121 million, but is
struggling to see profits.
GGF’s plans for TPB, however, aren’t
as small as Best Buy’s were for
Napster. GGF, almost immediately
after announcing its plans to buy
TPB, declared its intent to take the
website public... on Nasdaq.
If all the legal and technical
aspects of this deal work out as
expected, TPB’s intial public
offering will take place sometime in
2010. This gives us less than 16
months to plan.
But before we start setting aside
cash for this IPO, we need to take a
serious look at what this deal will
look like.
Why You Should Not Buy Pirate Bay...
At Least With What We Know Now
It’s safe to assume TPB’s 25-plus
million users aren’t all going to
start paying the monthly fees.
Instead, we can expect more than 75%
of these users to stop sharing
files. Possibly as little as 10% of
TPB’s current user base will be left
when GGF starts requiring fees.
This transition is expected to come
very soon. On August 27, GGF is
holding a press conference to go
over the details of this
reorganization, as well as its plans
for the IPO.
GGF is also working on deals tis o
turn TPB’s enormous share of
Internet traffic into a second
revenue stream. By setting up deals
with ISPs, GGF will trade promised
bandwidth usage for cash.
ISPs are starting to sell bandwidth
to customers instead of offering
unlimited packages. This means that
users that transfer a large amount
of data packets will have to pay
considerably more than those that
just us the Internet to check their
email.
With this transition from monthly
subscriber to pay-as-you-go, ISPs
will have an opportunity to make
more money off bandwidth use. GGF
promises that TPB will provide this.
However, we’re not sold on this
business model. Napster 2.0 has not
been able to mount a significant
attack on powerful rivals such as
Apple’s iTunes store. Even web giant
Google has not been able to
effectively monetize its $1.65
billion purchase of the world’s most
popular video sharing site, YouTube.
GGF’s plan might seem enticing to
some-don’t buy into the hype. Music
and movie pirates will go somewhere
else for their illegal downloads.
Avoid this IPO at all costs.
Sincerely,
-- Jim Nelson
Managing Editor
Penny Sleuth
Editor's Note: This
article originally appeared in
Penny Sleuth. |
