BitTorrent's Big Break

Digital video distribution is hot these days -- just look at Google's (Nasdaq: GOOG  ) pricey acquisition of YouTube. However, the technology's still in its infancy, with many existing legitimate services leaving much to be desired. One interesting ongoing story further solidifed today: peer-to-peer file-sharing program BitTorrent's attempts to go legit.

BitTorrent has a whole slew of movie studios lined up to license "thousands" of content files for sale through its file-sharing service by February -- the same service well-known as a place for sharing pirated content. Time Warner's (NYSE: TWX  ) Warner Bros. made a similar deal with BitTorrent earlier this year, as did a lineup of independents. However, this latest news means business, with Viacom's (NYSE: VIA  ) Paramount and MTV, News Corp.'s (NYSE: NWS  ) Twentieth Century Fox, and Lionsgate signing on as well.

Despite its affinity for pirates, at least the Caribbean kind, Disney (NYSE: DIS  ) is an interesting no-show; then again, it's already distributing movies through Apple's (Nasdaq: AAPL  ) iTunes.

Many claim ordinary folks aren't ready for or particularly interested in digital delivery of movies, but let's also remember that many of the services thus far have been expensive, inconvenient, clunky, or all of the above. For example, unlike video-sharing services like YouTube, downloading movies is still usually time-consuming; I've read plenty of complaints about the time it takes to download a full-length feature from iTunes or Amazon.com's (Nasdaq: AMZN  ) Unbox.

As much as sedate, established media companies might despise file-sharing sites and their association with piracy, file-sharers are ahead of the curve when it comes to innovative solutions. BitTorrent uses open-source "file-swarming" technology to allow its users to download content, breaking large files into smaller pieces and sharing them among users' computers. This speeds up the download process and uses less bandwidth than downloading from a single source. It's a grand example of how network effects make the online world go 'round, even if many average Internet users might find the term "file-sharing" a bit sketchy.

Meanwhile, CNET.com quoted a BitTorrent spokesman as saying that the company has done research showing that 30% of its users are willing to pay for content. And as I pointed out when Warner Bros. made friends with BitTorrent, converting even a small percentage of pirates into paying consumers is a winning proposition. Look at how Apple proved that many people would pay for downloaded music, given the right service and the right price.

BitTorrent may not be a publicly traded entity, but it seems clear that before and after its shot at "legit" business, it's an important player in the evolution of digital media distribution. Given this newest development, the story isn't just about the studios' attempts to convert pirates into paying customers -- it's also going to be about how more established companies with an interest in selling digital content, like Apple and Amazon, fare against such upstarts.

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Alyce Lomax does not own shares of any of the companies mentioned.


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