Can BitTorrent Go Legit with the Entertainment Business?

What’s the first thing you think of when you hear the word “BitTorrent”? Probably visions of teenage boys in basements swapping pirated music and movie files. That’s long been the public perception of the technology protocol BitTorrent, but there’s also an entity known as BitTorrent, Inc., and it would very much like for you to forget that perception and think of it as a friend to the entertainment world.

BitTorrent, Inc. likes to point out that it’s been experimenting with helping musicians by putting up free content that will lead to better engagement and sales of music, concert tickets and other revenue in the future. The BitTorrent blog is full of such stories.

And recently, BitTorrent partnered with author Tim Ferris (whose Amazon-published book was shunned by big retailers), and helped get him 210,000 downloads of his book sample within seven days, with 85,000 clickthroughs to his book page on Amazon. After 11 more days, the numbers climbed to 600,000+ downloads, with 241,000+ clickthroughs to the Amazon page.

Still, there was no word on how many of those views converted to payments, despite claims that this is the first BitTorrent bestseller.

Payments for content are not front of mind for BItTorrent — not yet. I visited BitTorrent’s headquarters in San Francisco recently and spoke with its executive director of marketing, Matt Mason, about the changing business model for content online and what BitTorrent might do to help shift that. Mason was quick to point out that 30 percent of daily Internet traffic came from BitTorrent the protocol and that they had 160 million users, with 40 million active on a daily basis. But BitTorrent the company had become profitable not by charging for music downloads but by charging for a premium version of its software — without ads and including a much-needed anti-virus for downloads.

Its only mission at the moment deals with helping artists use the power of the BitTorrent network to gain fans and work out what it would sell them later.

“The email address is the most valuable thing you can get from a consumer. It’s probably worth more than a direct sale through iTunes,” according to Mason, who says the artist can then use that email to sell the fan multiple albums, concert tickets, merchandise and more down the line.

The following is an edited version of our discussion, including some video clips of key parts of the chat.

Q&A

This is probably the question you get the most. BitTorrent has had an image as being the home of piracy for so long. How do you combat that?

Matt Mason: It’s tough, because there are two parts to BitTorrent: BitTorrent the protocol and BitTorrent the company. BitTorrent the protocol was invented by our founder, Bram Cohen, back in 2001. It was invented to move large files across the Internet, which was then and is now a big problem for the Internet. The Internet is an asymmetric network with lots of many-to-many connections. The BitTorrent protocol moves 30 percent of the daily Internet traffic on a daily basis. So that’s the protocol. It’s open source — it exists. If we shut down the company tomorrow, it will still exist and people would use it for all kinds of things.

With BitTorrent, unfortunately, the name has become synonymous with illegal file-sharing or piracy the way that MP3 used to mean piracy. With MP3, over a period of time, people realized it was a technology, and now it’s used as such and today it doesn’t mean piracy. Now, people are starting to think of BitTorrent as a technology, too. We’re absolutely challenged, and it’s going to take people a long time to realize that BitTorrent doesn’t mean piracy; it’s just a way to move large files. That’s started to take hold as we start to work with more content creators to help them get stuff in the hands of fans using the BitTorrent protocol.

When it comes to entertainment companies, they have an in-grown fear of piracy. Is it hard to change their minds so you can work with them?

Mason: Yes, absolutely, and it’s difficult to convince people, and convince everybody at a company that it’s a good idea [to work with us]. We might convince a band, their manager and the CEO of the label, but the [general manager] of the label might say, ‘You can’t work with BitTorrent ever, ever, ever. It means piracy.’ And we don’t ever get to talk to that person. It’s difficult, but we are seeing the tide turn. Over the last year, we’ve done a lot of cool stuff with content. And when we go out and talk at media events, we tend to get a different reception; people are interested in the experiments we’ve been running.

Moving into 2013, our mission is: How do we create as many great tools for publishers to access the BitTorrent ecosystem as there are for consumers?

Mason explains why piracy sites use BitTorrent, and also why businesses like Facebook and Wikipedia and many others use it to update their servers:

What plans do you have to make a viable business layer in BitTorrent?

Mason: Right now anyone can create a Torrent file and put it out through the BitTorrent ecosystem. We think there’s a layer that we can create, that will let people publish files in a slightly different way, and in a way that makes sense for publishers and less savvy Internet users as well. We’re not sure what that looks like yet; it’s something we’re just starting to think about.

We need to do deep research first. The experiments we’ve done so far with the likes of Counting Crows, DJ Shadow have been about trying to figure that out. We’ve seen some great things, some great campaigns with excellent conversion rates that we’ve concluded that there’s a meaningful, sustainable place for content creation in the BitTorrent ecosystem. It’s not the only solution for the dilemma for how you make money from digital content. We certainly think it’s a massive part of it. BitTorrent is a massive part of the Internet.

We did a campaign with the author Tim Ferris on his new book “The 4-Hour Chef.” In the first seven days of that campaign, we saw 210,000 downloads of the sample of the book. That’s awesome, but what’s even more awesome is that of those people, 85,000 of them then visited Tim’s Amazon page for the book. That’s a sick conversion rate. That’s off the charts.

Do you know how many people then bought the book?

Mason: That’s what we’re trying to figure out … Something’s happening here. There are 160 million people using BitTorrent, and this isn’t teenagers in basements pirating films. It’s a massive cross-section of the global population. BitTorrent is a business; we’re a profitable company with 110 people working here.

How are you profitable? Are you trying a freemium model with downloads, where people get free samples and then you can sell them something else?

Mason: No, to date we haven’t tried to monetize any of the content experiments that we’ve done. We’ve really focused on making money for the artist. If that works, then we will figure out if that’s [a future source of revenue]. We have three main revenue streams. We sell premium versions of our software product, BitTorrent and uTorrent. There’s a free version with ads, and there’s a premium version without ads and has anti-virus and will play more codecs.

We’ve also launched an ad network within the ecosystem. We’ve seen really encouraging signs there in the last six months. We got some flack for serving ads to our network, but we didn’t launch them without testing it deeply with our users first.

Mason explains why ads on BitTorrent work so well:

Have you tried getting people to pay for downloads?

Mason: We’ve experimented with having people pay right off the bat, or at least allow people to donate. Last year we did a really interesting experiment with a TV show called “Pioneer One.” Two filmmakers from New York made a pilot. The pilot got a lot of attention and won an award at Tribeca. They were interested in a new way to distribute it, and even a new way to fund the production.

Funding TV is kind of crazy if you do something with one of the big networks or cable channels. You might get $4 million to make your pilot, and it could be great, and it could get great feedback in focus groups. But if there’s a scheduling conflict with “Desperate Housewives,” that pilot could be shelved and no one will ever see it. That’s a reality for a lot of TV producers.

These guys were interested in creating a show and finding out if people were actually interested in seeing it. We put up the pilot through BitTorrent for free, and we gave people the opportunity to donate to make Episode 2. They had between 4 million and 6 million downloads of Episode 1 and got enough donations to make Episode 2. Then they had enough donations to make Episode 3, and then 4, and so on. They got enough donations to make an entire season of “Pioneer One” that ran over an entire year. That was a successful experiment, which was funded directly by the BitTorrent audience.

That’s one thing we did, but we’ve done many more. Our take is that there isn’t any one way to distribute content in the digital world. There’s actually a different business model for every piece of content.

Mason talks about the new age of music marketing as being about relationships, and how getting a fan’s email is worth more than a download:

You say there’s a different business model for every piece of content. Isn’t that intimidating for content creators? How can they figure it out?

Mason: The ways that you can actually hack growth with certain audiences — those are things you can learn and just do. If your content is good, they will just work. That’s not how the content industries worked [in the past]. That’s a very rational way of doing things. The content industries have never before been rational. Data is the new hustle for musicians. Hustle used to be literally “how am I going to get this guy to play my record?” You can find all kinds of nefarious stories about how people did that before. How Hollywood works is a mystery even to people in Hollywood.

With the Internet the way you get things to fans is very transparent by comparison. There’s lots of ways you can look at things and understand how they work. You look at someone like Justin Bieber or whoever the latest Internet sensation is, you can see very clearly how they did what they did. So now every time there’s a big hit, you can see how it was done, but every time it’s slightly different. All of these things are interesting, but there’s clearly not one way to do it. You can check how they’re doing it — go check their Alexa rank, go check their bit.ly links, you can see what’s happening. And there’s no way you could see what was happening at a Hollywood studio, or a label, or radio station. No way.

I think we’re entering a golden age of data-driven content creation, which sounds super-nerdy and intimidating, but it’s actually really good news.

Tell me about the live-streaming test that you’re doing.

Mason: Live-streaming is something we’ve been developing for some time. We’ve actually created an entirely new protocol called BitTorrent Live, that’s based on the BitTorrent protocol. With BitTorrent, every time there are people sharing a piece of content they are part of a swarm. The more people who are sharing it, the easier it is to get that piece of content. The big problem with live-streaming is that if too many people are watching a live-stream, it tends to slow down and eventually break. If there are too many people trying to watch the Super Bowl, then the Super Bowl will break.

That’s because you have all these people trying to get content from one source. The way BitTorrent live works is very different — it’s peer-to-peer live-streaming. So what that means is that everybody in your audience is part of the processing power, so you offset the power of broadcasting the stream. The more people who watch a BitTorrent Live stream, the more resilient it gets. Plus, the good news is that the cost of broadcasting it is zero.

This is one of the most fundamentally new technologies that will hit the Internet.

So would you work with whoever has rights to the Super Bowl to see about live-streaming it for them?

Mason: Right now, you could broadcast the Super Bowl with this technology, but how can you keep someone from hijacking that feed and broadcasting it themselves with their own ads? We’re working on that right now.

The other part of that is: What if you’re at a town square in Egypt and the police are beating people up? It would be great if you could flip out your phone and broadcast that to 20 million people and nobody could stop you. So there are huge commercial benefits to BitTorrent Live, and there are these huge social benefits too. The question is, how do we navigate this so it works for everybody?

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What do you think about BitTorrent, the company? Can they change the image of BitTorrent and become a friend to the entertainment biz? Share your thoughts in the comments below.

Mark Glaser is executive editor of MediaShift and Idea Lab. He also writes the bi-weekly OPA Intelligence Report email newsletter for the Online Publishers Association. He lives in San Francisco with his son Julian and fiancee Renee. You can follow him on Twitter @mediatwit. and Circle him on Google+