The big news this week is that The Pirate Bay is in the process of being sold off to a new, possibly public, company. At first there was a hell of a lot of confusion about what was going on till TorrentFreak appeared to clear up some of the mess. But what does this mean for file sharing (both illegal and otherwise) and what exactly is going to happen to the site? The water is still muddy but as we climb down from the excitement several things are becoming clear: most of all that this might simply be a not-all-that-clever-really dodge by the Bayers.

Disclaimer TPB is incredibly mysterious in their operations. The group have always insisted this is for legal rather than nefarious reasons: and probably that is true. But the result is that any information is pretty much limited to what they tell the public - often containing much that could well be misdirection, sarcasm and outright untruth's. The summary is - I have interpreted things as much as I can, but only a few people know the truth for sure. And it seems their not telling.

To really understand what is going on we need to get a few things straight about the site in it's current (pre-sale) form.

The first item to get clear is that the founders currently do not own the site. It was signed over in 2006 to an unknown party:

(from Torrentfreak)

Peter explained that he and the original owners of TPB disposed of the site in 2006. He refused to name who took the site but referred to a single owner in one of his responses, using the word â€œheâ€.

The insinuation seems to be that there is a single owner - via some kind of holding company (corroborating that is next to impossible, but krs a co-founder of the site elaborated).

(via HN, sorry no original link)[update: original source via a comment]

To clarify a bit.. TPB has been owned by a company for the last years since the raid so nothing there will really change except the names of the owners.

Whilst the Brokep and his companions certainly seem to continue to administer the site they have a lot less involvement now than previously.

The second thing is that The Pirate Bay can be sub divided into several different services. Firstly they run a tracker which is a core part of the BitTorrent protocol allowing people to find peers more easily. Secondly they run a torrent hosting service (and arguably the search feature and the hosting are separate) from which you can download the torrent meta package. This is an important distinction because uploaded torrents don't have to contain TPB tracker.

Finally; revenue. This is always a risky subject with The Pirate Bay. They have claimed for years it is too dangerous to release financials and other "important" data. At their recent trial the co-founders were accused of taking huge cuts of ad generated revenue. This is a bit hard to believe considering point number one above (that none of those accused appears to be the actual current owner of the site). On the other hand it is also hard to believe that a site in the top 100 in the world and which serves adverts on every search page doesnt make a substantial amount. And how much of that is spent on hardware, resources and security?

At the end of the day I suspect the real profit isn't as big as has been suggested and that none of it actually makes it's way into the pockets of the founders. But when they wont release any details it's kind of hard to take their side (I've said this before).

The Sale

Ok, back to the present and the announcement of the "sale". At first it appeared everything had changed hands already (several places reported it this way).Â Slowly it became clear that this wasn't true and eventually Brokep confirmed that there is some kind of agreement and GGF have 4 weeks to find the cash. Looking back it appears the story was broken early; the hurriedly written blog post on TPB hinted it was a leak:

News reached the press today in Sweden - The Pirate Bay might...

It later emerged (via Torrentfreak) the sale is in the agreement stage and the current owners are waiting on GGF to find the money. The suggestion has been that the firm dont actually have any capital in hand yet, with Peter Sunde talking about unknown "backers".Â GGF's site indicates the takeover is scheduled for August this year.

In actual fact the sale seems fairly simple (though we'll discuss where the money is going at a later stage) the complex part is what's going to happen now. To dig into that we need to take a look at the other parties involved.

Global Gaming Factory

GGF is in some respects a bit of a mystery. They are owners of both SmartLaunch and CyberCafe Pro; popular (so it appears) Cyber Cafe software. This is where it gets interesting, because both of these products are subsidiaries of GGF. It's a common business practice where a public "holding company" (the term used in a loose sense here) wholly owns private subsidiaries with products to sell. That it's 2 current known subsidiaries sell Cyber Cafe products could be telling.

It's clear GGF is a shell holding company rather than an actual "make it to sell" venture, indeed a comment posted over on Digg pretty much proves this:

Global Gaming Factory X AB (Ltd, Co.) never registered for "F-skatt", which is a basic permit needed for companies in Sweden to operate under corporate tax laws instead of private laws. Not having this permit usually means that it's a company 1) run under a mother company or 2) that isn't active

I'm sure GGF could have other owners - but it looks unlikely when you peek at their figures. It looks simply like a holding company used to manage a set of products under one umbrella.

The quote, though, could prove important in another respect: I am not an expert on Swedish law so I have no idea if being subject to private law leaves them less open to legal action. I'm assuming, seeing as the company has been around for a little while, the non-filing has other reasons. But it may also prove useful in the future (if anyone is an expert in Swedish legal stuff please do drop me a line).

Given their previous form for buying out companies it is unclear whether this is the approach GGF are taking with TPB. Are they going to become the whole owners of the company currently in charge of the bay? It's something of a toss up I think. On one hand it would fit GGF's "MO" and would probably be the easiest approach for them. On the other (and again, I am not sure of the legal requirements here) such a buyout would almost certainly require some form of documentation - potentially exposing the mysterious "current owner".

Just to confuse things even more there has been suggestions (from TPB crew themselves) that said owner is an overseas company. This could complicate a simple buy out.

GGF itself is marketed asÂ "The New World's Media Channel". What that means becomes more clear on their "About Us" page:

Global Gaming Factory X AB uses Smartlaunch and CyberCafePro's installed base of cafe management software at thousands of internet cafes and gaming centers around the world for digital distribution of advertising, software and services to the large groups of tourists at Internet cafes and and the gamer community at gaming venues. The company uses state-of-the-art technology to reach its target groups with high precision.

I have to confess I have looked very little into their 2 cyber cafe products but the inference here is they are using them as a content distribution platform and, crucially, targeted advertising. This, I believe, is going to be the key to unlocking the mystery.

There is one more important thing to note regarding the company. Indeed in my eyes it is the most important point - purely because it has been overlooked by many. At the same time as it's acquisition of TPB, GGF also announced the takeover of Peeralism:

(from the GGF press release)

and the technology company Peerialism, that has developed next generation file-sharing technology.

The Peeralism website is very vague though it refers several times to next generation P2P technology and, specifically, p2p overlay networks . As Peer2Peer is essentially an overlay network anyway it is unclear whether their product is a new P2P protocol or something built on top of existing protocols. From digging around I think it is the latter; they talk extensively about using P2P for serving video content and "IP traffic".

Indeed it appears Peeralism did have a working video project called PeerTV. I say did because according to their site it was sold off to a Swedish ISP earlier last month. It looks like PeerTV is a set-top box based system that delivers internet TV channels, apparently using P2P. I cant quite get my head around how that works - but it does sound pretty cool.

Peeralism appear to have 2 remaining important technologies. Firstly PeerNet which they claim is about network traffic optimisation. In more depth it appears it is a proposal to allow the ISP to use it's userbase as a P2P network for popular content.

Secondly there is Net Topology. All the information that exists relating to it is as follows:

Net Topology: A P2P component to help construct a locality aware overlay network.

Intriguingly this seems to be either corporate hot air - or a potentially useful product for a P2P provider.

In my eyes Peeralism are exhibiting the classic signs of a company in trouble. Selling off your leading product smacks of dwindling funds. And then a buy out just weeks later seals the deal for me. Peeralism was, it seems, falling apart and GGF have nabbed it in the process.

The Whole Picture?

We seem, perhaps, to have all of the pieces in play now:

The Pirate Bay - Long time torrent search engine, host and tracker.

GGF - public company with history of acquisitions which currently owns 2 pieces of popular Cyber Cafe software

Peeralism - a P2P development company. Perhaps with a new protocol, certainly interested in video distribution

But before we can really get down to the meat of it there is one more (or to be precise 2 more) piece to consider. Unfortunately this is the most mysterious and where we really start to head into a bit of guesswork. It all started here:

Pirate Bayâ€™s Peter Sunde has informed TorrentFreak that the site will soon decentralize and stop running a BitTorrent tracker of its own. Instead they will encourage their users to use a yet to be launched third party tracker for their torrents. To decentralize even further, the torrents that will be listed on the site wont be hosted on The Pirate Bayâ€™s servers anymore. In the near future the site will use a new torrent hosting service that will store the torrents for them. This new hosting service will be open to other torrent sites as well and can be accessed through an API.

That was a big shock to some people but in a way is understandable. The takeover is scheduled for August and I assume that GGF wont want any illegal content on the site when they take control - simply because a week later 100 DCMA's would be on their door mat.

What is more interesting is simply the admission of these 2 new services. In essence it appeared The Pirate Bay (who's tracker is currently estimated to serve half of all BitTorrent users) would have it's heart ripped out.

However it wasn't long before GGF themselves answered these worries (from their CTO via TF):

â€œWe had discussed closing it down initially so I think thatâ€™s why he said so. The plan is to use technology from Peerialism that makes bandwidth utilization more efficient and then it would not make sense to shut it down,â€ he said, adding. â€œPeerialism will modify the tracker but it will be backwards compatible. But all this is subject to change if for some reason it would not work. It is our ambition to do so.â€

The issue is this: there is no way GGF will want to risk hosting or tracking illegal content - so all of it will, one assumes, be removed. Also crucially his final comments (above) suggest the actual tracker is somewhat immaterial to GGF's plans (more on that in a sec).

TBP crew have since said there are plans to create a new tracker and host service as originally described. This lends weight to the idea they are ditching the Pirate Bay and attempting to shift the services sideways into 2 separate sites. Certainly if the bay tracker disappeared for good it would be a huge blow to the torrent community - if nothing else for the scale of it's use.

Irrespective of this it now appears we do have everything on the table, lets take a look at what it all could mean.

Analysis: GGF

The first consideration is probably GGF and their plans for The Pirate Bay. Certainly from their many admissions and press releases it is clear they do have some kind of master plan. Their seemingly off hand consideration of the bay's tracker and hosting network is telling: it is becoming clear that it is the traffic they want the most. Keeping the tracker would certainly keep some elements of the user base happy and so would be a "good thing", but if that doesnt work out they dont seem too bothered.

Interestingly Peter Sunde admitted this directly to TF:

Peter said that TPB have been approached by companies before to sell out, but they didnâ€™t understand the value of TPB. He said the value of the site is to be found in the userbase and nothing else. He added that if a company is interested in buying that userbase they have to keep up spirits or they will find themselves owning something that rapidly decreases in value.

This admission is critical. It is clear both TPB and GGF have come to this deal to buy/sell the users and the traffic. Clearly TPB understand the site will lose a lot of it's current content.

So what are GGF's specific plans? Interestingly the BBC managed to get the most clear information from them direct. Some key excerpts:

GGF's Hans Pandeya said that the only way to beat illegal file-sharing was to make something more attractive. "We are going to set up a system where the file-sharer actually makes money," he said.

The Pirate Bay would[continue] to be a file-sharing site. The only difference - at least in terms of content - would be that the files would be hosted legally, rather than stolen from copyright holders.

So at face value it seems simple (kill the illegal content) but the money making scheme is a bit more intriguing, and this is where we start to pick at GGF's "master plan".

The acquisition of Peeralism seems very definitely targeted on their "content sharing" ideas. Getting users to serve content from their PC's (via P2P) and receive some reward for it. I suspect the rewards will be tiny (rather like Ad-sense for example) but enough to attract people into the scheme. Indeed as the whole point of P2P is to share files anyway users could well fell they are getting paid for something they already do. The question is what kind of content GGF have their eye on? Again from the BBC report:

"We can then use this massive network of file-sharers to help [internet service providers] reduce overload. "Let's say a popular song comes out. Rather than a million downloads from a site - which would cause a considerable strain on that ISP - we can take that song and put it out on P2P.

Their model appears to be this: set up a massive CDN using P2P technology and millions of users. Then convince media companies to distribute content via this method. I assume the idea would be for each person to pay for (say) a song, torrent it and then seed it via the network (akin to Napster's model in the past). Crucially however they seem to be suggesting those who seed the material for other licensed purchasers to download will get some kind of payback. Logically speaking this has to be less than the cost of the song (otherwise it's a loss maker). Or perhaps it builds up as credit against new purchases (this seems a safer method) who knows.

Actually all of the issues aside this idea appeals to me. I like the model, I like the incentives. The problem is going to be convincing rights holders (though GGF claims some are already interested). Considering the negativity attached to torrenting AND (especially) The Pirate Bay it could prove a challenge; even though Napster eventually made it TPB are leaps and bounds more notorious then it ever was.

As a final twist we have GGF's existing Cyber Cafe products to consider. GGF specifically refer to them in a way which suggests targeted advertising and content distribution. Will they be looking to launch a games platform akin to Steam on the back of Peeralism and TPB? That is pure speculation but I am sure it has crossed their minds. If nothing else the advertising part is intriguing. If GGF are paying both the distributors/users and the rights holders quite where their revenue would come from is ambiguous. Perhaps an advertising model is their solution (though arguably Spotify are beginning to prove this doesn't always work).

Whatever their intentions GGF seems to be heavily committed to the vision. In a way I wish them luck - it is a bold strategy.

Analysis: The Bayers

Next up are the TPB crew. They are looking at a cool $7.8 million dollars to play with so one assumes their plans are equally big.

Whilst many of TPB users are calling them sell outs they are overlooking a couple of crucial points. The first is this mysterious new service mentioned a couple of times by various representatives. The suggestion is this is a more ambitious tracker and torrent hosting project based on their experiences with TPB.

Secondly TPB has received a lot of heat recently. It is almost certainly beginning to lose public support in certain areas. And with the recent court case it appears less and less secure from a legal perspective. I suspect this move is born out of a desire to ditch the name and attempt to lose the legal vultures circling it.

If you combine those 2 revelations things start to become less murky. Clearly having 2 separate new services (a tracker and a host) makes it harder to "attack". It's pure complexity to the operations - decentralisation as Peter Sunde put it. Add in the fact that the suggestion is the host will have an API to allow any number of sites to provide a torrent search portal and the Bayers master plan starts to look more solid.

With hundreds of points to find content it is harder to shut them down. And with torrent files and the tracker as separate entities it is much harder to build a complete case. This is crucial; to win in future the rights holders have to link the whole shebang - from search portals, through the torrent host and on to the tracker. If that proves impossible or extremely hard then any case could simply fall apart.

The Money

Who was it who said "follow the money". This time there is quite a lot of it: around $7.8 million. But where is it going and for what purpose.

Certainly Brokep and the others wont be getting it; they have denied it many times over and it is clear if they did get private payouts it would almost certainly end up with them under heavy fire from all sides.Â That's not to say they wont get to see the colour of it!

Indeed it is somewhat interesting that in the same week as the sale details of an ambitious new venture, The Video Bay, surfaced. Such an enterprise would require a substantial investment and it is very tempting to imagine much of the money will be funding it. Indeed I'm willing to lay my hat in the ring and say that, assuming the site has no other backers, this will be #1 destination for the proceeds of the sale.

Also don't forget there is this mysterious new hosting service in the wings - will some of the funding go towards that? It's hard to imagine it wont.

Otherwise it could well go into lobby groups and perhaps the Pirate Party. I'm willing to bet after TVB and the new tracker/host this is where the cash it most likely to go.

The Conspiracies

And, finally, conspiracy time. Given the notoriety there is going to be a host of them kicking about. Lets have a look at some of the common ones (and, well, debunk them):

GGF is an RIAA front - There have been claims the RIAA are behind GGF and are the mysterious "backers".

Actually the idea has merit (although probably not in the form of the RIAA). It would make sense that taking down TPB would heavily impact the torrent community both by removing a popular tracker/torrent host and (probably more importantly) removing one of the most vocal exponents of illegal file sharing.

But the theory doesn't wholly stand up. Firstly because GGF are an established company. There is no real way to dispute that, prior to this purchase, they were a legit independant company. Potentially they have been "infiltrated" or "commissioned" to perform the purchase but it seems unlikely: the plans GGF have laid out for the site seem serious.

Plus, of course, the Bayers are not thick. The thought would have crossed their minds and even the slightest inkling would surely have put them off.

Unless of course they are in the know! One variation on this conspiracy is that it is an elaborate out of court settlement. The Bayers' fines can remain unpaid and the rights holders pay them off to shut down the site. But I seriously doubt this - there is just nothing over the whole history of the site that suggests they would sell out so simply.

On the other hand other unkown factors could come into play. The mysterious current owner could have a lot of clout behind the scenes. Or perhaps the Bayers hope to expose a scam at a later date.

GGF is a TPB front - GGF has been commissioned by TPB to purchase and host the site while they still work on the background.

This is highly unlikely in my eyes. Firstly the sale seems serious and secondly GGF's plans seem more tailored towards using the traffic than anything else.

Conclusion

Whatever happens this is big stuff for the torrent community. What I suspect has happened is that GGF laid out their plan for the site (as I have suggested above) and TPB crew (or the mysterious owner) found it a good proposal. Given the pressure the site is under they made a decision to sell TPB on to legitimacy and build up again in a "harder to beat" format.

IfÂ I have got GGF's plans right then I think I approve. It is a good model and might even work. It could convince rights holders not only that digital distribution does work well but that Peer2Peer is also a great medium to use. The benefits could be wide ranging.

Or it could all flop: but then anything is a risk and this seems one worth taking.

As to the Bayers: who knows? What they do is often unpredictable, off the wall or crazed; perhaps they will relaunch under a new brand, perhaps TVB is their new focus or perhaps they have other secret plans. Whatever happens 2Â things are certain. We will be hearing from them soon. And we have an interesting time ahead.