Dealing with the devil?

Years ago, when Japanese electronics manufactures introduced the VCR, US movie studios went ballistic and tried to shut the new technology down with lawsuits.

Hollywood was afraid the VCR was going to kill its business.

As things turned out, the VCR and the DVD have proven to be a boon to  Hollywood because it opened a brand new income stream and got its product into more people’s hands.

Then along came the Internet… and a truly scary technology called BitTorrent.

BitTorrent technology was created in 2001, by programming savant Bram Cohen.  It immediately became a favorite of folks who like to share movies online – illegally.

BitTorrent solves one of the biggest problems multimedia content faces on the Internet: bandwidth.

Here’s the problem in a two-part nutshell:

1. Multimedia files (audio, video, software, games. etc.) tend to be BIG.

2.  If you succeed in attracting a big audience for your creation you want to share, you can find yourself knocked out by punishing bandwidth costs.

The BitTorrent solution is elegant and simple.

Users join the BitTorrent network by adding the BitTorrent software to their computers.

When a new file is placed on the network everyone who reaches out to download it automatically becomes a source of the file to others on the network who want it.

So instead of one server groaning as the sole source of a file, the more popular a given file is, the more resources there are to distribute it within the network.

Smart, but scary… if your business is selling digital content.

Obviously, there are legitimate uses for a technology like this, but there’s a whole lot of “black market” dealing going on on the network too.

In 2004, Cohen turned BitTorrent into a business and set out to make peace with Hollywood.

Earlier this week,  he announced his first big deal – with Warner Brothers,  the movie arm of the Time Warner media empire.

Why is this mega-corporation cooperating with BitTorrent, the movie pirate’s tool of choice?

Because the horse is already out of the barn.

To quote Kevin Tsujiharta, president of Warner Brothers Home Entertainment:

“If we can convert 5, 10, or even 15 percent of the illegal downloads into (legitimate) consumers of our product, that is significant.”

Even more significant are the hundreds of millions of Internet users who have not yet joined the BitTorrent world.

By setting up shop on BitTorrent now, Warner Brothers is hoping to train these future consumers pay for the movies they get from BitTorrent.

I know that nobody who reads this letter needs to be told, but video on the Internet is here to stay and it’s only going to become more and more prominent.

Companies like Warner Brothers and many others – movie studios, television networks, news channels, you name it – are investing billions of dollars into teaching Internet users how to consume video on the
Internet.

The flood of Internet video rolls on…

* The BitTorrent site here:

http://www.BitTorrent.com

* The story just two years ago:

Wired: “Hollywood Wants BitTorrent dead.”

http://www.wired.com/news/business/0,1367,66034,00.html?tw=wn_tophead_2

* BitTorrent developer Bram Cohen’s personal web site:

http://www.bitconjurer.org

– Ken McCarthy

P.S. For over 25 years I’ve been sharing the simple but powerful things that matter in business with my clients.

If you’d like direction for your business that will work today, tomorrow and twenty years from now, visit us at the System Club.