Saturday, October 20, 2007

BitTorrent Bets on New CEO, New Business Model

Here's a business conundrum Henry Ford never had to face: How do you convert a popular service built largely on the appeal of illicit file sharing into a legitimate business?

The challenge has caused headaches and grief for executives at Napster, Kazaa and YouTube, to name a few. Now BitTorrent will make an attempt at the same perilous transition.

The San Francisco-based peer-to-peer file-sharing firm debuts Doug Walker as its new CEO Wednesday. He replaces the technology's inventor, Bram Cohen, who will become chief scientist. The news comes hot on the heels of last week's unveiling of the company's enterprise platform, BitTorrent DNA, as well as the firm's announcement that internet video-service provider Brightcove will be the product's first major customer.

In a meeting with Wired News, BitTorrent's new CEO and the privately held firm's co-founders, Cohen and Ashwin Navin, laid out an ambitious strategy: They want to own the world of streaming content.

"YouTube makes low-quality videos available, not because people wouldn't watch high-quality ones," says Cohen. "That's all it can afford."

With BitTorrent DNA, the company now offers a protocol for streaming high-definition video, including 780p and 1080i. Until now, the BitTorrent protocol only worked for downloading files, not for streaming media files (playing them as they download).

Cohen's goals as chief scientist include improving the streaming and making the protocol more "polite" to the end user. Because BitTorrent's peer-to-peer protocol both uploads to and downloads from a user's computer, it has in the past interfered with web browsers and other applications. The new release is more polite in that respect, though Cohen will continue to work on the issue, he says.

BitTorrent has more than YouTube in its sights. In February, the company launched an iTunes competitor, the BitTorrent Entertainment Network, selling downloadable movies, TV, games, music and software. The majority of its commercial files are protected by digital-rights-management technology and only play on Windows PCs. The company claims much of that content will be free to the customer by the end of the year, with revenue coming from ads.

BitTorrent is now applying the same P2P distribution model it uses in its store to a distribution service for companies that want to sell video, games and commercial software. The larger goal is to allow content creators to save on the infrastructure costs associated with online downloads, while also enabling higher-quality images and faster download times.

The few gray hairs on Walker's head should go a long way towards soothing entertainment execs, whose panic over letting go of old business models is rivaled only by their panic over losing market share to internet upstarts. While Cohen, 32, and Navin, 30, inspire confidence respectively as tech genius and sharp dealmaker, they admit that a seasoned CEO helps their cause.

Walker, 48, was previously an executive with IBM, Sun Microsystems and Silicon Graphics. He most recently served as CEO of Alias Systems, creator of the leading 3-D animation software, Maya. About half of Alias Systems' customers were in the entertainment sector that BitTorrent is targeting.

"High-level diplomacy within the entertainment sector is the area where the P2P industry needs the most work," says Marty Lafferty, CEO of the Distributed Computing Industry Association. Lafferty's reaction to BitTorrent's announcement: "Finally!"

BitTorrent DNA's first major customer, Brightcove, delivers the streaming content for major content sites including CBS, MTV and Warner Music. The outcome of the partnership will serve as a bellwether for BitTorrent DNA. If cost savings prove real and image quality is improved, additional big-name customers will likely follow.

BitTorrent also opened a two-person satellite office last week in Japan, a country whose broadband infrastructure is a generation ahead of the U.S. market. BitTorrent hopes that Japan will serve as a model for where the American market might take legal P2P technology.

Is Cohen pleased to be giving up the CEO job?

"Yes I am," he says with a grin.

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