BitTorrent offers lessons on the media revolution
A couple of weeks ago, I visited BitTorrent’s headquarters in San Francisco for a briefing with CEO Eric Klinker. This was a routine appointment that turned out to be far more interesting that I expected.
Over at SiliconBeat, for instance, I shared some of Klinker’s thoughts on the current mania for cloud computing, and why he’s a skeptic. And last weekend, I used his remarks as a basis for a Sunday column on why things are changing more slowly than we think. Klinker noted that one of BitTorrent’s priorities is to find ways to get embedded into televisions because 99 percent of all video is still viewed through the tube.
That was an eye opener for me, since I view BitTorrent as one of the revolutionaries. The BitTorrent filesharing protocol released in 2001 became one of the primary ways people began sharing video content early last decade, and in fact still carries a big chunk of the video content across the Internet. That rang piracy alarms, and eventually the creators of BitTorrent started a for-profit business in 2004 out of the protocol to find legitimate uses and a sustainable business. The protocol is still open source, available to anyone to use.
So my visit with Klinker was to understand where BitTorrent was, and what kind of progress they had made. The company has raised about $40 million in venture capital and has about 45 employees. Klinker said the company is “moderately profitable,” in part because it has a healthy revenue stream from distributing browser tools for third parties. But the company is still trying to focus on finding a robust, growth business model.
So in addition to the above thoughts, I wanted to share some other lessons I took away from that interview that I think are relevant to people interested in the future of media:
- Things are changing more slowly than we think. See the column link above.
- In thinking about business models, the way BitTorrent is trying to frame their approach is around the concept of “scarcity.” More on that in a minute.
- Video games are an important source to watch in developing business models for the Web.
- These first three have led BitTorrent to focus on the freemium model.
If you want to check out some of the latest evolutions of BitTorrent, check out their labs page here. In the meantime, here’s more detail on each point:
1. Pace of change: In a nutshell, when you get outside the Silicon Valley bubble, people’s habits remain stubbornly resistant to change. Rather than get bogged down in ideology, smart companies recognize this and try to fit their services into people’s lives, rather than trying to force users to make a major shift in their usage.
BitTorrent is thinking a lot about the user experience. They’ve hired someone to focus exclusively on this issue. If you haven’t used BitTorrent, or haven’t downloaded a torrent, or even done file sharing, it’s worth noting that these can be somewhat complex for the average user. BitTorrent is trying to simplify the finding of content, the dowloading of it, and the playing of it. I’m always surprised, still, when I talk to folks designing some new online news service at how little thought they’ve given to the user experience. “We want to make it a more seamless user experience,” Klinker said.
2. Scarcity: In trying to explore business models, BitTorrent has used the framework of “scarcity.” In essence, the Web has given us most content in abundance. And when that happens, it’s futile to try to monetize it. “The Internet is like a big copying machine,” Klinker said. “And a lot of media is struggling with this. It’s what we call the ‘scarcity crisis.’ It’s hard to control bits and extract money for content that everyone has.”
To that end, BitTorrent is trying to identify the things only it can offer users, and then find the value in them. “You can extract value for the things that are scarce,” Klinker said.
That’s still a work in progress for BitTorrent. But I like the idea of using scarcity as a way to focus thinking around monetization.
3. Video games: I’m not a gamer. And neither is Klinker. But we had an interesting digression into a trend we’ve both been following: They way social gaming companies like Zynga are demonstrating the power of new forms of business models on the Web. In particular, “free-to-play” games like Mafia Wars and Farmville have become huge hits. But Zynga is making a ton of money by exploiting people’s willingness to buy virtual goods. I wrote about the intersection of virtual goods and news here. BitTorrent is not about to get into the virtual goods business. At least not yet. But they’re watching closely for ways to offer free services and then sell additional goods and services.
“How do I extract value from things that aren’t scarce?” Klinker said. “Games have been leading media in the right direction.”
4. Freemium. The company is in the process of revamping the BitTorrent client to allow developers to build applications that can run on top of it. Users would just add them with one click, much like any app store you’re used to seeing. BitTorrent is still working out how the revenue would be split. For instance, someone could install the BitDefender app, which is free and offers various security features, but pay for some premium services, with some of the revenue going to BitTorrent. “We think this has a strong future on the Internet,” Klinker said of the freemium model.
On a separate note:
Klinker pointed to BitTorrent’s involvement in the recent “Pioneer One” video project. Pioneer One was intended to be a TV series and pilot, but didn’t have any luck with TV networks. So the creators raised $6,000 through Kickstarter and then used that to shoot a pilot, which was distributed by BitTorrent. I don’t get the sense that this is any future business model for BitTorrent. But it’s an interesting intersection between the lowering costs of content creation, crowd funding, and new forms of distribution.
