2008 should have been a good year for P2P startups. The FCC ruled that ISPs can’t block BitTorrent and other distributed protocols, the growing importance of HD was increasingly making P2P look like a viable solution, and the P4P folks even came up with a way to increase the speed of P2P downloads while appeasing ISPs at the same time.
And yet the industry continued to struggle, especially some of its bigger players. BitTorrent Inc. cut two-thirds of its staff, saw the departure of its co-founder as well as its CEO and had to pay back millions of dollars of funding while Vuze had two rounds of layoffs. Unfortunately, it doesn’t look like the P2P industry has turned the corner quite yet, even though there are some opportunities ahead in 2009.
BitTorrent Inc. was probably the most emblematic of the struggles P2P startups faced. Back in 2007, then-president Ashwin Navin told NewTeeVee that he expected the number of legal torrent files to surpass unauthorized content by the end of 2008.
Well, that didn’t quite happen. The company founded by BitTorrent inventor Bram Cohen closed its own download store in mid-November, and has yet to announce any deals with major broadcasters or studios for its P2P CDN service. Combine that with the somewhat unprecedented devaluation that forced the company to pay back $10 million to its investors, and you know that this wasn’t exactly BitTorrent’s best year.
Meanwhile, BitTorrent client maker Vuze laid off a total of 24 people and the struggling video platform Joost decided to ditch P2P altogether for the time being and convert its service into a Hulu-like web site. Akamai’s (s akam) P2P CDN Red Swoosh not only lost pretty much all of its original employees, but also its domain name (ouch!). The BBC ditched Kontiki’s P2P media delivery service. P2P old-timer Streamcast Networks closed its doors in the spring, and P2P advertising startup Skyrider shut down in October.
Of course, that doesn’t mean that P2P is any less popular. In fact, the Pirate Bay clocked 25 million simultaneous users in November, a record that was driven equally by the fall TV season, the popularity of the latest Batman DVD torrent and the fact that consumers just don’t like to spend money on DVDs during a recession.
P2P client makers like BitTorrent Inc., Pando and Vuze are increasingly relying on these users to boost their revenue with bundled toolbars, but that strategy could spell trouble for 2009. Companies like Yahoo (s yhoo) and Microsoft (s msft) won’t spend big bucks on toolbars forever in times like these. Just ask DivX Inc: The codec maker recently had to fire 21 people because Yahoo backed out of its toolbar distribution deal.
Still, there are some reasons for cautious optimism for 2009. First of all, distributing HD video is still expensive, and falling ad revenues might force content platforms to give P2P another try to reduce costs.
Then there is the music industry; record labels are finally making peace with P2P. Not only have they abandoned mass lawsuits against consumers, but Warner is actually in the process of setting up a system to monetize unregulated file-sharing.
It’s still unclear when or in what form this will become reality, and it probably won’t be a solution that can be easily adopted by Hollywood. But it might just encourage video content owners to be a little less fearful of piracy and to instead think outside of the box.