Under U.S. pressure, Swedish authorities are going after the popular Pirate Bay Web site for illegal distribution of video files. But if Hollywood wants to stop online pirates—who cost the industry some $7 billion in 2005—it needs to join them, not beat them.
Pirate Bay co-founder and resident boy genius Gottfrid Svartholm, 22, photographed at the site's headquarters, in Solna, Sweden.
I relented and signed up for UKNova membership. The site functions as a "torrent tracker," a skeletal database that allows users to locate and share digital files with other users. Unlike some previous peer-to-peer content-sharing programs, the files are not located on a Web site or taken from any single source; they're shared among members in the form of tiny digital fragments that are eventually reconstituted, like a completed jigsaw puzzle, as a single file on your desktop. The operation—which incidentally makes it difficult to sue members of a site like UKNova—is enabled by an ingenious little software application called BitTorrent, a paradigmatic advance in file sharing that has engendered many variants since its 2002 advent.
Loath as I am to admit it, UKNova did change my life—at least as far as my viewing habits are concerned. After downloading free BitTorrent software, I could use UKNova to procure—slowly at first—television shows that would have hitherto obliged me to beg British friends and relatives to record them for me on VHS (remember tapes?) and send via airmail. The unalloyed thrill of watching all this downloaded Brit-TV stuff easily outweighed the nagging shame of staring at a computer screen for hours on end.
I began storing all my UKNova downloads on blank DVDs—first on spindles of 10, then 25, then 50. I soon had enough material to program my own TV channel—Steve TV!—for weeks on end; my Time Warner Cable box was switched on only for live soccer games and weekly HBO favorites. This UKNova habit went well beyond the recreational-use stage: according to site statistics, I have downloaded a frankly embarrassing 800 gigabytes' worth of files—well over 1,500 hours of programming. And since UKNova expects members to maintain a decent balance between material uploaded and downloaded, my computer stayed connected to the Internet for, more or less, 18 months straight in order to allow other users access to my file fragments. The cost of two burned-out hard drives seemed like a small price to pay.
Then this BitTorrent junkie discovered that Philips made a DVD player (Model DVP642) that would play, straight from the disc, UKNova files that previously required hours of reprocessing to watch on a standard player. Which is when I started making over-enthusiastic phone calls to my friends.
Surprisingly, not everyone was receptive to my BitTorrent evangelism—in fact, some went as far as to suggest I had turned into some kind of cyber-criminal. Sure, I knew that the Motion Picture Association of America claimed worldwide losses of $18.2 billion to movie piracy in 2005, $7.1 billion of which was ascribed to Internet file sharing. And I knew that even though the U.S. government had shut down prominent Internet operations for violating copyright laws—eDonkey, Grokster, Kazaa—there are now many BitTorrent mega-sites that continue to thrive; in particular, the Pirate Bay (ThePirateBay.org), based in Sweden, stands as probably the prime destination for anyone looking to download, unrestricted, the very latest in Hollywood movies, video games, TV shows, music, software, and pornography.
As my exquisite digital-video library threatened to overrun my apartment, even my original BitTorrent pusher Richard was starting to talk about the dark side of the file-sharing phenomenon: according to him, this fun little application was going to bring about nothing less than the end of the entertainment industry as we know it. Typically hyperbolic, I thought—until my friend cited the damage file sharing had done to his former company, a marketer of left-leaning documentaries. Then again, weren't his products targeted at exactly the same demographic of pesky young troublemakers who have the time and ingenuity to copy DVDs and share them over the Internet?Legitimate-DVD sales have been slowing down for some time now. The movie studios as a whole are in trouble, and piracy is—along with rising costs—one of the main factors being cited. DVD revenue is a critical component of Hollywood's bottom line, and with theatrical box-office receipts believed to be in long-term decline, DVD sales look set to become an increasingly important revenue stream.
The industry has assigned the task of repelling the pirate hordes to the Motion Picture Association of America, a body best characterized by a 2006 public-service announcement that shows action-movie oldsters Jackie Chan and Arnold Schwarzenegger riding twin motorcycles in front of green-screened freeway mayhem. "Let's terminate piracy!" bellows Schwarzenegger. Your more sentient Hollywood graybeards will have flashed back to 1982, when then M.P.A.A. president Jack Valenti fired off a warning to Sony about its newfangled Betamax video recorder. This sinister device, said Valenti, would do to the American film industry what "the Boston Strangler did to a woman alone."
If the online file-sharing universe is the Wild West, Sweden is Deadwood—a place where the rule of law leaves barely a footprint. Thanks to a combination of national copyright laws, laissez-faire social attitudes, and inexpensive and superior bandwidth, gentle little Sweden—which refers to itself as Europe's "duck pond"—has become a file-sharing fortress in which more than 10 percent of its nine million citizens trade digital material, much of it provided by the country's Pirate Bay site.
Early on the morning of May 31, 2006, Swedish police launched the kind of cleanup operation the M.P.A.A. had long been craving. Law-enforcement officials raided eight locations related to Pirate Bay, with more than 50 police officers involved in arresting the site's operators and seizing their computer equipment. As one Swedish Internet entrepreneur puts it, "When was the last time the Swedish police had 50 people doing anything?"
When Pirate Bay co-founder Gottfrid Svartholm first heard that there was police activity at the site's main location, he jumped in a cab and headed straight there, only to be pulled over by a police car with lights flashing and siren blaring. Svartholm's business partner, Fredrik Neij, had also been alerted to the raid in progress, and was able to back up most of Pirate Bay's files before showing up and doing a bit of "who-are-you-ing" with the invading lawmen.
If Svartholm and Neij's experience sounds like something out of a generic mid-90s cyber-thriller, neither of them is exactly leading-man material. Neij, a 28-year-old who is the more gregarious of the pair, is a scruffy, impish type who regards his outlaw status with wry detachment; Svartholm is a sad-eyed 22-year-old with wispy hair and near-translucent skin that positively scream out "Dungeons and Dragons Master."
Although this pair of Internet scofflaws (or criminal masterminds, if you prefer) now live with the threat of prison sentences looming over their heads, neither seems particularly jittery as they conduct a brief tour of their modest empire on a sunny afternoon in Stockholm. The police raids focused particularly on the basement premises Pirate Bay occupies in the back of an office building in Solna, an unremarkable suburb of the city.
Pirate Bay HQ is a shabby, low-ceilinged concrete bunker that bears little resemblance to anyone's idea of a high-tech Death Star that is threatening to annihilate Hollywood. A handful of cheap desks are strewn with standard dude detritus: empty beer bottles, scattered paperwork, take-out-food cartons, and so on. In the middle of the floor stands a red-and-black Honda Super Sprint motorcycle belonging to Neij. It was moved inside after some of the kids in his neighborhood tried unsuccessfully to break the heavy-duty chain around the front wheel; instead, they burned a patch of paint with a lighter. "I don't mind copying," Neij notes, "but I don't like taking."
Neij certainly didn't like it when the Swedish police entered this facility and confiscated 186 pieces of computer equipment, most of which were servers, from him and his partner—particularly since only about 20 of those machines were connected to Pirate Bay. The other equipment belonged to PRQ, the legitimate Internet-service provider from which Neij and Svartholm make their living. In a back room there are now a few replacement servers stacked up in small, uneven piles.
The Swedish courts decided that the police could keep the PRQ servers, and those belonging to company clients, for forensic examination until May 2007. When PRQ sued for the return of the non–Pirate Bay equipment, the prosecutor responded in hysterical Valenti mode, comparing Pirate Bay to the I.R.A.—the judge ruled that the police could keep any computer equipment netted by the raids until the trial date.
Despite the hardware hardships inflicted by the raids, Pirate Bay managed to find a temporary home in the Netherlands within 24 hours, and, thanks to borrowed equipment, the site was fully functional within three days. Fredrik Neij takes great pride in the way this rapid regeneration wrong-footed the authorities. "The prosecutor didn't know we were back up," he says. "A journalist asked him what he thought, and had to explain that the site was back up. The anti-piracy chief said, 'They won't be back up.' When he was corrected, he said, 'Well, it still works a bit bad.'" The Swedish government had been outdrawn by the fastest guns in Deadwood. (Incidentally, the HBO series of that name continues to be available for free download through Pirate Bay—along with such recent movies as Borat, Blood Diamond, Apocalypto, and Night at the Museum.)
Pirate Bay has now taken careful steps to ensure that any future raids will inflict minimal disruption to the service. "We have divided the servers up geographically—they are hidden," explains Svartholm. "If they come after us again they will only find our front end. A single metal box with a short message stuck on the front: 'You forgot to take my label writer.'"
In reality Svartholm does not expect another raid: "At this point it would be political suicide," he says. Shortly after the raid more than 1,000 citizens attended Pirate Bay rallies in central Stockholm and Sweden's second-largest city, Gothenburg, events which were captured by the quickie documentary Steal This Film. The recently formed Pirate Party doubled its membership, and even mainstream politicians—mindful of Sweden's million or so file-sharing voters—weighed in on the Pirates' behalf.
As Neij pilots his red, rusted Chevy Van 20 toward another scene of the May raids, he explains that he himself is too busy to maintain a serious file-sharing habit. In keeping with the classic computer-geek stereotype, he admits to "pretty much downloading every episode of every sci-fi series that's out there." The late-night animated show Robot Chicken is the entertainment of choice for Svartholm, the Pirate Bay partner who posts diligently bitchy replies whenever the site receives threatening letters from corporate lawyers.
The other locus of the Pirate Bay raids was a giant data-storage facility that is also used by many of Sweden's major banks. It so happened that the company responsible for operating the surveillance cameras at this location relied on Svartholm and Neij's PRQ company for its Internet connection—which may be why grainy footage of the raid appeared on the Internet soon after it happened.
The publicity generated by the Pirate Bay raids gave a huge boost to the site's traffic, which already stood at more than one million visitors per day, and forced the company to hire five new workers to cope with merchandising demand. There are thousands of back orders for the original Pirate Bay T-shirt, which features a skull and crossbones with a cassette tape in the center. When Neij was wearing the shirt on a 2006 business trip to San Francisco, he was surprised to find how far the Pirate cult had spread. "There was a school class lined up outside a museum, a big group of eight- or nine-year-old American kids. And a bunch of them started pointing at me: 'Hey! Pirate Bay! Cool!'"
The New Frontier
As befits an organization of global disrepute, Pirate Bay had its beginnings not in Scandinavia but in far-off Mexico City, where Gottfrid Svartholm was working, in 2003, for an Internet-security firm. As a devout member of Sweden's pro-piracy Web site Pirate Bureau, Svartholm agreed to use the security firm's servers to launch the Swedes' BitTorrent venture, and when he returned home the following year, he found a new accomplice in Fredrik Neij, a self-taught programmer who got his first job through a criminal act. "I hacked a company's service provider and put up obscene messages," says Neij. "The company said work for us or we prosecute." Asked why he committed the original act of vandalism, Neij responds brightly, "Because I could!"
By the time Neij got involved with Pirate Bay (there is a third, silent partner, named "Peter"), the site had effectively outgrown its host. "We had no idea it would happen," says Rasmus Fleischer, co-founder of Pirate Bureau. "It started off as just a little part of the site. Our forum was more important. Even the links were more important than the [torrent] tracker."
Another of Pirate Bureau's founders, Marcus Kaarto, believes that the U.S. entertainment industry itself is, ironically enough, responsible for the rise of the BitTorrent protocol that is now sending the Hollywood community into such a tailspin. "The record industry destroyed Kazaa," says Kaarto, referring to the once popular file-sharing service. "They hired companies to fill it with bogus content and viruses—and that drove users to BitTorrent." And the new software happened to be far more efficacious for transmitting video files. What had begun as a music-business problem was now, thanks to sites like Pirate Bay, starting to send gusts of panic across the television and movie industries.
Among the underlying reasons that Sweden became the hub of the burgeoning culture of international file sharing, the most often cited are national copyright laws that were, until fairly recently, relatively lax toward Internet piracy. Other factors include tax benefits offered for purchasing computers and, more important, one of the most developed Internet infrastructures in the world. Kazaa was invented in Sweden by Niklas Zennström and Janus Friis, who together went on to create Skype, the VoIP (Voice over Internet Protocol) company that they ultimately sold to eBay for $2.6 billion.
One of the main engineers of Sweden's Internet pre-eminence is 34-year-old Jonas Birgersson, also known by the nickname "Broadband Jesus." Birgersson is a former military-intelligence prodigy whose tiny Broadband Company became a major telecommunications player in the late 90s by laying fiber-optic cable across much of the country, giving Swedish consumers cheap access to vastly expanded bandwidth.
In 2000, Birgersson was lauded in a Newsweek article that gushed over Stockholm's high-tech success story and anointed the city "a Scandinavian Seattle."
Thanks to the Pirate Bay raids, Sweden's cuddly image has, in the minds of many in the entertainment business, been supplanted by something much more ominous. Birgersson is among those who think the hostility is completely misguided. "Sweden is not the enemy," he says. "Sweden is the prototype of society to come."
A Hollywood Production
Not only had the Swedish police been heavy-handed in their seizure of Pirate Bay's property, they had, on the evidence of a private investigator's report, questioned a female acquaintance of Neij's and searched her apartment. Also hauled in for questioning was Pirate Bay's legal counsel, Mikael Viborg; for some reason police saw fit to take a DNA swab from the inside of his mouth, as they'd also done with Neij and Svartholm. Initial public outrage over the police's actions only increased when widespread suspicion about the raids' origin was confirmed. It turned out that the whole operation was indeed a Hollywood production.
In late 2005, Sweden's Motion Picture Association was imploring the country's justice department to prosecute Pirate Bay for large-scale copyright infringement, but chief prosecutor Hakan Roswall decided that the site's owners were doing nothing actionable concerning American films' copyrights. Shortly after the raids the Swedish media discovered what had inspired Roswall's change of heart.
In June 2006, the Swedish media exposed a leaked March 17 letter from John Malcolm, head of anti-piracy for the U.S.-based M.P.A.A., to Dan Eliasson, state secretary to Sweden's minister for justice. Malcolm's missive referred to an earlier meeting between the pair and urged the Scandinavian official "to take much-needed action against the Pirate Bay." Eliasson's cordial reply was dated April 10.
Malcolm and Eliasson had been brought together in October 2005 by Monique Wadsted, lead lawyer for Sweden's M.P.A.; Wadsted also happened to have been a law-school classmate of Eliasson's boss, Justice Minister Thomas Bodström. Frustrated by the lack of police resources allotted to her ongoing complaint against Pirate Bay, Wadsted successfully suggested that the M.P.A. hire a private detective to put together a file on the site. "We provided information to push on the investigation," she admits.
Wadsted found herself caught up in the public backlash against the Pirate Bay raids when her personal details were posted on the Internet by persons unknown. The lawyer complains vociferously about having her privacy violated, yet she refuses to allow that other Swedish citizens may also have had their privacy violated as a result of the M.P.A.'s scattershot intelligence gathering. "The private investigators haven't done anything illegal," Wadsted insists. "It's a different thing to give people personal information on a lawyer and urge people to harass her. I'm not a criminal. I'm not even suspected of being a criminal."
In terms of international-copyright malfeasance, Sweden found itself among some heavyweight company. The U.S. had, for instance, become extremely frustrated that it hadn't insisted on China's compliance with digital-piracy laws before China joined the W.T.O. And the very same issue has been one of the major obstacles to the admission of Russia, a nation where former military bases have been converted to factories that churn out millions of bootleg CDs and DVDs.
On July 5 of last year, with the Swedish government still reeling from the Pirate Bay scandal, and ministers being subjected to investigation, there was momentary relief in the form of a national-newspaper article. The story alleged that Neij and Svartholm had all along been making a healthy financial score off Pirate Bay, in the form of advertising revenue. Posing as a potential advertiser, a journalist had approached the company that sells banner ads on Pirate Bay, and estimated that these must be generating, in Swedish advertising alone, as much as $80,000 per month, and claimed that these funds were being channeled into a front company in Switzerland.
Neij insists that whatever advertising revenue is generated is severely limited by the fact that the site operates in a legal "gray zone," and Svartholm points out that they lost $60,000 worth of equipment in the raids. "It's not free to operate a Web site on this scale," he adds. In early 2007, one of the companies advertising on Pirate Bay was none other than Wal-Mart—touting DVDs, no less. Svartholm says he doesn't know which third party bought the space on Wal-Mart's behalf (it was an Israeli company), and he continues to maintain that the site yields only enough profit to cover operating costs. "If we were making lots of money I wouldn't be working late at the office tonight," says the pallid Swede. "I'd be sitting on a beach somewhere, working on my tan."
As the M.P.A.'s Wadsted is eager to point out, any conclusive proof that Pirate Bay's owners are businessmen rather than amateurs would alter the complexion of the impending legal proceedings against them. "This would be a more serious matter altogether," she says. "The judge could end up sending both of these guys to prison for five years."
After my fact-finding safari in Sweden, I returned to Paris, where I was temporarily domiciled, and where my personal piracy habit was expanding quite impressively. During a settling-in period in France, my wife happened to mention how much she regretted missing the third season of Project Runway (which was supposedly even better than the first two). Proving that chivalry is not dead, I strayed from the genteel UKNova tea party and downloaded, through the torrent tracker mininova.org, all the new episodes of Bravo's flagship reality series. It didn't stop there: I went on to indulge myself with the pilot episodes (unscreened at that point) of Studio 60 and Knights of Prosperity, among other U.S. network treats.
But I still drew the line at downloading movies. This was mainly because, in light of my irrational dislike of French TV variety shows, I had already prepared for our relocation by augmenting "Steve TV" with several months' worth of illegally copied movies—meaning that I'd rented dozens of DVDs from Netflix and duplicated them using a fun (and completely illegal) little computer application called Mac the Ripper. There may be those who need their Criterion Collection DVDs in the lavish original packaging, but it turned out I wasn't one of them—apparently I've become just another one of the millions worldwide who can't resist the idea of getting stuff for free. "Because I can."
Among the few senior entertainment executives who have been able to absorb this seemingly basic aspect of human nature is Anne Sweeney, president of Disney–ABC Television. In her keynote speech at the October 2006 MIPCOM audiovisual-content market in Cannes, France, Sweeney broke ranks with her boardroom peers to make a bracingly pragmatic statement. "Piracy is a business model," Sweeney said. "It exists to serve a need in the market—consumers who want TV content on demand. And piracy competes for consumers the same way we do: through quality, price, and availability."
The major television networks have been finding it far easier than the Hollywood studios to adapt to the dramatic technological shifts that will be reshaping the traditional media marketplace for years to come. The networks have already enjoyed the luxury of experimenting with different distribution models, from selling episodes on iTunes to the more realistic approach of giving them away on the Web with advertising intact.
It has been more than a year since the 260 layoffs at Warner Bros. confirmed that Hollywood's executive class is anticipating turbulent times ahead. And yet, in the interim, the movie industry's response to digital piracy has been about as effective as a dawn raid by the Keystone Kops.
In terms of offering consumers legitimate movie downloads, disunity and incompetence have been the order of the day. As far back as 2002, Paramount, Universal, MGM, Sony, and Warner Bros. joined forces to launch the download site Movielink, but the paltry fare offered is so hopelessly freighted with protective technical restrictions that BusinessWeek, in a 2006 article, poignantly described it as "difficult or impossible to use." A similarly hidebound rival site called CinemaNow has proved equally unappealing to the millions who already consume their movies online for free.
Last summer, Apple's era-defining iTunes service strode into the movie-download arena amid much fanfare—but it initially offered only a meager inventory of around 75 films from Disney, the only company with which Apple had struck a deal. This is not surprising, given that Apple C.E.O. Steve Jobs is Disney's largest shareholder, as well as a company director. So what is preventing other studios from signing up? One name: Wal-Mart.
As the retailer responsible for shifting around 40 percent of the $17 billion worth of DVDs sold in 2006, Wal-Mart wields uniquely powerful influence over the way in which Hollywood studios choose to distribute their product. Until Paramount announced a deal with iTunes this past January, no studio other than Disney was willing to risk offending Wal-Mart, a company that they fear more than Pirate Bay itself. So even though DVD sales are slowing and online piracy is booming, Wal-Mart can restrict the studios' downloading plans and hold them to a pact of mutually assured self-destruction.
This past fall, Wal-Mart took its first baby steps into the movie-downloading arena, offering a rudimentary service to its online customers—not even the most paranoid Wal-Mart executive would be threatened by the other major legal-download service currently in operation, Amazon.com's Unbox. In its current iteration Unbox boasts a reasonably large inventory of films, but with many unappealing restrictions: the movies it provides can be viewed only on Windows devices (i.e., video iPods not invited); hit-movie downloads are priced slightly lower ($14.99–$19.99) than physical DVDs, but they cannot be burned onto blank DVDs and they self-delete in 24 hours.
In 2004, longtime M.P.A.A. president Jack Valenti was succeeded by Dan Glickman, the secretary of agriculture in the Clinton administration. While Glickman's public pronouncements on piracy can tend toward Valenti-like belligerence, in person he is alarmingly reasonable when discussing Hollywood's piracy problem. Glickman believes that the movie industry will soon give the public "a reasonably priced, hassle-free alternative" to illegal downloading. "Most people, if it's easily available, will not steal it," he insists.
This assertion is not necessarily supported by the available data. For instance, although Apple's iTunes service became known as the savior of the record business by generating millions of dollars a year through its legal, hassle-free downloads, the market share is less than healthy. A recent industry study estimated that iTunes accounted for a mere 2.5 percent of music files downloaded from the Internet. Glickman is undaunted by this grim statistic. "I see the glass half full, not half empty," he states. Though he'll admit that there is "a lot of trial and error going on" during this "digital transition," he insists that Hollywood will soon get its act together.
Glickman supports this positive forecast with two examples, neither of which really stands up to serious scrutiny: Yes, the studios have made BitTorrent founder Bram Cohen guarantee that his site (bittorrent.com) will no longer host any illegal content. So one pirate surrendered—the fleet is still growing by the day thanks to Cohen's original software. Glickman's other ray of hope is Guba, a marginal site that offers visitors a smorgasbord of YouTube-like amusements, plus commercial fare that again comes with severe technical restrictions. January 2007 saw the launch of Qflix, a movie-download system endorsed by all the major studios. Qflix sounded like a promising development and a marked improvement on existing services, but once again there was a catch: most customers would need to purchase a new DVD burner in order to use it.