• BusinessWeek, Thursday, July 2, 2009 1:04 PM

What do Hans Pandeya and Global Gaming Factory, the company that just bought The Pirate Bay for $7.9 million, plan to do with the Web's most notorious destination for illegal file-sharing? In an interview with BusinessWeek's Mark Scott, Pandeya, Global Gaming's CEO, says he intends to pay royalties to the likes of Warner Bros. and Sony BMG for the right to distribute their content. Of course he didn't say how much he's willing to pay-in fact, he hasn't yet entered into negotiations with them. But gaining access to legitimate content is just Phase 1.

Pandeya's ambitions for Phase 2 are much greater, says Scott. His "groundbreaking scheme" is to bundle together the collective bandwidth of the Pirate Bay's users into a giant peer-to-peer network, and then resell that capacity to ISPs in need of cheap bandwidth. He actually plans to split the revenue with The Pirate Bay's users, who will be compensated for sharing their connections. Pandeya did not say how much users would get. "The technology will use the community of file-sharers to cut costs of data traffic for ISPs by more than a half," says Pandeya. "Users will earn money by joining, which can be spent on Pirate Bay's other services [such as an expected online music store] or transferred to their bank accounts."

Some analysts aren't convinced the plan will work. Mark Mulligan, research director at Forrester Research, warns that mass defections by Pirate Bay users-who will undoubtedly look elsewhere once the site swears off illegal content-could make it hard to build a peer-to-peer community large enough to generate excess bandwidth to sell to ISPs. "This doesn't appear financially viable," Mulligan says.

Pandeya's other moneymaking scheme: advertising, from which he plans to make as much as $56 million per month, a figure Mulligan calls "crazy."

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