BusinessWeek on BitTorrent’s VC Dollars

BitTorrent’s Grab at Respectability [pdf]

BitTorrent, the maker of popular file-sharing software used to distribute movies, music, and games both legally and illegally, is going commercial. The company has raised $8.75 million in venture capital from Menlo Park (Calif.)-based Doll Capital Management and plans to create a marketplace for dispensing digital goods.

[…] [Brian] Cohen always distanced himself from illegal use of his technology, though he did make money by accepting donations and selling T-shirts — that is, until the past year. Ashwin Navin, a former Yahoo! (YHOO ) employee and now BitTorrent’s chief operating officer, met Cohen last year, and the two began discussing how to turn the publishing technology into a bigger business.

They set up headquarters in San Francisco and began looking for venture funding. They spoke to studios, record labels, and industry associations, including the Recording Industry Association of America and the Motion Picture Association of America. Now, with the VC money, BitTorrent plans to build out a marketplace aimed at attracting the huge audience of BitTorrent users, which the company estimates at around 45 million people. “We want to bring people the content that they want to watch,” says Navin. “Some of that will come from Hollywood, some will be independently created.”

Aspirations aside, BitTorrent’s planned transition is fraught with risk. Its execs have to persuade movie executives, game makers, and record labels to distribute their works through the service. […]

A big part of winning over holders of copyrighted work will be addressing concerns over illegal file sharing, much of which is done through so-called BitTorrent superhubs, independent sites that distribute both legal and illegal content. Navin says BitTorrent is working with the superhubs to reach licensing agreements on copyrighted works. BitTorrent will include any copyright protection technology that rights holders want to use.