The Inside Story of BitTorrent’s Bizarre Collapse
How a group of valley outsiders blew through the company’s cash and nearly left it for dead.
By Jessi Hempel
Jan 11 2017
Last April, a pair of cousins named Bob Delamar and Jeremy Johnson became co-CEOs of BitTorrent. Delamar was a bearded Canadian Japanophile in his early forties; Johnson a network engineer from San Diego. Through an unusual financial arrangement, they represented a four-person group that had recently come to own a controlling stake in the company, and they had a plan to turn BitTorrent into, as Delamar was fond of saying publicly, “the next Netflix.”
BitTorrent had already tried to be the next Netflix, starting long before Netflix had become the next Netflix. The company was founded in 2004 by Bram Cohen, inventor of the open-source protocol that lent the startup its name, and Ashwin Navin. BitTorrent — the protocol — was a genius way to transmit large amounts of information over the net by breaking it into small chunks, sending it through a peer-to-peer network, and reassembling it. BitTorrent — the company — got started on the assumption that Cohen was brilliant. He’d invented one of the web’s most fundamental tools, and surely there was a business to be made from it.
But from the start, BitTorrent had a branding problem — pirates used it to share movies illegally, making it the Napster of entertainment. Because the protocol was open-source, BitTorrent (the company) couldn’t stop the pirates. For 12 years, BitTorrent’s investors, executives and founders attempted to figure out many money-making strategies, including both enterprise software and entertainment businesses, while convincing us all that, sure, people might use the BitTorrent protocol to conduct illegal activity, but BitTorrent was just a tool — a really great tool you can use for really great things!
They’re right: 170 million people used the protocol every month, according to the company’s website. Facebook and Twitter use it to distribute updates to their servers. Florida State University has used it to distribute large scientific datasets to its researchers. Blizzard Entertainment has used BitTorrent to let players download World of Warcraft. The company’s site boasts that the protocol moves as much as 40 percent of the world’s Internet traffic each day.
But transforming this technology into any kind of business has proved elusive. By last spring, BitTorrent had already endeavored to become a media company, twice. There was BitTorrent Entertainment Network, launched in 2007, which was a storefront for movies and music that made no money and shut down a year later. And then there was the BitTorrent Bundle, launched in 2013, which was a competitor to iTunes and Amazon that let artists distribute their work directly to fans at a fraction the cost. In 2014, the company even announced plans to produce its own original series, a scifi show called Children of the Machine. But by early the next year, BitTorrent had given up on this strategy, too.
Some startups are born lucky. By the chance of their timing, their technology, or the individuals who helm them, they experience Facebook-size success. Others fail quickly. There is luck in this, too — in an immediate, concise conclusion. Far more startups, having raised funding on the merits of an idea and a team, plod along for years or even decades, constantly casting about for the idea or customer or partnership that will transform them. Their investors are patient, and then exhausted, and then checked out, and then impatient. Their executives change, and then change again. The founders leave, or they hang on in hopes the company they conceived will somehow eventually prove itself. They are zombie startups.
Such is the case with BitTorrent. It has remained a technology in search of a business for a dozen years. Then last year, Delamar and Johnson arrived with plans to save it once and for all. Instead, they squandered millions on failed schemes, putting the company on course for collapse.