Bit Torrent - a Disruptive Technology

Executive Summary:

Bit torrent is a peer to peer file sharing protocol used for distributing large amounts of data. It can distribute a large file without the heavy load on source or network. File sharing through bit torrent was a breakthrough idea and it disrupted the value chain of video and movie industry. Before the augment of bit torrent, people where watching content on DVD, theatres or though video on demand sites like Netflix but bit torrent technology revolutionized the way business was done for the online movie market. Now people were able to own a video by simply downloading the file through torrent client. This destroyed value for the stake holders by disrupting their traditional value chain but on the other hand, if used wisely and kept under strict vigilant, the technology had huge potential to generate revenue with very less input cost. There was a huge untapped market in form of internet users and by asking them to pay premium, stake holders could generate revenue for the movies which were not in circulation but have been hit previously.

It was an open source program so different developers used it and provided torrent clients for downloading the torrents. So bit torrent added value in a certain way and destroyed value in a certain way for the stakeholders.

Bit torrent technology was revolutionary when from business idea per se. It provided an altogether different mode through which people can take ownership of a file. This was a pretty scalable solution without incurring extra costs. But content then had a looming problem of getting leaked even before its screening like what happened in one of the Star Wars movie. Hence the movie industry was sceptical to welcome this technology. Bit Torrent has potential for illicit file sharing thus by downloading copyrighted material, users were essentially infringing copy rights. They called for tighter controls and vigil and sent out appeal to the customers to avoid such kind of piracy. MPAA sought action against this kind of file sharing as this was a huge loss of revenue for the studios and filmmakers and was a massive disruption to the value chain of film release.

Bit torrent is disruptive to the current movie industry in the sense that it operates on different values and has different process of doing business. It possesses tremendous growth and improvement potential and it is not something which essentially can be a fundamental requirement of the customers.

Value Chain Analysis of Bit-Torrent technology

Value chain is a connected series of activities which could include research and development, manufacturing, packaging, marketing and distribution. These activities combine to create and deliver a product (or value) to customers. In video and movie industry, the value chain consists of:

Development -> Financing -> Production -> Sales/Licensing