About | ACP | Buy | Forum | Industry Watch | Learning Curve | Search | Twitter | Xnews
Home » Industry Watch

TPB Update

And interviews with The Pirate Bay cofounder Neij, prosecutor Roswall, and Swedish tax authority representative Ahlqvist.


STOCKHOLM (SvD) -- The cofounders of The Pirate Bay have three good reasons to move revenues to foreign companies and out of sight of the Swedish authorities: profit, culpability, and image.

The business model serves primarily to generate income and reduce taxation.

But if Neij and Svartholm are convicted of violating copyright law they'll receive harsher sentences if it can be demonstrated they've been running The Pirate Bay as a commercial interest.

And revenues in the millions don't exactly rhyme well with their image as an idealistic non-profit challenging the super-commercial entertainment industry.

Tax authority control organiser Göran Ahlqvist intimates that his office have their eyes on The Pirate Bay and the cofounders' hosting company PRQ who own the servers seized by the police on 31 May.

'Our investigations are confidential until they are completed and have led to a public decision. But an event like the raid on The Pirate Bay will normally attract our attention. And our investigation will easily take half a year', says Ahlqvist.

The couplings with foreign companies and tax planning consultants make the investigation more complex and more difficult to control by Swedish authorities. Ahlqvist stresses that tax planning through Swiss companies and tax paradises need not be illegal.

'It's about exploiting each country's legal framework. But there's a gray zone between tax planning and tax evasion. We have a suspicious attitude towards constructs with companies in different countries which attempt to evade taxation.'

Donations

The raid on The Pirate Bay caused an upswing in revenues for TPB's owners, but despite hundreds of thousands rolling in every month they're still asking for donations.

The raid put TPB amongst the 150 most visited sites on the planet. After a few weeks uniques went down again and TPB are now ranked #416 by Alexa, which is still a very high rank, beating any other site in Scandinavia.

Ads for TPB are sold by Eastpoint Media and Adbrite. A reporter for SvD went 'underground' to find out how expensive the ads are.

Eastpoint Banners

There are two alternatives, he was told: a smaller banner for $5000 per month and a larger for $10000 per month. Ad real estate is shared by five advertisers. If all areas are sold out the total revenues are somewhat over $50000 per month. Only a 6% rebate is given if ads are purchased over a longer period.

Gambling sites such as Unibet and Noble Poker have been frequent customers.

'We've seen the ad revenues for The Pirate Bay triple or quadruple the past two months. We're doing extremely good business there', says Eastpoint Media's Luar Busó.

Eastpoint Media get to keep half of the revenues; the rest go to a middleman, the Swiss based Random Media, who then turn over the money to the owners of The Pirate Bay.

As no one at Random Media has responded to enquiries, it is still not known what cut of the money they keep for themselves.

Adbrite Text Links

Adbrite is the other company used by The Pirate Bay to push ads. They sell text links. A text link costs $800 per month.

To more precisely calculate The Pirate Bay's revenues is difficult. The Swedish tax authority's records are not always up to date.

The Pirate Bay is not even registered as a corporation. The cofounders Gottfrid Svartholm and Fredrik Neij do however run the Internet hosting company PRQ. The most recent tax statements available to the public are two years old.

Ads are not The Pirate Bay's only source of revenue. The following blurb can be found on the site.

'As we who are working with the tracker have spent a lot of time, hardware, and money out of our own pockets, donations are welcome, which go directly to financing the tracker.'

Under the blurb are instructions how one donates money with SMS or by depositing money in a bank account held by Fredrik Neij at a local bank. That The Pirate Bay today make big money on ad revenues is not mentioned.

'Anyone can encourage people to donate money, as long as you don't send out invoices. That people do this is sometimes regrettable. The question is whether it's well spent money if it goes to a profitable company', says consumer ombudsman Karin Lindell.

Since the turn of the year donations don't go to The Pirate Bay but to The Pirate Bureau, who are working to legalise file sharing, according to Fredrik Neij.

'We haven't updated our site in a while. We're going to take care of it. Starting in the new year we're working with Random Media, and now we can pay expenses ourselves', says Neij.

Neij says The Pirate Bay receive up to $800 per month in donations. A prominent link is also found on the website to The Pirate Shop where people can buy The Pirate Bay t-shirts. Even these revenues go to The Pirate Bureau. According to The Pirate Bureau there's been a stark increase in sales the past weeks.

Admissions

The cofounders of The Pirate Bay admit they are making money. Prosecutor Håkan Roswall is now investigating their financial situation. If he finds they are profiting by the site their sentence in the case of a conviction can be significantly harsher.

'Most of the money is used to pay bills, especially now when we've had to buy new server hardware', says Fredrik Neij. 'To purchase new equipment after the police seized our old equipment has cost us about $10000.'

'We intend to make further investments so the site gets redundant locations, so even if the police knock down the one we can open again somewhere else in minutes. We've started working on this. Now we have servers in Sweden and in another country - which country I don't want to say so someone starts exploiting diplomatic channels.'

Neij now admits that he and Gottfrid Svartholm are profiting by the venture.

'If there's any money left over it'll go to salaries for those who work on the site. Right now that money is with the ad company. And we'll wait until there's more money before we take any.'

Prosecutor Håkan Roswall and the police are now going through the 300 servers that were seized. To start with, the cofounders of The Pirate Bay are under suspicion of violating copyright law, but the police will also investigate their financial situation.

'We haven't had time to look into their finances yet, but we will get to that shortly. If the site is commercial, and it is if it's financed by advertising, it will have a dramatic effect on sentencing - which will be entirely different it it can be demonstrated they're making money off their venture', says Håkan Roswall.

Earlier copyright cases where the accused profited by their crimes (although not file sharing cases) have resulted in significant prison sentences, according to Roswall.

The police will pour over the bookkeeping and the flow of payments with a focus on the management of the ad revenues. They will also see if taxes have been paid.

'We might also bring in material from other companies that have had business relations with them', says Roswall.

The Stockholm courts ruled last week that Roswall may in fact keep several of The Pirate Bay's servers until December. The servers belong to PRQ and contain the company's financial system.

According to Håkan Roswall the authorities may very well turn up interesting facts about the commercial side of The Pirate Bay. But to what extent he suspects any further wrongdoing he does not wish to comment. Neither will he say how much money he believes the site is earning.

But he doesn't rule out collaborating with the financial crimes authorities at a later stage. Fredrik Neij has a personal tax debt of $18000, but this has no influence on the case, according to Roswall.

A decision by the prosecutors office is not expected before the end of the year.

See Also
TPB Raking in Millions

About | Buy | Forum | Industry Watch | Learning Curve | Products | Search | Twitter | Xnews
Copyright © Rixstep. All rights reserved.