On the surface, it seems like Hollywood is doing a better job of getting consumers to use their approved methods for transferring content over the web — but the reality is that it’s a mess. And the only reason piracy isn’t so rampant in the US is that our broadband speeds, for the most part, suck.

Sure, there are a lot of channels to get films legally over the web. iTunes, Xbox Live, Amazon, Netflix and Hulu are all doing a fairly good job at making the content they’re given, accessible. Unfortunately, it’s the content that’s the problem. If you go to any of those services looking for a specific movie, there’s a very good chance that it won’t be available. And that can be true even if it was available on the service in the past. It’s a nightmare.

Farhad Manjoo had a good article yesterday on Slate outlining some of the major problems. One of the biggest ones is that Hollywood’s archaic syndication rules are in play with digital distribution over the web. For example, Hollywood now gives some movies to services like iTunes for rental immediately or soon after they’re released. But because of the deals studios have in place with premium content channels like HBO, after the pay-per-view window closes (iTunes and the other services’ rentals systems are considered pay-per-view), these movies have to be pulled off of the rental services so that the premium channels can get their exclusive rights to broadcast them.

Those movies then stay exclusive to the premium channels for 15 to 18 months — let me repeat 15 to 18 months! And from there it only gets worse. After the year and a half in premium channel jail, movies then go to the regular cable channels and big networks for airing. As I understand it, some online rentals are again okay during this time, but then, they often go back to the premium channels for a second run. That means they get pulled once again.

This whole process often lasts for seven years or more, as Manjoo notes. It’s only after that time period that movies are really free to be distributed a bunch of different ways. That includes Netflix’s popular Watch Instantly streaming feature — so now you see why the selection of movies on that service is mostly older films. In fact, basically, the only newer ones they offer is because of their deal with Starz, the premium cable channel. That deal may have been one of the smartest ones Netflix has made yet, because at least it gives us access to some movies this side of 2002.

The fact that online distribution has to play in this foolish game of broadcast rights tennis, is of course, bullshit. The brick and mortar rental stores of yesteryear, like Blockbuster, don’t have to play by these ridiculous rules. Movies don’t vanish from their shelves because they’re playing on HBO for the next 18 months. If they did, Blockbuster would have been in trouble a lot sooner than its most recent woes (tied to its failure to get out in front of new forms of distribution).

So how can anyone really expect any of the online movie services to flourish under such restrictions? They shouldn’t, because none of them truly will until Hollywood changes these rules. And with billions of dollars at stake, Hollywood probably isn’t going to do it anytime soon. In fact, I’d venture to guess that the only thing that will force their hands is if services like BitTorrent, which people use to distribute pirated movies, continue to gain popularity as broadband access and speeds improve.

In other words, things may change when Hollywood starts getting screwed just like the music industry got screwed.

Seriously, search for a bunch of new movies you want on iTunes rentals, Netflix Watch Instantly and a torrent tracker. Which has the best selection? It’s certainly going to be the torrent tracker — and that gives you the movies for free.

The success of iTunes music store has proven that people are willing to pay for content (it’s now the largest music retailer, bigger than even Wal-mart), but the key factor is ease of use — of which, selection is a big part. It’s beyond frustrating to search a service for something you really want to pay to watch, only to find it doesn’t offer it. Hollywood is leaving money on the table.

I could go on about other ridiculous things is doing to screw up online distribution. For example, the fact that while a lot movies are available to buy on the day they’re release, most cannot be rented online until a few weeks later. But it’s all part of the same problem.

Hollywood is scared to embrace the move to online distribution. It’s still holding out hope that Blu-ray will catch on and become their next multi-billion dollar cash cow. That’s not happening. For most people, Blu-ray simply doesn’t offer enough of an improvement over DVD. Online distribution, with its instant access, does. Will Hollywood realize that too late?

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In one board action, $10 million was removed from the company’s bank account and the valuation slashed from $177 million to just $35 million.

Recapitalizations, where existing stockholders are crammed down to near zero equity in anticipation of a new round of financing at a lower valuation, are common. Particularly in down markets. Old investors are forced to put in new capital to maintain their ownership. New stock options are awarded to current employees. Anyone who’s left the company, even founders, are left with nothing. Even though they’ve often paid hard cash to exercise stock options.

Recaps are the only way to make bloated startups that have run out of cash healthy again. But they only happen when a company is desperate for cash and has no other options. The reason is clear – the board of directors has a fiduciary duty to protect stockholders. Recapitalizations are not good for existing stockholders, and can only be approved when the company has no other choice.

But what happened at BitTorrent wasn’t a standard recapitalization. Nothing about the BitTorrent reorganization was standard, in fact. The company, which laid off more than 2/3 of staff (65 to 19 employees), had over $20 million in the bank before this transaction, says a source close to the company. They weren’t generating much revenue from toolbar and device installations – just $5 million or so annually – but at least the company had plenty of runway left.

In other words, the fiduciary duty of the board of directors to the stockholders of BitTorrent was almost certainly disregarded.

The letter to stockholders said that “DAG claimed that the Series C financing should be substantially renegotiated.” But our sources say that Accel was the firm to insist on the change, forced the decision on everyone else, and let DAG take the fall. Why did DAG allow that to happen? The firm’s whole investment thesis is to follow top tier firms like Accel and Sequoia, investing in later rounds at higher valuations. They have to keep these top firms happy. As a result, they are effectively a whipping boy when someone has to be held publicly responsible for unpopular actions.

But the real question about the recap is why the board of directors let it happen. The board has a strict fiduciary duty to protect stockholders. That didn’t happen here, since all existing stockholders were effectively wiped out by the recap.

So why did the board vote for this extraordinary transaction? Two of the board members, Ping Li (Accel) and David Chao (DCM), are investors in the company and stood to gain financially from the rescission and recap. CEO Erik Klinker is an Accel man, having previously worked at Accel-funded Internap. That leaves founder Bram Cohen, founder Ashwin Navin and outside director Brad Templeton.

Navin voted against the transaction. Templeton voted for it, but refused to comment when I asked him why he felt this was in the best interest of the company and it’s stockholders. Cohen also voted for the transaction, and as the majority holder of common stock he was a necessary vote. Without him, the transaction would not have happened.

So why did Cohen agree to vote for the transaction? Speculation abounds, but one aspect of the transaction is suspicious. The term sheet calls for $750,000 to be spent buying back shares from common stock holders. That mostly means Cohen, who is reportedly getting the lion’s share of the 30% of the company put aside for current employees. Cohen, who has recently had highly publicized financial troubles, may have simply been bought off.

There’s no other reason for the stock buyback. If the company is in a dire enough financial situation to warrant an unprecedented rescission of a $17 million financing, then money that’s left sure as hell shouldn’t be spent in payouts to founders.

BitTorrent and Accel will not respond to requests for comment. Everyone is keeping quiet. For now.

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The company, admitting that the their business was “not gaining sufficient traction,” has closed a new $7 million round of financing from those same investors at a “substantially reduced” valuation of $28 million.

Down valuation rounds are common in tough economic times. But rescinding entire rounds of financing and returning capital to investors isn’t – it’s a sign of significant distress at a startup.

From a letter to shareholders:

In late May and June of this past summer we closed a $17 million Series C financing.
The lead investor in this financing was DAG Ventures. Given the changes in our Company’s business model and projections that occurred in close proximity to the Series C financing, DAG claimed that the Series C financing should be substantially renegotiated. After evaluating DAG’s claim, engaging in significant negotiations with DAG, unsuccessfully trying to raise funds from other sources, and taking into account the overall economy, the Company decided to work with DAG to significantly modify the terms of the Series C financing.

The executive team has also been cut dramatically. Most of the executives listed on this page no longer appear to work for the company (BitTorrent previously announced that Eric Klinker was promoted from CTO to CEO after the resignation of Doug Walker) :

As a result of the foregoing, the Company now employs 19 people, and our executive
officer team consists of the undersigned, Eric Klinker, as CEO, Mitch Edwards as CFO, Bram Cohen as Chief Scientist, Simon Morris as VP of Product Marketing and Ilan Shamir as VP of Engineering.

The founding team has also been diluted to the point that they own a very small percentage of the company. Common stock and stock options account for only 11.4% of the company after the new financing, and much of that is owned by the venture capitalists. Current executives, though, are clearly being topped up. 30% of the newly capitalized company is set aside for new stock options.

The full letter is below, as well as the term sheet for the new financing and the current capitalization table. We’ve emailed BitTorrent with a request for comment.

Letter To Stockholders:

CONFIDENTIAL

Dear BitTorrent Shareholder:

I am writing to inform you of a number of significant developments related to the
Company, including the renegotiation of the terms of the Company’s Series C financing, and to
request your approval of, and to offer you the opportunity to participate in, the revised financing.

Business Update

Last spring the Company was focusing its business efforts on content delivery services
(DNA), embedded software (SDK) and our direct to consumer portal (the Store). Over the
course of the summer it became clear that some of the Company’s businesses were not gaining
sufficient traction, and that the Company would significantly miss its projections. In response,
the Company substantially restructured various product offerings, closed the Store, laid off a
significant number of employees, and made significant changes to our management team.

As a result of the foregoing, the Company now employs 19 people, and our executive
officer team consists of the undersigned, Eric Klinker, as CEO, Mitch Edwards as CFO, Bram
Cohen as Chief Scientist, Simon Morris as VP of Product Marketing and Ilan Shamir as VP of
Engineering.

Series C Financing

In late May and June of this past summer we closed a $17 million Series C financing.
The lead investor in this financing was DAG Ventures. Given the changes in our Company’s
business model and projections that occurred in close proximity to the Series C financing, DAG
claimed that the Series C financing should be substantially renegotiated. After evaluating
DAG’s claim, engaging in significant negotiations with DAG, unsuccessfully trying to raise
funds from other sources, and taking into account the overall economy, the Company decided to
work with DAG to significantly modify the terms of the Series C financing. The modifications
included reducing the amount of the financing from $17 million to $7 million, substantially
reducing the pre-money valuation of the Company to $28 million, and reducing the amount of
the outstanding pre-financing liquidation preference from $38 million to $13 million.

Series C-1/Series C-2 Financing

The terms of the revised financing call for the rescission of the Series C financing and the
sale of $7 million of a new Series C-1 Preferred Stock at a price of $0.32178 per share. The
terms also require the conversion of all of the Company’s pre-financing outstanding Preferred
Stock into Common Stock, and providing shareholders whose Preferred Stock is converted into
Common Stock the opportunity to exchange approximately one-third of such Common Stock
(approximately 2.1 million shares based on a $7 million financing) for a new Series C-2
Preferred Stock at a ratio of approximately 15 shares of new Series C-2 Preferred Stock for each
share of Common Stock being exchanged, if such shareholders participate in the new Series C-1
financing. The new Series C-2 Preferred Stock has a liquidation preference of $0.4196 per share,
resulting in an aggregate liquidation preference of the Series C-2 Preferred Stock of $13 million
(assuming a $7 million financing). The purpose of this Series C-2 Preferred Stock exchange is to
incent current Preferred shareholders to participate in the Series C-1 financing, and to obtain
their agreement to the reduction of their liquidation preference, by providing for them to receive
a higher percentage of the Company than they would otherwise have. We expect that the $7
million raised in this financing will fund the Company’s operations for a minimum of 12 months.

Please note that the financing documents also provide that the Company may use up to
$750,000 of the financing proceeds to repurchase shares of Common Stock from current
Common Stock holders. The Company has not yet decided whether to pursue such possibility.

In connection with the financing John Cadeddu of DAG will be joining the Company’s
Board, and Ashwin Navin has resigned. All directors other than Mr. Navin voted in favor of and
support the financing.

Enclosed is a Summary of Terms describing the Series C-1/C-2 financing in more detail,
together with a pre-financing and post-financing capitalization table.

The Company has already received the commitment of DAG to purchase $2 million in
the Series C-1 financing, and for Accel and DCM, the Company’s other major investors, to
invest an aggregate of $5 million in the financing. The other smaller investor in the Series C
financing, Quilvest, has elected not to participate in this financing. The Company may raise up
to approximately $7.8 million in total if additional shareholders purchase their pro rata portion.

Shareholder Participation

Given the nature of this financing, the Company is providing all shareholders the
opportunity to participate in the financing, to the extent that they can consistent with applicable
securities laws. If you would like to participate in the financing, or would like additional
information on the financing or the Company’s business, please contact the undersigned at (415)
568-[redacted] or [redacted]@bittorrent.com; or Mitch Edwards at (415) 568-[redacted] or
[redacted]@bittorrent.com.

If you are interested in participating in the financing you must notify the Company in writing by January 5, 2009.

Financing Approval

Enclosed is a Shareholder Consent approving this financing, and various related matters
(including a substantial increase in the Company’s stock option plan to allow the Company to
provide appropriate incentive to its new management team). If the proposed transactions and
Consent are acceptable, please sign the Consent and return it to our Company’s law firm,
Fenwick & West, attention Diana Woods at (650) 938-5200 (fax) or dwoods@fenwick.com (by
pdf). Please provide your consent as soon as possible, as we would like to close the initial
closing of this financing in the very near future. We will be holding a second closing in the
future for any shareholders who wish to participate in the financing as described above.

The need for this revised financing is disappointing. That said, the management team
believes that the Company’s prospects are bright with a greatly reduced operational expense
profile, a focus on attaining profitability and a commitment to building value for our
shareholders.

Sincerely,

Eric Klinker
President and CEO

Term Sheet:

DOCS-1990105-v4-Summary_of_Terms_Series_C-1_BitTorrent – Free Legal Forms

Capitalization Table:

bitprepostcap – Free Legal Forms

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The lightweight µTorrent client for Windows was first publicly released in September 2005, and was acquired by BitTorrent in 2006, who continued development on the application and promised to release a Mac version. It has now arrived, but as Torrentfreak points out, the Mac release only runs on Leopard/Intel Macs at the moment and may still contain serious bugs.

Alternatives include Vuze (formerly Azureus) and Transmission.

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In what will surely make every BitTorrent lover jump for joy, a rough alpha version of uTorrent for the Mac has surfaced on The Pirate Bay and BitTorrent isn’t too happy about it.

uTorrent, which was acquired by BitTorrent in 2006, has always been a Windows-only service. But ever since the acquisition, BitTorrent has promised that uTorrent would be coming to the Mac. For almost two years, Mac users have waited for uTorrent to make an appearance and it finally has — much to the dismay of BitTorrent.

Speaking to TorrentFreak, BitTorrent’s product development VP Simon Morris said the leaked alpha version is not for public use and those that try it out should be warned that it’s still in development.

“Apparently an internal development build of uTorrent for Mac has been leaked publicly. It has been referred to as an ‘alpha’ quality build,” Morris told TorrentFreak. “The unfortunate part is that we did not intentionally release this build and would strongly recommend folks not to use it as it isn’t yet complete or stable enough to be released to the public.”

BitTorrent didn’t give any indication when uTorrent for the Mac would be available, but considering it’s still in development, it could take quite some time.

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But it also has one of the worst ratings on Amazon (2,016 out of the 2,216 ratings are one star) because of a concerted campaign by fans protesting its DRM. It has also been downloaded an estimated 500,000 times on BitTorrent, and is well on its way to becoming the most illegally downloaded game ever.

The DRM that comes with the official game only allows customers to use it on three machines (after that you have to call EA for permission to activate the game on additional machines). This is nothing more than an inconvenience. Gamers, in general, are more likely to have more than one computer, and to cycle through computers faster than other PC owners because they always want the latest, greatest, and fastest machines. Many will hit that three-machine limit quickly.

Maybe EA should join the rest of the entertainment industry in coming up with a consistent DRM policy. Unlike iTunes, which imposes a five-machine limit on most purchased songs and movies, there is no way to associate new machines or disassociate old ones from your account online. You have to call. That does not scale.

So now EA has a consumer backlash on its hands, and not because consumers don’t like the game, but because they don’t like EA telling them what they can do with the game after they’ve paid for it. What is worse, the DRM is obviously not stopping pirated versions from getting out there. And since the pirated version is DRM-free, many gamers consider it a better product than the DRMed one that Electronic Arts is trying to sell.

The silliest part of this whole affair is that EA has a much more effective weapon against piracy than the DRM: the game itself. Many of Spore’s most interesting features, such as the ability to upload characters you create and explore worlds created by other players, have an online component. These are integral to the gameplay. All EA needs to do is to turn these features off to anyone who cannot prove that they’ve actually purchased the game. Then no self-respecting gamer will want that pirated copy.

There is a lesson here for all media companies. Whether they are producing videogames, movies, or music, adding DRM won’t stop piracy. The best way to stop piracy is to hobble the pirated version, not the official one.

(Image via Danja Vasiliev).

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The Comcast move seems more focused on the politics of the FCC decision to rule out Comcast’s filtering of P2P traffic. But BitTorrent and other such traffic is all about downloading, not streaming, and the advent of new look-ahead streaming capabilities in Silverlight suggest that streaming can accommodate DVR-like functionality that makes the value proposition of “owning” the data on a local drive much less important.

It used to be that having physical control of entertainment and other software was critical to the user experience. Record and film companies kept accelerating the quality levels of their products to stay ahead of the pirates and the growing ability of consumers to capture and archive content off the radio and television networks. But as broadband became more available as competition between telcos, cable, and satellite increased, sharing of MP3s and DVR time-shifting had an oddly counter-intuitive impact.

First, the Netflix strategy made renting movies a less onerous process, with no late fees and a large catalogue to choose from. When Blockbuster and Hollywood Video adopted similar MVP programs, the cable and satellite companies were forced to counter-attack with on-demand offerings that were even easier to acquire and in fact were spooled from servers rather than downloaded to home machines.

This, of course, is the same shift software has undergone from shrinkwrap to service, from Outlook to Gmail, Office to Google Apps, and from the hard drive to the cloud. In effect, productivity apps are now streamed to and the data from the user. With the data stored redundantly in the cloud, we are more comfortable with a streaming situation than with the former illusion that we “owned” our data locally.

Read the rest of this entry at TechCrunchIT.

(Photo by Quinn Dombrowski).

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According to a report at Torrentfreak, both clients are vulnerable to a remote denial-of-service attack due to the way they handle user-supplied data. Versions found to be vulnerable so far are the official BitTorrent 6.0 client, uTorrent 1.7.x, uTorrent 1.6.x and uTorrent 1.8-alpha-7834.

The flaw allows an attacker to crash the application, however Code execution is not possible, meaning that it’s more of an annoyance than something that should cause BitTorrent users to panic.

Both clients are produced by the company BitTorrent, which has taken $34 million in funding over two rounds from Accel Partners and Doll Capital Management.

Update: Commenter’s suggest there’s already a fix. That was quick, make sure that the BitTorrent client you’re using to download legitimate legal content is up-to-date.

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A clickable pop-up toast ad for Take TV appears at the beginning. The company is experimenting with the frequency of the ads. One pops up between every 5 and 10 minutes. The controls are limited. There is pause/play, restart, volume, and full-screen. No fast-forward or rewind. [Update: I stand corrected. There is a tiny, hard-to-find fast-forward/rewind button that pops up when you hover the mouse over the progress bar].

The technology works. Unfortunately, the pickings are slim. Other than The Ring, there is not much worth watching. They do have Fight Club, but it’s the Bollywood version. (BitTorrent’s such a tease). The TV shows are even more obscure. Wooden Clogs anyone? Deep South Wrestling? I didn’t think so. You are better off sticking to BitTorrent downloads for now.

The Watch Now section is really meant to be a showcase for BitTorrent’s DNA technology. “This is a demonstration for us at this point,” says BitTorrent President Ashwin Navin. He is convinced that ad-supported peer-to-peer streaming is the how video will be delivered in the near future across the Web. ABC or Warner Brothers, for instance, could use it to stream long-form videos from their own sites. (NBC is planning on using P2P software from competitor Pando Networks to stream its video). Navin predicts:

The browser-based video environment is going to get a whole lot better. It makes a closed-off client experience a lot less appealing to the consumer. All of our customers are embracing the browser to deliver videos.

Hmm, a closed-off client experience. Who could that be? Maybe it is time for Joost to finally embrace the browser as well.

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However, free doesn’t seem cheap enough. Despite the potentially free download, over 240,000 users got the album from peer to peer BitTorrent networks on the first day of release, according to Forbes. Since then, the album was downloaded about 100,000 more times each day, totaling more than 500,000. By comparison, Radiohead pushed 1.2 million sales of the album through their site, including pre-orders. File sharing networks are expected to surpass legal downloads in the coming days.

While the numbers may seem drastic, it’s really more a tale of how late to the game the music industry has been. Piracy networks have been growing over the past couple of years, despite the industry’s declared “war” on illegal file sharing. The networks have grown into easy-to-use distribution methods for digital music — even easier than what Radiohead offered. Users could easily grab “In Rainbows” while downloading music from other artists. Radiohead couldn’t be as compelling by only offering their own music and requiring users to take the time to set up an account.

But Radiohead doesn’t have that much to be sad about. The band gets to keep all the proceeds of their digital experiment and has distributed about six times more albums than their last release, which sold 300,000. That seemed to be enough to get EMI thinking harder about changing. Forbes obtained a email form EMI’s chairman saying “The industry, rather than embracing digitalization and the opportunities it brings for promotion of product and distribution through multiple channels, has stuck its head in the sand. Radiohead’s actions are a wake-up call which we should all welcome and respond to with creativity and energy.” So it seems there’s still hope yet that those legal war chests will be put to use on some innovations.

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Now BitTorrent is taking another try at legal torrenting by applying the power of peering to content its partners want to be shared, free files and streaming video. The new service, BitTorrent DNA (Delivery Network Accelerator), uses torrents to assist in sharing these files with their users. It effectively creates a virtual network of viewers’ computers that will share amongst themselves to speed up downloads for popular files from your servers.

The peering arrangement sounds a lot like what BitTorrent currently does, share large files amongst many user. DNA’s big difference, however, is that it does this more transparently. Viewers don’t need to search for tracking files and deal with a torrent download manager, but instead simply install a new BitTorrent client (around 330 K) that handles everything when they come to a DNA enabled site. For example, when you’re on a site and halfway through watching a movie or downloading a file, DNA shares these files behind the scenes with other users that need it too. If you’re concerned about sharing being too much of a drag on your bandwidth, you can go into your control panel and shut off the “download acceleration”.

The main selling point is that BitTorrent should reduce your bandwidth costs, meaning publishers can hold on to more of their ad revenue. The savings is expected to be pretty significant, with BitTorrent saying their customers can shift as much as 80% of their content delivery to the P2P network. Brightcove, one of their launch partners, will be using the peering technology to serve their high bandwidth video content for a new product, “Brightcove Show“.

By teaming up with BitTorrent, Brightcove hopes to take on Joost by allowing its network of Web video publishers to stream broadcast-quality, full-screen videos (possibly even up to HD-quality) without the need for a separate, walled-garden application. The videos will just stream directly from the Web, with bits being pulled from other people’s computers who have the BitTorrent DNA client and have watched a particular video, combined with bits delivered from the Limelight content-delivery network when there aren’t enough BitTorrent peers available to do the job.

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“Together, we are pleased to announce that BitTorrent, Inc. and µTorrent AB have decided to join forces,” Cohen wrote in his blog. “BitTorrent has acquired µTorrent as it recognized the merits of µTorrent’s exceptionally well-written codebase and robust user community. Bringing together µTorrent’s efficient implementation and compelling UI with BitTorrent’s expertise in networking protocols will significantly benefit the community with what we envision will be the best BitTorrent client.”

The move will bring quite a few torrent users over to BitTorrent. News site TorrentFreak estimates that buying uTorrent, will bring BitTorrent nearly 50 percent of torrent users.

“What does this mean for the µTorrent community?” wrote Cohen. “Not much, at least not at first. The intention is to maintain the website as it is, and keep the forums and community active. Moving forward behind the scenes, we will continue to develop µTorrent and will be using the codebase in other applications, especially ones where a fast, lightweight implementation is more suitable, such as embedded systems on TVs, cell phones, and other non-PC platforms.”

The acquisition price has not yet been disclosed.

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Azureus is known for their peer-to-peer applications and Zudeo will build off of that, allowing users to share their own content. But it will also allow corporate content providers to publish, showcase, and distribute high resolution, long form content. The company says the focus will be on “high quality DVD and HD content.” Essentially, Zudeo is a hybrid of YouTube’s social sharing and a B-to-C content channel.

“Media companies are embracing digital media distribution,” said Jarl Mohn, current chairman of the board of CNET Networks and an Azureus board member, in a release sent to TechCrunch on Friday. “Zudeo provides a very effective and secure P2P platform to distribute content to their audience.”

Azureus said that they are trying to “centralize and go viral.” Each listing will have a user rating and an embed code called Azureus Magnet so that users can share the content on other sites.

Azureus also announced a $12 million round of funding by Redpoint Ventures and BV Capital. This is a heap of cash for a video-sharing site if you consider that YouTube was initially financed for approximately $11 million. Azureus CEO Gilles BianRosa told us that the money would go towards marketing and team building.

Currently, Azureus has 15 employees. The company says that they have had 130 million downloads of their client, mostly from SourceForge.net, and are averaging 500,000 more per week. The company claims to have 15 million unique users.

Azureus’ deal with content providers is where they believe they will profit the most.

“Today, content creators and publishers can use Zudeo to freely promote and distribute their digital creations, with no limitation in length or video quality,” BianRosa said. “Furthermore, they can use our social networking tools to expose their content throughout the web, including blogs and social networks. Similarly, movie, games, and music fans can access a growing catalog of high resolution media content and share it with their friends easily.”

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And CEO Bram Cohen, who created the BitTorrent protocol, is definitely on his way out. The company has retained the well known headhunting firm Heidrick & Struggles to find a replacement as soon as possible. No word on what, if any, role Cohen will have going forward.

More Upcoming BitTorrent News:

The company is yet to launch a new service to sell licensed video content on its own retail site, and has signed licensing agreements with, among others, Warner Bros. and Paramount to sell movies and TV shows at prices starting at $1 each. The company will also announce deals to put the BitTorrent software on DVRs, cable boxes, and wireless routers, enabling BitTorrent users to download legal movies or TV shows to PCs and TVs.

BitTorrent is making a real effort to stay legitimate and in favor with the RIAA and MPAA, which of course doesn’t sit well with the majority of the world’s 70 million BitTorrent users. Napster failed miserably when they tried to work with the RIAA. We’ll see how well BitTorrent does this time.

Update: In a very tense conversation with Bram Cohen and BitTorrent’s Director of Communications, Lily Lin, today, the company made it clear that Bram is with the company for the long haul. They would not comment on the CEO search.

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