A Swedish games developer, Global Gaming Factory X, is to buy the controversial peer to peer file sharing catalogue company Pirate Bay for £4.72m.
It will also pay £7.87m for Peerialism, a software firm that has developed new file-sharing technology. The deals are expected to close by August 2009.
Global Gaming Factory X, will install the new file sharing distribution technology, p2p 2.0, on Pirate Bay and open a legitimate market for content owners and users, the company said.
Pirate Bay is one of the top 100 most visited sites on the web, attracting more than 20 million visitors and serving more than one billion page views per month.
Its founders were last week denied a retrial after being found guilty of aiding the illegal distribution of copyrighted content, even though they did not host the content but merely provided a listing and a link to the material.
GGF CEO Hans Pandeya, a serial entrepreneur with a background in publishing classified advertisements, said Pirate Bay required a new business model that satisfied the needs of content providers, broadband operators, users, and the judiciary.
"Content creators and providers need to control their content and get paid for it. File sharers need faster downloads and better quality," Pandeya said.
He said GGF would introduce business models that would ensure that content providers and copyright owners get paid for content that is downloaded via the site.
Peerialism came out of the Royal Institute of Technology and the Swedish Institute of Computer Science. It develops systems for data distribution and distributed storage based on new p2p technology. The acquisition guarantees GGF's access to the technology.
Johan Ljungberg, Peerialism's CEO, said its P2P technology was compatible with Pirate Bay's existing technology.
The acquisition of Pirate Bay and Peerialism gives GGF a strategic position in the international digital distribution market. File sharing traffic accounts for more than half of today's global internet traffic, and is likely to grow as applications like the BBC's iPlayer, which uses BitTorrent file-sharing software, are used more widely.