BitTorrent opened a new digital download store yesterday, adding legal downloading to the quick distribution capabilities the company and software already enjoyed. The five-year-old company will use DRM to protect files from the piracy so often associated with BitTorrent's (and other sites) peer-to-peer technology.

The applications of this development to the world of digital media are enormous. Quick use and easy to share software and files will make the transition from a physical world easier and less time consuming. This is another step in a process I first outlined in a blog a week ago about digital music and the radio. With actual DRM files and material entering the "p2p" networks, the labels will have another source to look for increased sales.

If the downloads are quicker now, then consumer satisfaction should theoretically increase. The problem relies with the average and new users understanding and ability to use torrents in this case. If consumers cannot easily access the material, then the problems that plague the transition from physical to digital will continue. This is at least one more positive step to increase the ease of use for the digital media. Now, if torrents could make the iTunes program load quicker!

The large film studios have wrestled digital piracy for more than a decade now. DVDs become easy to unlock and pirated versions of movies grew into the millions of copies, especially in markets like China. File sharing services like KaZa and BitTorrent made sharing illegal copies over the internet easy and fast.

While the studios insisted that consumers could only watch films in theaters or on DVDs and VCRs, the incentive for consumers to turn to other means grew with the technology that allowed them to exploit the weaknesses in Old Media systems.

Hollywood has not only gone digital, it has gone Darwinian. The big film companies are releasing feature-length content on everything from download services at outlets like Wal-Mart Stores, Inc.'s (NYSE:WMT) Walmart.com to the Apple Inc.'s (NASDAQ:AAPL) video iPod to file-sharing services gone legit. The latest such service is from BitTorrent, once Hollywood's great digital nemesis. Now the tech company is about to offer films using its system and digital rights management from Microsoft Corp. (NASDAQ:MSFT). Several studios will sell their movies on the new service.

Hollywood has gotten bright fast. Digital film distribution has been inevitable as has an e-commerce system that would get some money back to the content owners. So far, however, the studios have opted for a chaotic system whereby a large number of digital companies will have distribution rights. That means that those companies that can find a large audience for content over the internet will survive. The others will go the way of the Dodo. Big media has set up a race. The winners will be the de facto best partners, but the studios don't appear to care who those winners are.

To the victors go the spoils.

Douglas A. McIntyre is a partner at 24/7 Wall St.

In light of Google's $1.65 billion purchase of YouTube, investors are hunting for the next cash-out. Maybe it will be BitTorrent, which announced it has snagged $20 million in venture capital. The investors include Accel Partners and Doll Capital.

BitTorrent is super-sophisticated technology platform that allows for efficient transfers of data (this is accomplished with whiz-bang peer-to-peer technology). In other words, it is a great vehicle to deliver video. It also became a great place to file-share copyrighted content.

But, over the past year, BitTorrent has been clamping-down on this. Of course, that makes the site appealing to traditional content players. In fact, this week, BitTorrent signed licensing deals with a variety of Hollywood players, such as Paramount and MTV.

I interviewed Chase Norlin, who is the CEO of Pixsy, which is a search engine for multimedia content. According to him: "Bittorrent's deals with the studios is just another example of content owners requiring multiple avenues for distribution. Bittorrent seems to have a good start in being the platform for this, but I suspect that there will be multiple distribution channels. Actually, the company in this space that I believe will be a big player in a few years is Comcast."

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.

Something is happening out in the digital world, and it may spell some rough times ahead for Apple. Apple's recent love affair with the mainstream press and non-Apple users has centered around the iPod. The stylish digital media device for many means Apple. iTunes, available for PC or Apple is the reason the brand has taken a more prominent place in the stage.

In order to keep the hold, Apple has to keep providing a great deal of value in its selections. So far the music library has been expanding, and most of the companies are still very cautious. Apple and its similar Fairplay DRM licenses seem like a fair compromise to many. But to get to that involved a lot of hard feelings as record companies sued little old ladies and generated an immense backlash of bad publicity.

Not long ago, media empires sued file sharers. Now, they strike partnerships.

The latest is from Time Warner's Warner Bros. The deal calls for distribution of Warner Bros.' rich content library of TV shows and movies on Guba.com.

OK, in this deal, "sharing" means selling the movie downloads. Interestingly enough, like other video sites, Guba.com shared copyrighted content for free.  Well, it is changing its ways.

Actually, Warner Bros. has been quite visionary.  The company recently struck a similar deal with another file sharer, BitTorrent.

Warner Bros. also realizes that – if it wants to find its customers – it must move to the Web.  Why not go to places where huge numbers of users gather? Yes, it's not brain surgery.  But, in the entertainment business, often the first inclination is to sue, not partner.

The announcement that Warner will sell not only TV but film content via BitTorrent is really quite remarkable.  BitTorrent technology is currently the number one way that Hollywood content is pirated online, which makes it both an obvious threat but also a long-term opportunity. 

It's a different strategy than the other current Hollywood efforts, Movielink and CinemaNow, which initially looked like a somewhat half-hearted effort to say "See, we offer legal downloading, so do the right thing."  Both sites have improved their technology and usability this year, but still involve changing the habits of an audience that's already downloading feature-length content someplace else.  Working with BitTorrent is a gutsy but logical step: go where the potential customers already are.  While some commentators contend that Warner has still set its pricing and DRM restrictions too high, I think that's inevitable: lowering prices and reducing restrictions, once you have your feet wet, is much easier than trying to go the other direction.  (Just ask the print world how well they're doing charging for newspaper and magazine content on the Web.)

What's in it for Hollywood?  First, they've learned from the recording industry: if you don't get in front of illegal downloading, you'll face a really, really tough catchup game.  Legal music downloads are growing fast, but they're still nowhere near the volume of the illegal file-sharing that had years to gain momentum before legal alternatives appeared. 

But past that, selling direct to the consumer could ultimately cut out all the other folks who take a slice of the profits in film distribution: theater owners, Blockbuster, Netflix, cable, satellite.  The metric to watch here is the theatrical window: what's the time period before movies appear on DVD, pay-per-view and soon, the Internet?  The window is getting shorter and shorter, and some producers suggest it will ultimately become no more than thirty days, even for the biggest titles. 

None of this will happen overnight, of course, but fitting nicely into this pattern is the fact that older moviegoers are increasingly building their own theaters at home.  I've spent time recently with some of the mass-market homebuilders--the people who build more than a thousand homes a year--and many feel that the media room will soon become a standard expectation in new homes.  It will be years before the Internet can easily deliver a top-quality home theater experience, but it's none too soon for Hollywood to explore the best and cheapest way to reach that audience.